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Exhibit 10.9
MOBIUS MANAGEMENT SYSTEMS, INC.
STOCK PURCHASE AGREEMENT
As of May 12, 1997
To the Investors
(as hereinafter defined)
Dear Sirs:
The undersigned, MOBIUS MANAGEMENT SYSTEMS, INC., a Delaware corporation
(the "Corporation"), and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (each
individually, a "Founder" and collectively, the "Founders"), hereby agree with
each of the parties listed on Schedule I hereto (each, an "Investor", and
collectively, the "Investors") as follows:
SECTION 1. Amended and Restated Certificate of Incorporation; Certificate
of Designation. Prior to the execution and delivery of this Agreement, the
Corporation shall have filed with the Secretary of State of the State of
Delaware an Amended and Restated Certificate of Incorporation (the "Certificate
of Incorporation"), a copy of which is attached hereto as Exhibit A, and a
Certificate of Designation, Preferences and Rights of Series A Convertible
Preferred Stock (the "Certificate of Designation"), a copy of which is attached
hereto as Exhibit B and which designates 40,910 shares of Preferred Stock, $.01
par value (the "Preferred Stock"), as Series A Convertible Preferred Stock (the
"Series A Preferred Stock") and sets forth the terms, designations, powers,
preferences and relative, participating, optional and other special rights, and
the qualifications, limitations and restrictions, of the Series A Preferred
Stock.
SECTION 2. Issuance and Sale of Preferred Shares and Reservation of
Reserved Common Shares; Closing.
2.1. Issuance of Preferred Shares and Reservation of Reserved Common
Shares. Subject to the terms and conditions hereof, the Corporation has
authorized the issuance on the Closing Date (as defined in Section 2.4 hereof)
of an aggregate of 40,910 shares of Series A Preferred Stock (such shares of
Series A Preferred Stock being sometimes hereinafter collectively referred to as
the "Preferred Shares"), and the reservation of an equal number of shares of
Common Stock, $.01 par value (the "Common Stock"), of the Corporation for
issuance upon conversion of the Preferred Shares (such reserved Common Stock
being sometimes hereinafter referred to as the "Reserved Common Shares").
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2.2. Agreement to Sell and Purchase the Series A Preferred Shares. Subject
to the terms and conditions hereof, the Corporation is selling to each Investor
and each Investor is severally purchasing from the Corporation at the Closing
(as hereinafter defined), the number of Preferred Shares set forth opposite the
name of such Investor on Schedule I hereto for a purchase price of $293.33 per
share, representing an aggregate purchase price of $12,000,130.33 for the
Preferred Shares purchased by all Investors.
2.3. Delivery of Series A Preferred Shares. At the Closing, the
Corporation shall deliver to each Investor a certificate or certificates,
registered in the name of such Investor, representing that number of Series A
Preferred Shares being purchased by such Investor. Delivery of certificates
representing Series A Preferred Shares shall be made against receipt by the
Corporation of a check payable to the Corporation or a wire transfer to an
account designated by the Corporation in the full amount of the purchase price
for the Series A Preferred Shares being purchased by such Investor at the
Closing.
2.4. The Closing. The closing (the "Closing") hereunder with respect to
the transactions contemplated hereby is taking place on the date hereof at the
offices of ▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP, ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ (the date hereof sometimes being referred to herein as the "Closing
Date").
SECTION 3. Representations and Warranties of the Corporation and the
Founders. Except as otherwise set forth on the Disclosure Schedule attached
hereto (the "Disclosure Schedule"), such Disclosure Schedule to be arranged in
sections corresponding to the numbered and lettered sections contained in this
Section 3 (it being understood, however, that any disclosure set forth in any
section of the Disclosure Schedule shall be deemed to qualify all other sections
in this Section 3 to which such disclosure may be applicable), the Corporation
and the Founders hereby jointly and severally represent and warrant to the
Investors as follows:
3.1. Organization; Power and Authority; Qualifications. The Corporation 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
corporate authority to own, lease and operate its properties, to carry on its
business as presently conducted and as presently proposed to be conducted and to
carry out the transactions contemplated by this Agreement, the Stockholders'
Agreement (as defined in Section 5.5 hereof) and the Registration Rights
Agreement (as defined in Section 5.6 hereof) (each, a "Document" and
collectively, the "Documents"). Each Founder has the full and absolute power and
capacity to enter into the Documents and to
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carry out the transactions contemplated thereby. The Corporation is qualified to
transact business as a foreign corporation and is in good standing in the State
of New York and all other jurisdictions in which the character of the property
owned or leased or the nature of the activities conducted by the Corporation
makes such qualification necessary and the failure to so qualify would have a
material adverse effect on the Corporation. The Corporation has provided
▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP, special counsel to the Investors, with true,
correct and complete copies of its Certificate of Incorporation, including the
Certificate of Designation, and its By-laws (the "By-laws"), in each case, as
amended to, and as in effect on, the date hereof, copies of which are attached
hereto as Exhibits A, B and C, respectively.
