Exhibit 10.29
BLUESTONE SOFTWARE, INC.
SERIES A PREFERRED
STOCK PURCHASE AGREEMENT
April 18, 1997
TABLE OF CONTENTS
Page
1. Purchase and Sale of Stock......................................................................1
1.1 Sale and Issuance of Series A Preferred Stock..........................................1
1.2 Closing................................................................................1
2. Representations and Warranties of the Company...................................................2
2.1 Organization, Good Standing and Qualification..........................................2
2.2 Capitalization and Voting Rights.......................................................2
2.3 Subsidiaries...........................................................................3
2.4 Authorization..........................................................................3
2.5 Valid Issuance of Preferred and Common Stock...........................................3
2.6 Governmental Consents..................................................................3
2.7 Offering...............................................................................4
2.8 Litigation.............................................................................4
2.9 Employee Agreements....................................................................4
2.10 Patents and Trademarks.................................................................4
2.11 Compliance with Other Instruments......................................................5
2.12 Agreements; Action.....................................................................5
2.13 Related-Party Transactions.............................................................6
2.14 Financial Plan.........................................................................7
2.15 Permits................................................................................7
2.16 Environmental and Safety Laws..........................................................7
2.17 Manufacturing and Marketing Rights.....................................................7
2.18 Disclosure.............................................................................7
2.19 Registration Rights....................................................................8
2.20 Title to Property and Assets...........................................................8
2.21 Financial Statements...................................................................8
2.22 Changes................................................................................8
2.23 Employee Benefit Plans.................................................................9
2.24 Tax Matters...........................................................................11
2.25 Insurance.............................................................................12
2.26 Books and Records.....................................................................12
3. Representations and Warranties of the Investors................................................12
3.1 Authorization.........................................................................12
3.2 Purchase Entirely for Own Account.....................................................13
3.3 Disclosure of Information.............................................................13
3.4 Investment Experience.................................................................13
3.5 Accredited Investor...................................................................13
3.6 Restricted Securities.................................................................13
3.7 Further Limitations on Disposition....................................................13
3.8 Legends...............................................................................14
3.9 Certain Tax Matters...................................................................14
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4. Conditions of Investor's Obligations at Closing................................................15
4.1 Representations and Warranties........................................................15
4.2 Performance...........................................................................15
4.3 Compliance Certificate................................................................15
4.4 Qualifications........................................................................15
4.5 Proceedings and Documents.............................................................15
4.6 Employee Agreements...................................................................15
4.7 Opinion of Company Counsel............................................................15
4.8 Tax Opinion of Company Counsel........................................................16
4.9 Investors' Rights Agreement...........................................................16
4.10 Right of First Refusal and Co-Sale Agreement..........................................16
4.11 Voting Agreement......................................................................16
4.12 Due Diligence.........................................................................16
4.13 Restated Certificate of Incorporation.................................................16
4.14 Key Person Life Insurance.............................................................16
4.15 Related Agreements....................................................................16
4.16 Consummation of the Spin-off. .......................................................17
5. Conditions of the Company's Obligations at Closing.............................................17
5.1 Representations and Warranties........................................................17
5.2 Payment of Purchase Price.............................................................17
5.3 Qualifications........................................................................17
5.4 Right of First Refusal and Co-Sale Agreement..........................................17
5.5 Voting Agreement......................................................................17
6. Indemnification................................................................................17
7. Miscellaneous..................................................................................19
7.1 Survival of Warranties................................................................19
7.2 Successors and Assigns................................................................19
7.3 Governing Law.........................................................................19
7.4 Counterparts..........................................................................19
7.5 Titles and Subtitles..................................................................19
7.6 Notices...............................................................................20
7.7 Finder's Fee..........................................................................20
7.8 Expenses..............................................................................20
7.9 Amendments and Waivers................................................................20
7.10 Severability..........................................................................20
7.11 Aggregation of Stock..................................................................21
7.12 Entire Agreement......................................................................21
7.13 Definition of Investor................................................................21
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SCHEDULE A Schedule of Investors..........................................................................26
SCHEDULE B Disclosure Letter..............................................................................27
EXHIBIT A Restated Certificate of Incorporation..........................................................28
EXHIBIT B Form of Employee Agreement.....................................................................29
EXHIBIT C Opinion of Company Counsel.....................................................................30
EXHIBIT D Tax Opinion of Company Counsel.................................................................31
EXHIBIT E Investors' Rights Agreement....................................................................32
EXHIBIT F Right of First Refusal and Co-Sale Agreement...................................................33
EXHIBIT G Voting Agreement...............................................................................34
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BLUESTONE SOFTWARE, INC.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of the 18th day of April 1997,
by and between Bluestone Software, Inc., a Delaware corporation (the "Company"),
and the investors listed on Schedule A hereto, each of which is herein referred
to as an "Investor."
INTENDING TO BE LEGALLY BOUND, and in consideration of the mutual
agreements stated below, the parties agree as follows:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF SERIES A PREFERRED STOCK
(a) The Company shall adopt and file with the
Secretary of State of Delaware on or before the Closing (as defined below) the
Amended and Restated Certificate of Incorporation in the form attached hereto as
EXHIBIT A (the "Restated Certificate").
(b) Subject to the terms and conditions of this
Agreement, each Investor agrees, severally, to purchase at the Closing (as
hereafter defined), and the Company agrees to sell and issue to each Investor at
such Closing, that number of shares of the Company's Series A Convertible
Preferred Stock, $.001 par value per share ("Series A Preferred Stock"), set
forth opposite each Investor's name on SCHEDULE A hereto, at a price of $0.95
per share.
1.2 CLOSING.
The purchase by the Investors and sale by the Company
of the shar es of Series A Preferred Stock hereunder (the "Shares") shall take
place at the offices of Blank Rome ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, Four Penn Center Plaza,
Philadelphia, Pennsylvania at 10:00 A.M., on April 18, 1997, or at such other
time and place as the Company and the Investors, mutually agree upon orally or
in writing (which time and place are designated as the "Closing"); provided,
however, that if acceptable to the Company and the Investors, the Closing may be
effected by facsimile transmission of executed copies of the documents delivered
at the Closing and payment of the purchase price specified in Section 1.1 and by
sending original copies of the documents delivered at the Closing by reputable
overnight delivery service, postage or delivery charges prepaid, for delivery to
the parties at their addresses stated on the signature page of this Agreement by
the third business day following the Closing. At the Closing the Company shall
deliver to each Investor a certificate representing the Shares that such
Investor is purchasing against payment of the purchase price therefor by check,
wire transfer, or any combination thereof (or in the case of ▇▇▇ ▇▇▇▇▇▇
("Baiada"), by cancellation of indebtedness owed by the Company to Ba iada) in
an amount equal to the purchase price referred to on SCHEDULE A attached hereto.