3.2. Authorization of the Documents; No Conflicts. The execution, delivery
and performance by the Corporation of the Documents have been duly authorized by
all requisite corporate action by the Corporation and each such Document
constitutes a valid and binding obligation of the Corporation, enforceable
against the Corporation in accordance with its terms. The Documents have been
duly executed and delivered by the Founders and each such Document constitutes a
valid and binding obligation of each Founder, enforceable against such Founder
in accordance with its terms. The execution, delivery and performance of the
Documents and the consummation of the transactions contemplated thereby and
compliance with the provisions thereof by the Corporation and the Founders, and
the issuance, sale and delivery of the Series A Preferred Shares and the
Reserved Common Shares by the Corporation, will not (a) to the Best Knowledge
(as hereinafter defined) of the Corporation and the Founders, violate any
provision of law, statute, rule or regulation, or any ruling, writ, injunction,
order, judgment or decree of any court, administrative agency or other
governmental body applicable to the Corporation, either Founder or any of their
respective properties or assets or (b) conflict with or result in any breach of
any of the terms, conditions or provisions of, or constitute (with due notice or
lapse of time, or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of any
Encumbrance (as defined in Section 3.11 hereof) upon any of the properties or
assets of the Corporation or either Founder under, the Certificate of
Incorporation or By-laws, or, to the Best Knowledge of the Corporation and the
Founders, any note, indenture, mortgage, lease agreement or other contract,
agreement or instrument to which the Corporation or either Founder is a party or
by which any of them or any of their respective properties is bound or affected,
except for any such violations, conflicts, breaches, defaults or rights of
termination, cancellation or acceleration that would not, individually or in the
aggregate, have a material adverse effect on the transactions contemplated
hereby or on the business, properties, assets or condition (financial or
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otherwise) of the Corporation and the Subsidiaries (as hereinafter defined),
taken as a whole.
3.3. Authorization of Series A Preferred Shares and Reserved Shares. The
authorization, issuance, sale and delivery of the Series A Preferred Shares and
the authorization, reservation, issuance, sale and delivery of the Reserved
Common Shares have been duly authorized by all requisite corporate action of the
Corporation, and when issued, sold and delivered upon conversion of the Series A
Preferred Shares, as the case may be, the Reserved Common Shares will be validly
issued and outstanding, fully paid and nonassessable with no personal liability
attaching to the ownership thereof, and not subject to preemptive or any other
similar rights of the stockholders of the Corporation or others (except as
contemplated by the Stockholders' Agreement). The terms, designations, powers,
preferences and relative, participating, optional and other special rights, and
the qualifications, limitations and restrictions, of the Series A Preferred
Shares are as stated in the Certificate of Designation.
3.4. No Consent or Approval Required. To the Best Knowledge of the
Corporation and the Founders, no consent of any person and no consent, approval
or authorization of, or declaration to or filing with, any governmental or
regulatory authority is required for the valid authorization, execution and
delivery by the Corporation or either Founder of any Document or for the
consummation of the transactions contemplated thereby or for the valid
authorization, issuance and delivery of the Series A Preferred Shares, or for
the valid authorization, reservation, issuance and delivery of the Reserved
Common Shares, other than (a) those consents, approvals, authorizations,
declarations or filings (including those filings required to be made under
applicable Federal securities and/or state securities and "blue sky" laws) which
have been or will timely be obtained or made, as the case may be, and which are
identified on Section 3.4 of the Disclosure Schedule and (b) those consents of
persons (but not governmental or regulatory authorities) which the failure to
obtain would not have a material adverse effect on the business, properties,
assets or condition (financial or otherwise) of the Corporation and the
Subsidiaries, taken as a whole.
3.5. Capitalization. (a) The authorized capital stock of the Corporation
immediately upon the consummation at the Closing of the transactions
contemplated hereby, including the application of the proceeds contemplated by
Section 3.26 hereof and of the Disclosure Schedule, shall consist of:
(i) 400,000 shares of Common Stock, $.01 par value, of which (A)
109,090 shares shall have been validly issued and be outstanding, fully
paid and nonassessable, with no personal liability attaching to
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the ownership thereof, (B) 40,910 shares shall have been duly reserved for
issuance upon conversion of the Preferred Shares and (C) 20,455 shares
shall have been duly reserved for issuance upon conversion of the Class A
Common (as hereinafter defined);
(ii) 50,000 shares of Class A Non-Voting Common Stock, $.01 par
value ("Class A Common"), of which (A) no shares shall have been validly
issued or be outstanding and (B) 20,455 shares shall have been duly
reserved for issuance to officers, employees or directors of, or
consultants to, the Corporation; and
(iii) 200,000 shares of Preferred Stock, $.01 par value, of which
40,910 shares shall have been duly designated as Series A Convertible
Preferred Stock, all of which shares shall have been validly issued and be
outstanding, fully paid, nonassessable, with no personal liability
attaching to the ownership thereof.