Any Investor purchasing Shares pursuant to this Agreement shall become a party
to this Agreement, the Investors' Rights Agreement, the First Refusal and
Co-Sale Agreement and the Voting Agreement (each as defined below and
collectively with this Agreement, the "Transaction Agreements"), all dated as of
the date hereof.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . Knowing that each
Investor is relying thereon, the Company hereby represents and warrants to each
Investor that, except as set forth in the Disclosure Letter attached hereto as
SCHEDULE B (the "Disclosure Letter") furnished to each Investor and special
counsel for the Investors, specifically identifying the relevant subparagraph
hereof:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate power
and authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a
material adverse effect on its business or properties.
2.2 CAPITALIZATION AND VOTING RIGHTS. The authorized capital
of the Company will consist immediately after the Closing, of:
(i) PREFERRED STOCK. 5,526,316 preferred stock (the
"Preferred Stock"), all of which have been designated Series A Preferred Stock
and will be sold pursuant to this Agreement. The rights, privileges and
preferences of the Series A Preferred Stock will be as stated in the Company's
Restated Certificate.
(ii) COMMON STOCK. 17,726,316 shares of common stock,
$.001 par value per share ("Common Stock"), of which (a) 5,526,316 shares have
been reserved for issuance upon conversion of the Shares (the "Conversion
Shares"), (b) 700,000 shares have been reserved for issuance upon conversion of
the convertible term note held by ▇▇▇▇ ▇▇▇▇▇▇ in the principal amount of
$500,000 (the "▇▇▇▇ ▇▇▇▇▇▇ Conversion Shares"), (c) 813,250 shares have been
reserved for issuance upon the exercise of outstanding options (the "1996 Plan
Options") granted to certain employees of the Company pursuant to the Company's
Amended and Restated 1996 Incentive and Non-Qualified Stock Option Plan (the
"1996 Plan"), (d) 300,000 shares have been reserved for issuance upon the
exercise of outstanding options to be granted to ▇▇▇ ▇▇▇▇▇▇ on or after the
Closing (the "▇▇▇▇▇▇ Options"), (e) 1,386,750 shares have been reserved for
issuance upon the exercise of options to be granted in the future to certain
employees of the Company under the 1996 Plan, and (f) 9,000,000 shares are
currently issued and outstanding.
(iii) The outstanding shares of Common Stock are all
duly and validly authorized and issued, fully paid and nonassessable, and were
issued in accordance with the registration or qualification provisions of the
Securities Act of 1933, as amended (the "Act"), and any relevant state
securities laws or pursuant to valid exemptions therefrom.
(iv) Except for (a) the conversion privileges of the
Preferred Stock issued or to be issued under this Agreement, (b) the rights
provided in the registration rights provisions of the Investors' Rights
Agreement, (c) any other rights created under the Transaction Agreements, and
(d) as of the Closing (I) 700,000 shares of Common Stock reserved for issuance
upon conversion of the convertible term note held by ▇▇▇▇ ▇▇▇▇▇▇ in the
principal amount of $500,000, (II) 300,000 shares of Common Stock reserved for
issuance upon exercise of the ▇▇▇▇▇▇ Options, and (III)
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813,250 shares of Common Stock reserved for issuance upon exercise of the 1996
Plan Options, there are not outstanding any options, warrants, rights (including
conversion or preemptive rights) or agreements for the purchase or acquisition
from the Company of any shares of its capital stock. The Company has reserved an
additional 1,386,750 shares of its Common Stock for purchase upon exercise of
options to be granted in the future to certain employees under the 1996 Plan.
Except for the Transaction Agreements, the Company is not a party or subject to
any agreement or understanding, and, to the best of the Company's knowledge,
there is no agreement or understanding between any persons and/or entities,
which affects or relates to the voting or giving of written consents by a
director of the Company or the voting or giving of written consents by a
director or stockholder with respect to any security.
2.3 SUBSIDIARIES. The Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
association, or other business entity. The Company is not a participant in any
joint venture, partnership, or similar arrangement.
2.4 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of the Transaction Agreements, the
performance of all obligations of the Company hereunder and thereunder, and the
authorization, issuance (or reservation for issuance), sale and delivery of the
Shares being sold hereunder and the Conversion Shares, has been taken or will be
taken prior to the Closing. The Transaction Agreements constitute valid and
legally binding obligations of the Company, enforceable in accordance with their
respective terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Investors' Rights Agreement may be limited by applicable federal or state
securities laws.
2.5 VALID ISSUANCE OF PREFERRED AND COMMON STOCK. The Shares,
when issued, sold and delivered in accordance with the terms of this Agreement
for the consideration expressed herein, will be duly and validly issued, fully
paid, and nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under the Transaction Agreements and under applicable
state and federal securities laws. The Conversion Shares have been duly and
validly reserved for issuance and, upon issuance in accordance with the terms of
the Restated Certificate, will be duly and validly issued, fully paid, and
nonassessable and will be free of restrictions on transfer other than
restrictions on transfer under the Transaction Agreements and under applicable
state and federal securities laws.
2.6 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement (except such additional steps as may be necessary
to qualify the offer and sale of the Shares under applicable state securities
laws, which such steps have been taken or shall be timely taken by the Company).
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2.7 OFFERING. Subject in part to the truth and accuracy of
each Investor's representations set forth in Section 3 of this Agreement, the
offer, sale and issuance of the Shares as contemplated by this Agreement are
exempt from the registration requirements of the Act, and neither the Company
nor any authorized agent acting on its behalf will take any action hereafter
that would cause the loss of such exemption.
2.8 LITIGATION. There is no action, suit, proceeding
or investigation pending or currently threatened against the Company that
questions the validity of the Transaction Agreements or the right of the
Company to enter into such agreements, or to consummate the transactions
contemplated hereby or thereby, or that might result, either individually or
in the aggregate, in any material adverse change in the assets, condition,
affairs or prospects of the Company, financially or otherwise, or any change
in the current equity ownership of the Company, nor is the Company aware that
there is any basis for the foregoing. The foregoing includes, without
limitation, actions, suits, proceedings or investigations pending or
threatened (or any basis therefor known to the Company) involving the prior
employment of any of the Company's employees, their use in connection with
the Company's business of any information or techniques allegedly proprietary
to any of their former employers, or their obligations under any agreements
with prior employers. The Company is not a party or subject to the provisions
of any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality. There is no action, suit, proceeding or
investigation by the Company currently pending or that the Company intends to
initiate.
2.9 EMPLOYEE AGREEMENTS. [INTENTIONALLY OMITTED].
2.10 PATENTS AND TRADEMARKS. The Company owns or possesses
sufficient legal rights to all patents, trademarks, service marks, trade names,
copyrights, trade secrets, information, proprietary rights and processes
("Intellectual Property") necessary for its business as now conducted and as
proposed to be conducted without any conflict with or infringement of the rights
of others. The Disclosure Letter contains a complete list of all patents and
patent applications of the Company. There are no outstanding options, licenses,
or agreements of any kind relating to any of the Company's Intellectual
Property, nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the Intellectual Property of any other
person or entity. The Company has not received any communications alleging that
the Company has violated or, by conducting its business as proposed to be
conducted, would violate any of the Intellectual Property of any other person or
entity. The Company is not aware that any of the Company's employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his or
her best efforts to promote the interests of the Company or that would conflict
with the Company's business as proposed to be conducted. Neither the execution
nor delivery of the Transaction Agreements nor the carrying on of the Company's
business by the employees of the Company, nor the conduct of the Company's
business as proposed to be conducted, will, to the best of the Company's
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees is now obligated. The Company does
not believe that it is or will be necessary to utilize any inventions of any of
the Company's employees (or people it currently intends to hire) made prior to
their employment by the Company.
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2.11 COMPLIANCE WITH OTHER INSTRUMENTS.
(a) The Company is not in violation or default of any
provision of its Restated Certificate or Bylaws, or of any instrument, judgment,
order, writ, decree or contract to which it is a party or by which it is bound,
or, to the best of its knowledge, of any provision of any federal or state
statute, rule or regulation applicable to the Company. The execution, delivery
and performance of the Transaction Agreements, and the consummation of the
transactions contemplated hereby and thereby, will not result in any such
violation or be in conflict with or constitute, with or without the passage of
time and/or giving of notice, either a default under any such provision,
instrument, judgment, order, writ, decree or contract or an event that results
in the creation of any lien, charge or encumbrance upon any assets of the
Company or the suspension, revocation, impairment, forfeiture, or nonrenewal of
any material permit, license, authorization, or approval applicable to the
Company, its business or operations or any of its assets or properties.
(b) The Company has avoided every condition, and has
not performed any act, the occurrence of which would result in the Company's
loss of any material right granted under any license, distribution or other
agreement.
2.12 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated
hereby and by the Transaction Agreements, there are no agreements,
understandings or proposed transactions between the Company and any of its
officers, directors or affiliates, or any affiliate thereof.
(b) There are no agreements, understandings,
instruments, contracts, proposed transactions, judgments, orders, writs or
decrees to which the Company is a party or by which it is bound that may involve
(i) obligations (contingent or otherwise) of, or payments to the Company in
excess of, $25,000, or (ii) the license of any patent, copyright, trade secret
or other proprietary right to or from the Company, or (iii) provisions
restricting or affecting the development, manufacture or distribution of the
Company's products or services, or (iv) indemnification by the Company with
respect to infringements of proprietary rights.
(c) Since the date of the Latest Balance Sheet (as
defined below), the Company (i) has not declared or paid any dividends or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) except for (A) the convertible term note in the
principal amount of $500,000 payable to ▇▇▇▇ ▇▇▇▇▇▇ (the "▇▇▇▇ ▇▇▇▇▇▇ Term
Note"), (B) the term note in the principal amount of $250,000 payable to ▇▇▇
▇▇▇▇▇▇ (the "▇▇▇ ▇▇▇▇▇▇ Term Note"), (C) the term loan in the original principal
amount of $235,000 payable to PNC Bank (the "PNC Bank Term Loan"), (D) the
$1,000,000 revolving line of credit with PNC Bank (the "PNC Bank Credit Line")
and (E) the $150,000 convertible line of credit note with PNC Bank (the "PNC
Bank Convertible Line of Credit Note"), does not currently have outstanding any
indebtedness for money borrowed or any other liabilities individually in excess
of $25,000 or, in the case of indebtedness and/or liabilities individually less
than $25,000, in excess of $75,000 in the aggregate, or (iii) has not made any
loans or advances to any person, other than ordinary advances for travel
5
expenses, has not sold, exchanged or otherwise disposed of any of its assets or
rights, other than the sale of its inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c)
above, all indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities the Company has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual minimum
dollar amounts of such subsections.
(e) The Company is not a party to and is not bound by
any contract, agreement or instrument, or subject to any restriction under its
Restated Certificate or Bylaws that materially adversely affects its business as
now conducted or as proposed to be conducted, its properties or its financial
condition.
(f) The Company has not engaged in the past three (3)
months in any discussion (i) with any representative of any corporation or
corporations regarding the consolidation or merger of the Company with or into
any such corporation or corporations, (ii) with any corporation, partnership,
association or other business entity or any individual regarding the sale,
conveyance or disposition of all or substantially all of the assets of the
Company or a transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of the Company is disposed of, or (iii)
regarding any other form of acquisition, liquidation, dissolution or winding up
of the Company.
2.13 RELATED-PARTY TRANSACTIONS. No employee, officer, or
director of the Company or member of his or her immediate family is indebted to
the Company, nor is the Company, except for its obligations under the ▇▇▇▇
▇▇▇▇▇▇ Term Notes and the ▇▇▇ ▇▇▇▇▇▇ Term Note, indebted (or committed to make
loans or extend or guarantee credit) to any of them. To the best of the
Company's knowledge, none of such persons has any direct or indirect ownership
interest in any firm or corporation with which the Company is affiliated or with
which the Company has a business relationship, or any firm or corporation that
competes with the Company, except that employees, officers, or directors of the
Company and members of their immediate families may own stock in publicly traded
companies that may compete with the Company. No member of the immediate family
of any officer or director of the Company is directly or indirectly interested
in any material contract with the Company.
2.14 FINANCIAL PLAN. The financial plan attached to the
Disclosure Letter (the "Financial Plan") has been prepared in good faith by the
Company and does not contain any untrue statement of a material fact nor does it
omit to state a material fact necessary to make the statements made therein not
misleading, except that with respect to projections contained in the Financial
Plan, the Company represents only that such projections were prepared in good
faith by the Company and that the Company reasonably believes there is a
reasonable basis for such projections.
2.15 PERMITS. The Company has all franchises, permits,
licenses, and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which could materially and adversely
affect the business, properties, prospects, or financial condition of
6
the Company, and the Company believes it can obtain, without undue burden or
expense, any similar authority for the conduct of its business as planned to be
conducted in the Business Plan. The Company is not in default in any material
respect under any of such franchises, permits, licenses, or other similar
authority.
2.16 ENVIRONMENTAL AND SAFETY LAWS. To the best of the
Company's knowledge, the Company is not in violation of any applicable statute,
law or regulation relating to the environment or occupational health and safety,
and to the best of its knowledge, no material expenditures are or will be
required in order to comply with any such existing statute, law or regulation.
2.17 MANUFACTURING AND MARKETING RIGHTS. The Company has not
granted rights to manufacture, produce, assemble, license, market, or sell its
products to any other person and is not bound by any agreement that affects the
Company's exclusive right to develop, manufacture, assemble, distribute, market
or sell its products.
2.18 DISCLOSURE. The Company has fully provided each Investor
with all the information that such Investor has requested for deciding whether
to purchase the Series A Preferred Stock and all information that the Company
believes is reasonably necessary to enable such Investor to make such decision.
Neither the Transaction Agreements nor any other written statements or
certificates made or delivered in connection herewith or therewith contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading. There is no fact within
the knowledge of the Company, or any of the Company's officers which has not
been disclosed herein or in writing by them to the Investors and which
materially adversely affects, or in the future in their opinion may, insofar as
they can now foresee, materially adversely affect the business, properties,
assets or condition, financial or otherwise, of the Company. Other than as
stated in the Disclosure Letter, without limiting the foregoing, the Company has
no knowledge or belief that there exists, or there is, pending or planned, any
patent, invention, device, application or principle or any statute, rule, law,
regulation, standard or condition which would materially adversely affect the
condition, financial or otherwise, or the operations of the Company.
2.19 REGISTRATION RIGHTS. Except as provided in the Investors'
Rights Agreement, the Company has not granted or agreed to grant any
registration rights, including piggyback rights, to any person or entity.
2.20 TITLE TO PROPERTY AND ASSETS. The Company owns its
property and assets free and clear of all mortgages, liens, loans and
encumbrances, except (i) as reflected in the Financial Statements (as defined
below), (ii) for liens for current taxes not yet delinquent, (iii) for liens
imposed by law and incurred in the ordinary course of business for obligations
not past due to carriers, warehousemen, laborers, materialmen and the like, (iv)
for liens in respect of pledges or deposits under workers' compensation laws or
similar legislation, (v) for minor defects in title, none of which, individually
or in the aggregate, materially interferes with the use of such property, or
(vi) for such encumbrances and liens that arise in the ordinary course of
business and do not materially impair the Company's ownership or use of such
property or assets. With respect to the property and
7
assets it leases, the Company is in compliance with such leases and, to the best
of its knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances.
2.21 FINANCIAL STATEMENTS. The Company has delivered to each
Investor consolidated audited financial statements (balance sheet, operating
statement and statement of cash flows) of Bluestone Consulting, Inc., a New
Jersey Corporation (the "Predecessor Corporation") as of and for each of the
fiscal years ended December 31, 1996 and 1995 (the "Audited Financial
Statements"), and consolidated unaudited financial statements (balance sheet,
operating statement and statement of cash flows) of the Predecessor Corporation
as of February 28, 1997 and for the two months then ended (the "Unaudited
Financial Statements" together with the Audited Financial Statements, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and operating results of the Predecessor Corporation as of the dates,
and for the periods, indicated therein, subject to normal year-end adjustments.
The Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated and with each other, except that the Unaudited Financial
Statements may not contain all footnotes required by generally accepted
accounting principles. Except as set forth in the Financial Statements, the
Predecessor Corporation has no material liabilities, contingent or otherwise,
other than (i) liabilities incurred in the ordinary course of business
subsequent to February 28, 1997, and (ii) obligations under contracts and
commitments incurred in the ordinary course of business, which, individually or
in the aggregate, are not material to the financial condition or operating
results of the Predecessor Corporation. Except as disclosed in the Financial
Statements, the Predecessor Corporation is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
2.22 CHANGES. Since February 28, 1997, the date of the latest
balance sheet included in the Financial Statements (the "Latest Balance Sheet"),
there has not been:
(a) any change in the assets, liabilities, financial
condition or operating results of the Company from that reflected in the
Financial Statements, except changes in the ordinary course of business that
have not been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the assets, properties,
financial condition, operating results, prospects or business of the Company (as
such business is presently conducted and as it is proposed to be conducted);
(c) any waiver by the Company of a valuable right or
of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim
or encumbrance or payment of any obligation by the Company, except in the
ordinary course of business and that is not material to the assets, properties,
financial condition, operating results, prospects or business of the Company (as
such business is presently conducted and as it is proposed to be conducted);
8
(e) any material change or amendment to a material
contract or arrangement by which the Company or any of its assets or properties
is bound or subject;
(f) any resignation or termination of employment of
any key officer of the Company, and the Company, to the best of its knowledge,
does not know of the impending resignation or termination of employment of any
such officer;
(g) any mortgage, pledge, transfer of a security
interest in, or lien, created by the Company, with respect to any of its
material properties or assets, except liens for taxes not yet due or payable;
(h) any loans or guarantees made by the Company to or
for the benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business; or
(i) to the best of the Company's knowledge, any other
event or condition of any character that might materially and adversely affect
the assets, properties, financial condition, operating results, prospects or
business of the Company (as such business is presently conducted and as it is
proposed to be conducted).
2.23 EMPLOYEE BENEFIT PLANS. Except as set forth in the
Disclosure Letter, the Company has not established, maintained or contributed to
any Employee Benefit Plans as defined in the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and the Company has not proposed any Employee
Benefit Plans which the Company will establish, maintain, or to which the
Company will contribute, and the Company has not proposed any changes to any
Employee Benefit Plans now in effect (all of the preceding referred to
collectively hereinafter as the "Company's Employee Benefit Plans"). True and
correct copies and descriptions, to the extent that they exist, of all of the
Company's Employee Benefit Plans have been previously provided to the Investors.
If permitted and/or required by applicable Law, the Company has properly
submitted all of the Company's Employee Benefit Plans in good faith to meet the
applicable requirements of ERISA and/or the Code (as hereinafter defined) to the
IRS for its approval within the time prescribed therefor under applicable
federal regulations. Favorable letters of determination of such tax-qualified
status from the IRS have been previously provided to the Investors. With respect
to the Company's Employee Benefit Plans, the Company will have made, on or prior
to the Closing, all payments required to be made by it on or prior to the
Closing and will have accrued (in accordance with generally accepted accounting
principles consistently applied) as of the Closing all payments due but not yet
payable as of the Closing. The Company has previously provided to the Investors
a true and correct copy of the most current Form 5500 and any other form or
filing required to be submitted to any governmental agency with regard to any of
the Company's Employee Benefit Plans. All of the Company's Employee Benefit
Plans are, and have been, operated in full compliance with their provisions and
with all applicable Laws including, without limitation, ERISA and the Code and
the regulations and rulings thereunder. The Company and all fiduciaries of the
Company's Employee Benefit Plans have complied with the provisions of the
Company's Employee Benefit Plans and with all applicable Laws including, without
limitation, ERISA and the Code and the regulations and rulings thereunder. There
has been no termination or partial termination (including any termination
9
or partial termination attributable to this sale) of any of the Company's
Employee Benefit Plans. The Company has never established, maintained or had the
obligation to contribute to a defined benefit plan (as defined in the Code or
ERISA), an Employee Benefit Plan that is subject to the minimum funding
standards of the Code or ERISA, or a multiemployer (as defined in the Code or
ERISA). Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due from the Company under any of the
Company's Employee Benefit Plans, (ii) increase any benefits otherwise payable
under any of the Company's Employee Benefit Plans, or (iii) result in the
acceleration of the time of payment or vesting of any such benefits to any
extent. There are no pending actions, claims or lawsuits which have been
asserted or instituted against any of the Company's Employee Benefit Plans, the
assets of any of the trusts under such plans, the plan sponsor, the plan
administrator or against any fiduciary of any of the Company's Employee Benefit
Plans (other than routine benefit claims) nor does the Company have knowledge of
facts which could form the basis for any such action, claim or lawsuit. There
are no investigations or audits of any of the Company's Employee Benefit Plans,
any trusts under such plans, the plan sponsor, the plan administrator or any
fiduciary of any of the Company's Employee Benefit Plans which have been
threatened or instituted nor does the Company have knowledge of facts which
could form the basis for any such investigation or audit. Except as disclosed in
the Disclosure Letter, no event has occurred or will occur which will result in
liability to the Company in connection with any Employee Benefit Plan
established, maintained, or contributed to (currently or previously) by the
Company or by any other entity which, together with the Company, constitute
elements of either (i) a controlled group of corporations (within the meaning of
Section 414(b) of the Code), (ii) a group of trades or businesses under common
control (within the meaning of Sections 414(c) of the Code or 4001 of ERISA),
(iii) an affiliated service group (within the meaning of Section 414(m) of the
Code), or (iv) another arrangement covered by Section 414(o) of the Code. For
purposes of this Agreement, "Employee Benefit Plan" means (i) any employee
benefit plan, as defined in Section 3(3) of ERISA, and (ii) any other plan,
trust agreement or arrangement for any bonus, severance, hospitalization,
vacation, incentive or deferred compensation, pension or profit-sharing,
retirement, payroll savings, stock option, equity compensation, group insurance,
death benefit, fringe benefit, welfare or any other employee benefit plan or
fringe benefit arrangement of any nature whatsoever, including those benefitting
retirees or former employees.
2.24 TAX MATTERS.
(a) The Company has filed all Tax Returns (as defined
below) which it was required to file under applicable laws and regulations; all
such Tax Returns are complete and correct in all respects and have been prepared
in compliance with all applicable laws and regulations; the Company has paid all
Taxes (as defined below) due and owing by it with respect to any period ending
on or before the Closing (whether or not such Taxes are required to be shown on
a Tax Return) and have withheld and paid over to the appropriate taxing
authority all Taxes which it is required to withhold from amounts paid or owing
to any employee, stockholder, creditor or other third party with respect to any
period ending on or before the Closing; the Company has not waived any statute
of limitations with respect to any Taxes or agreed to any extension of time with
respect to any Tax Return; the accrual for Taxes on the Latest Balance Sheet
would be adequate to pay all
10
Tax liabilities of the Company if its current tax year were treated as ending on
the date of the Latest Balance Sheet; since the date of the Latest Balance
Sheet, the Company has not incurred any liability for Taxes other than in the
ordinary course of business; the assessment of any additional Taxes for periods
for which Tax Returns have been filed by the Company shall not exceed the
recorded liability therefor on the Latest Balance Sheet; the federal income Tax
Returns of the Company have been audited or closed for all tax years through
1992; no foreign, federal, state or local tax audits or administrative or
judicial proceedings are pending or being conducted with respect to the Company,
no information related to Tax matters has been requested by any foreign,
federal, state or local taxing authority and no written notice indicating an
intent to open an audit or other review has been received by the Company from
any foreign, federal, state or local taxing authority; and there are no material
unresolved questions or claims concerning the Company's Tax liability;
(b) The Company has not made an election under
Section 341(f) of the Internal Revenue Code of 1986, as amended (the "Code").
The Company is not liable for the Taxes of another person under (i) Treas.
Reg. Section 1.1502-6 (or comparable provisions of state, local or foreign
law), (ii) as a transferee or successor, (iii) by contract or indemnity, or
(iv) otherwise. The Company is not a party to any tax sharing agreement. The
Company has disclosed on their federal income Tax Returns any position taken
for which substantial authority (within the meaning of Section
6662(d)(2)(B)(i) of the Code) did not exist at the time the return was filed.
The Company has not made any payments, is obligated to make payments or is a
third party to an agreement that could obligate it to make any payments that
would not be deductible under Section 280G of the Code;
(c) As of the Closing, the Company is a qualified
small business within the meaning of Section 1202(c) of the Code. During the
period beginning one year prior to the Closing Date through the Closing, the
Company has not made a significant redemption of its stock within the meaning
of Section 1202(c)(3)(B) of the Code;
(d) The Company has made a valid election under
Section 1362(a) of the Code to be treated as an "S corporation" within the
meaning of Section 1361 of the Code, which election has been effective for all
tax periods from the date of the Company's formation to the Closing Date;
(e) The formation of Bluestone Consulting, Inc., a
Delaware corporation ("Bluestone") by the Company and the distribution of its
stock to the shareholders (the "Spin-off") did not and will not result in any
Tax to the Company, and for purposes of subsection 2.24(a) above, such formation
and distribution shall not be considered a transaction occurring in the ordinary
course of business; and
(f) For purposes of this Agreement, the term "Tax" or
"Taxes" means federal, state, county, local, foreign or other income, gross
receipts, ad valorem, franchise, profits, sales or use, transfer, registration,
excise, utility, environmental, communications, real or personal property,
capital stock, license, payroll, wage or other withholding, employment, social
security, severance, stamp, occupation, alternative or add-on minimum, estimated
and other taxes of any kind whatsoever (including, without limitation,
deficiencies, penalties, additions to tax, and interest attributable thereto)
whether disputed or not. The term "Tax Return" means any return, information
11
report or filing with respect to Taxes, including any schedules attached thereto
and including any amendment thereof.
2.25 INSURANCE. The Company has in full force and effect fire
and casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed.
2.26 BOOKS AND RECORDS. The minute books and stock record
books of the Company provided to the Investors contain (i) minutes of all
meetings of the stockholders, board of directors and any committee of the board
of directors, (ii) written statements of all actions taken by the stockholders,
board of directors and any committee of the board of directors without a
meeting, and (iii) records of the issuance, transfer and cancellation of all
shares of capital stock and other securities, in each case since the time of
incorporation. Such minute books and stock record books reflect all transactions
referred to there in accurately and completely.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor
hereby severally represents and warrants that:
3.1 AUTHORIZATION. Such Investor has full power and authority
to enter into the Transaction Agreements, and each such agreement constitutes
its valid and legally binding obligation, enforceable in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Investors' Rights Agreement may be limited by applicable federal or state
securities laws.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made
with such Investor in reliance upon such Investor's representation to the
Company, which by such Investor's execution of this Agreement such Investor
hereby confirms, that the Shares to be received by such Investor and the
Conversion Shares (collectively, the "Securities") will be acquired for
investment for such Investor's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof except in
accordance with the Securities Act of 1933, as amended (the "Act"), and that
such Investor has no present intention of selling, granting any participation
in, or otherwise distributing the same. By executing this Agreement, such
Investor further represents that such Investor does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities.
3.3 DISCLOSURE OF INFORMATION. Such Investor believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Shares. Such Investor further represents that it has had
an opportunity to ask questions and receive answers from the Company regarding
the terms and conditions of the offering of the Shares and the business,
properties, prospects and financial condition of the Company. The foregoing,
however, does not
12
limit or modify the representations and warranties of the Company in Section 2
of this Agreement or the right of the Investors to rely thereon.
3.4 INVESTMENT EXPERIENCE. Such Investor is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment, and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Shares. If
other than an individual, Investor also represents it has not been organized for
the purpose of acquiring the Shares.
3.5 ACCREDITED INVESTOR. Such Investor is an "accredited
investor" within the meaning of Securities and Exchange Commission ("SEC") Rule
501 of Regulation D, as presently in effect.
3.6 RESTRICTED SECURITIES. Such Investor understands that the
Shares and Conversion Shares are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and therefore may not be sold,
transferred or otherwise disposed of without registration under the Act or an
exemption therefrom, and that in the absence of an effective registration
statement covering the Shares or the Conversion Shares or an available exemption
from registration under the Act, the Shares or the Conversion Shares must be
held indefinitely. In this connection, such Investor represents that it is
familiar with SEC Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
3.7 FURTHER LIMITATIONS ON DISPOSITION. Without in any way
limiting the representations set forth above, such Investor further agrees not
to make any disposition of all or any portion of the Securities unless and until
the transferee has agreed in writing for the benefit of the Company to be bound
by this Section 3 and the Investors' Rights Agreement provided and to the extent
this Section and such agreement are then applicable, and:
(a) There is then in effect a Registration Statement
under the Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b)(i) Such Investor shall have notified the Company
of the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of paragraphs (a)
and (b) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by an Investor that is a partnership to a partner of
such partnership or a retired partner of such partnership who retires
13
after the date hereof, or to the estate of any such partner or retired partner
or the transfer by gift, will or intestate succession of any partner to his or
her spouse or to the siblings, lineal descendants or ancestors of such partner
or his or her spouse, if the transferee agrees in writing to be subject to the
terms hereof to the same extent as if he or she were an original Investor
hereunder.
3.8 LEGENDS. It is understood that the certificates evidencing
the Securities may bear one or all of the following legends:
(a) "These securities have not been registered
under the Securities Act of 1933, as
amended, or any state securities laws. They
may not be sold, offered for sale, pledged
or hypothecated in the absence of a
registration statement in effect with
respect to the securities under such Act and
such state securities laws or an opinion of
counsel satisfactory to the Company that
such registration is not required or unless
sold pursuant to Rule 144 of such Act."
3.9 CERTAIN TAX MATTERS.
(a) Such investor has no present plan or intention,
individually or together with other investors, to cause the company to,
liquidate, merge with another entity, or sell or otherwise dispose of the assets
of the company other than in the ordinary course if business or to cause the
company to cease carrying on the business of the company.
(b) Such investor acknowledges that the transactions
contemplated by the contribution and distribution agreement are intended to
qualify as transactions described in sections 368(a)(1)(d) and 355 of the code
and such investor has no present plan or intention to take any action or
position inconsistent therewith or with the consummation of such transactions as
contemplated in the contribution and distribution agreement.
4. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING. The obligations of
each Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
in writing thereto:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of the Closing.
4.2 PERFORMANCE. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing.
4.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to each Investor at the Closing a certificate stating that the
conditions specified in Sections 4.1 and 4.2 have
14
been fulfilled and stating that there shall have been no adverse change in the
business, affairs, prospects, operations, properties, assets or condition of the
Company since the date of the Financial Statements.
4.4 QUALIFICATIONS. All authorizations, approvals, or permits,
if any, of any governmental authority or regulatory body of the United States or
of any state (except for certain post-Closing Blue Sky filings required under
applicable state securities laws) that are required in connection with the
lawful issuance and sale of the Shares pursuant to this Agreement shall be duly
obtained and effective as of the Closing.
4.5 PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to Investors' special counsel, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
4.6 EMPLOYEE AGREEMENTS. [INTENTIONALLY OMITTED].
4.7 OPINION OF COMPANY COUNSEL. Each Investor shall have
received from counsel for the Company, an opinion, dated as of the Closing, in
the form and content satisfactory to the Investors and attached hereto as
EXHIBIT C.
4.8 TAX OPINION OF COMPANY COUNSEL. Each Investor shall
have received from counsel of the Company, a tax opinion, dated as of the
Closing, in form and content satisfactory to the Investors and attached
hereto as EXHIBIT D, that the Spin-off qualifies as a tax free reorganization
within the meaning of Section 368(a)(1)(D) and Section 355 of the Code and
that, except as otherwise provided in the Disclosure Letter, which such
disclosures shall be satisfactory to each of the Investors, no federal income
tax will be imposed on the Company by reason of the Spin-off.
4.9 INVESTORS' RIGHTS AGREEMENT. The Company and each Investor
shall have entered into an investors' rights agreement in the form attached
hereto as EXHIBIT E (the "Investors' Rights Agreement").
4.10 RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT. The Company
and certain key members of the Company's management and those individuals who
hold more than two percent (2.0%) of the outstanding Common Stock of the Company
as of the Closing (on a fully as-converted basis, as if all shares of Series A
Preferred Stock and all convertible securities had been fully converted into
shares of Common Stock) shall have entered into a right of first refusal and
co-sale agreement in the form satisfactory to the Investors and attached hereto
as EXHIBIT F (the "Right of First Refusal and Co-Sale Agreement").
4.11 VOTING AGREEMENT. The Company and each of Baiada and ▇▇▇▇
▇▇▇▇▇▇, shall have entered into a voting agreement in the form attached hereto
as EXHIBIT G (the "Voting Agreement").
15
4.12 DUE DILIGENCE. All matters investigated by the Investors
in the course of their due diligence shall be satisfactory to each of the
Investors, special counsel for Investors and Ernst & Young, L.P., accountants
for the Investors.
4.13 RESTATED CERTIFICATE OF INCORPORATION. The Restated
Certificate in the form satisfactory to the Investors and attached hereto as
EXHIBIT A shall have been adopted by the Company and filed with the Secretary of
State of Delaware.
4.14 KEY PERSON LIFE INSURANCE. The Company shall have
obtained from financially sound and reputable insurers, term life insurance on
the life of Baiada in the amount of $2,000,000, and on each of the lives of ▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇ in the amount of $500,000. Such policies shall name the
Company as loss payee and shall not be cancelable by the Company without prior
approval of at least a majority of the shares of Series A Preferred Stock then
outstanding.
4.15 RELATED AGREEMENTS. Each Investor shall have received
from the Company, the following agreements in form and content satisfactory to
each of the Investors:
(i) BANK LENDING AGREEMENTS. Any and all lending
agreements by and between the Company and its primary lender for working
capital, capital equipment leases and software leases;
(ii) SHAREHOLDER LENDING AGREEMENTS. Any and all
lending agreements by and between the Company and the shareholders of Bluestone;
and
(iii) SERVICES AGREEMENT. Any and all agreements by
and between the Company and Bluestone regarding the provision of consulting
services by Bluestone to the Company.
4.16 CONSUMMATION OF THE SPIN-OFF. The Closing of the
transactions contemplated by the Contribution and Distribution Agreement dated
April 17, 1997, by and between Bluestone and the Company shall have been
consummated.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Investor:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investors contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.
5.2 PAYMENT OF PURCHASE PRICE. The Investors shall have
delivered the purchase price specified in Section 1.1.
16
5.3 QUALIFICATIONS. All authorizations, approvals, or permits,
if any, of any governmental authority or regulatory body of the United States or
of any state (except for certain post-Closing Blue Sky filings required under
applicable state securities laws) that are required in connection with the
lawful issuance and sale of the Shares pursuant to this Agreement shall be duly
obtained and effective as of the Closing.
5.4 RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT. The
Investors shall have entered into the Right of First Refusal and Co-Sale
Agreement.
5.5 VOTING AGREEMENT. The Investors shall have entered into
the Voting Agreement.
6. INDEMNIFICATION.
(a) In addition to all rights and remedies available to the
Investors at law or in equity, the Company shall indemnify, defend and hold
harmless each of the Investors and any parent, subsidiary, associate, affiliate,
partner, shareholder, director, officer, shareholder or agent of each such
Investor, and each subsequent holder of Series A Preferred Stock and their
respective affiliates, stockholders, officers, directors, employees, agents,
representatives, successors and permitted assigns (all of the foregoing are
collectively referred to as the "Indemnified Parties") from and against and pay
on behalf of or reimburse such party as and when incurred all losses (including,
without limitation, diminutions in value), liabilities, demands, claims, actions
or causes of action, costs, damages, judgments, debts, settlements, assessments,
deficiencies, taxes, penalties, fines or expenses, whether or not arising out of
any claims by or on behalf of any third party, including interest, penalties,
reasonable attorneys' fees and expenses and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing (collectively,
"Losses") which any such party may suffer, sustain or become subject to, as a
result of, in connection with, or relating to or by virtue of:
(i) any material misrepresentations or material
breach of warranty on the part of the Company under Section 2;
(ii) without duplication of subsection 6(a)(i), any
material misrepresentation in or material omission from any of the
representations or warranties contained in any certificate, document or
instrument or the Disclosure Letter delivered to the Investors by or on behalf
of the Company in connection herewith;
(iii) any material nonfulfillment or breach of any
covenant or agreement on the part of the Company under this Agreement or under
any certificate, document or instrument delivered in connection therewith; or
(iv) any action, demand, proceeding, investigation or
claim by any third party (including, without limitation, governmental agencies)
against or affecting the Company and/or its affiliates or subsidiaries which, if
successful, would give rise to or evidence the existence of or
17
relate to a material breach of (A) any of the representations or warranties at
the time made or (B) covenants of the Company.
(b) Notwithstanding the foregoing, and subject to the
following sentence, upon judicial determination, which is final and no longer
appealable, that the act or omission giving rise to the indemnification
hereinabove provided resulted primarily out of or was based primarily upon the
Indemnified Party's gross negligence, fraud or willful misconduct (unless such
action was based upon the Indemnified Party's reliance in good faith upon any of
the representations, warranties, covenants or promises made by the Company
herein), the Company shall not be responsible for any Losses sought to be
indemnified in connection therewith, and the Company shall be entitled to
recover from the Indemnified Party all amounts previously paid in full or
partial satisfaction of such indemnity, together with all costs and expenses of
the Company reasonably incurred in effecting such recovery, if any.
(c) All indemnification rights hereunder shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereunder indefinitely, regardless of any
investigation, inquiry or examination made for or on behalf of, or any knowledge
of any of the Investors and/or any of the other Indemnified Parties or the
acceptance by either Investor of any certificate or opinion.
(d) If for any reason the indemnity provided for in this
Section 6 is unavailable to any Indemnified Party or is insufficient to hold
each such Indemnified Party harmless from all such Losses arising with respect
to the transactions contemplated hereunder, then the Company and the Indemnified
Party shall each contribute to the amount paid or payable by such Loss in such
proportion as is appropriate to reflect not only the relative benefits received
by the Company on the one hand, and such Indemnified Party on the other, but
also the relative fault of the Company on the one hand, and the Indemnified
Party on the other, as well as any relevant equitable considerations. In
addition, the Company agrees to reimburse any Indemnified Party upon demand for
all reasonable expenses (including legal counsel fees) incurred by such
Indemnified Party or any such other person in connection with investigating,
preparing or defending any such action or claim. The indemnity, contribution and
expense reimbursement obligations that the Company has under this Section 6
shall be in addition to any liability that the Company may otherwise have. The
Company further agrees that the indemnification and reimbursement commitments
set forth in this Agreement shall apply whether or not the Indemnified Party is
a formal party to any such lawsuits, claims or other proceedings.
(e) Any indemnification of either Investor or any other
Indemnified Party by the Company pursuant to this Section 6 shall be effected by
wire transfer of immediately available funds from the Company to an account
designated by such Investor or such other Indemnified Party within 15 days after
the determination thereof.
7. MISCELLANEOUS.
7.1 SURVIVAL OF WARRANTIES. The warranties, representations
and covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution,
18
delivery and performance of this Agreement and the Closing and shall in no way
be affected by any investigation of the subject matter thereof made by or on
behalf of the Investors or the Company.
7.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any Securities). Nothing in this Agreement express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.3 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the Commonwealth of Pennsylvania without giving
effect to conflict of law principles.
7.4 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one counterpart hereof.
7.5 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 NOTICES. Unless otherwise provided, all notices, consents
or other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given (i) when
delivered personally, (ii) three business days after being mailed by first class
mail, postage prepaid, or (iii) one business day after being sent by a reputable
overnight delivery service, postage or delivery charges prepaid, to the parties
at their respective addresses stated on the signature page of this Agreement.
Notices may also be given by prepaid telegram or facsimile and shall be
effective on the date transmitted if confirmed within 24 hours thereafter by a
signed original sent in the manner provided in the preceding sentence. Any party
may change its address for notice and the address to which copies must be sent
by giving notice of the new addresses to the other parties in accordance with
this Section 7.6, except that any such change of address notice shall not be
effective unless and until received.
7.7 FINDER'S FEE. Each party represents that it neither is nor
will be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which such Investor or any of its officers, partners,
employees, or representatives is responsible. The Company agrees to indemnify
and hold harmless each Investor from any liability for any commission or
compensation in the nature of a finders' fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.
7.8 EXPENSES. Subject to the provisions of Section 6, whether
or not the Closing is effected, the Company shall pay all costs and expenses
that it incurs with respect to the
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negotiation, execution, delivery and performance of this Agreement. If the
Closing is effected, the Company shall, at the Closing, reimburse the reasonable
fees and out-of-pocket expenses of special counsel for the Investors and
auditors for the Investors. Investors will make all reasonable efforts to ensure
that such fees (exclusive of such out-of-pocket expenses) do not exceed $60,000.
If any action at law or in equity is necessary to enforce or interpret the terms
of the Transaction Agreements, the prevailing party shall be entitled to
reasonable attorney's fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
7.9 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Common Stock issued or issuable upon conversion of the Shares.
Any amendment or waiver effected in accordance with this Section 7.9 shall be
binding upon each holder of any such securities purchased under this Agreement
at the time outstanding (including securities into which such securities are
convertible), each future holder of all such securities, and the Company.
7.10 SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
7.11 AGGREGATION OF STOCK. All Shares held or acquired by
affiliated entities or persons shall be aggregated together for the purpose of
determining the availability of any rights under this Agreement.
7.12 ENTIRE AGREEMENT. This Agreement and the other
Transaction Agreements referred to herein constitute the entire agreement with
respect to the subject matter hereof among the parties, and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
7.13 DEFINITION OF INVESTOR. The term "Investor" as it is used
in Sections 2, 4 (except for subsections 4.9 and 4.11) and 6 of this Agreement
only shall not include Baiada.
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IN WITNESS WHEREOF, the parties have executed this Stock Purchase
Agreement as of the date first above written.
BLUESTONE SOFTWARE, INC.
By:/s/ ▇▇▇ ▇▇▇▇▇▇
-------------------------
Name: ▇▇▇ ▇▇▇▇▇▇
Title: President
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
INVESTORS:
THE P/A FUND, L.P.
By: APA PENNSYLVANIA PARTNERS II, L.P.,
its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: General Partner
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
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PATRICOF PRIVATE INVESTMENT CLUB, L.P.
By: APA EXCELSIOR IV PARTNERS, L.P.,
its General Partner
By: PATRICOF & CO. MANAGERS, INC.,
its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. Case
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. Case
Title: Vice President
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
APA EXCELSIOR IV, L.P.
By: APA EXCELSIOR IV PARTNERS, L.P.,
its General Partner
By: PATRICOF & CO. MANAGERS, INC.,
its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. Case
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. Case
Title: Vice President
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
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APA EXCELSIOR IV/OFFSHORE, L.P.
By: PATRICOF & CO. VENTURES, INC.,
its Investment Advisor
By: /s/ ▇▇▇▇▇▇▇ ▇. Case
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. Case
Title: Vice President
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
/s/ ▇▇▇ ▇▇▇▇▇▇
------------------------------------------
▇▇▇ ▇▇▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇
------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇
Address: ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
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