(b) Section 3.5 of the Disclosure Schedule contains a list of (i)
all holders of capital stock of the Corporation, including the number of shares
of capital stock held by each such holder, and (ii) all outstanding warrants,
options, agreements, convertible securities or other commitments pursuant to
which the Corporation is or may become obligated to issue any shares of the
capital stock or other securities of the Corporation, which list names all
persons entitled to receive such shares or other securities and the shares of
capital stock or other securities required to be issued thereunder. Except as
contemplated by the Documents, there are, and immediately upon consummation at
the Closing of the transactions contemplated hereby, there will be, no
preemptive or similar rights to purchase or otherwise acquire shares of the
capital stock of the Corporation pursuant to any provision of law, the
Certificate of Incorporation or By-laws or any agreement to which the
Corporation is a party; and there is, and immediately upon the consummation at
the Closing of the transactions contemplated hereby, there will be, no
agreement, restriction or encumbrance (such as a right of first refusal, right
of first offer, proxy, voting trust, voting agreement, etc.) with respect to the
sale or voting of any shares of capital stock of the Corporation (whether
outstanding or issuable upon conversion or exercise of outstanding securities),
except as contemplated by the Documents. All shares of the capital stock and
other securities issued by the Corporation at or prior to the Closing have been
or are being issued in transactions exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act"), and all applicable
state securities or "blue sky" laws. The Corporation has not violated the
Securities Act or any applicable state securities or "blue sky" laws in
connection with the
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issuance of any shares of capital stock or other securities at or prior to the
Closing.
3.6. Subsidiaries. Set forth in Section 3.6 of the Disclosure Schedule is
a complete list of each subsidiary of the Corporation (each, a "Subsidiary" and
collectively, the "Subsidiaries") and all other direct or indirect proprietary
interests of the Corporation in any other corporation, association, trust,
partnership, joint venture or other entity. The Corporation owns, of record and
beneficially, all of the issued and outstanding capital stock of each
Subsidiary. To the Best Knowledge of the Corporation and the Founders, the
Corporation has provided ▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP, special counsel to
the Investors, with true, correct and complete copies of the certificate of
incorporation and by-laws, or similar constituent documents, of each Subsidiary.
3.7. No Defaults. Neither the Corporation nor, to the Best Knowledge of
the Corporation and the Founders, any of the Subsidiaries is in default (a)
under its certificate of incorporation or by-laws, or any Contract (as
hereinafter defined) or (b) of any order, writ, injunction or decree of any
court or any Federal, state, municipal or other domestic or foreign governmental
department, commission, board, bureau, agency or instrumentality, other than any
such defaults which would not have a material adverse effect on the business,
properties, assets or condition (financial or otherwise) of the Corporation and
the Subsidiaries, taken as a whole. There exists no condition, event or act
which constitutes, or which after notice, lapse of time or both, would
constitute, a default under any of the foregoing.
3.8. Financial Information. (a) Section 3.8(a) of the Disclosure Schedule
contains the following information (collectively, the "Financial Statements"):
(i) the audited consolidated balance sheet of the Corporation and
the Subsidiaries as of June 30, 1996, and the related consolidated
statements of operations, stockholders' equity and cash flows (including
the notes thereto) for the fiscal year then ended, certified by KPMG Peat
Marwick LLP; and
(ii) the unaudited consolidated balance sheet of the Corporation and
the Subsidiaries (the "Interim Balance Sheet") as of March 31, 1997 (the
"Interim Balance Sheet Date"), and the related unaudited consolidated
statements of operations and cash flows for the nine-month period then
ended (collectively, the "Interim Financial Statements"), prepared by the
Corporation.
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(b) The Financial Statements (in the case of the Interim Financial
Statements, to the Best Knowledge of the Corporation and the Founders) (i) are
in accordance with the books and records of the Corporation and the Subsidiaries
and (ii) present fairly the financial condition and results of operations of the
Corporation and the Subsidiaries as of the date and for the periods indicated
(except as otherwise set forth therein) in accordance with generally accepted
accounting principles consistently applied (except as set forth in the notes
thereto and subject, in the case of the Interim Financial Statements, to normal
year-end audit adjustments, which adjustments shall not be material individually
or in the aggregate).
3.9. Absence of Undisclosed Liabilities. To the Best Knowledge of the
Corporation and the Founders, as of the Interim Balance Sheet Date, (a) neither
the Corporation nor any of the Subsidiaries had any material liability (whether
matured or unmatured, fixed or contingent) which was not provided for or
disclosed in the Interim Balance Sheet and (b) all liability reserves
established by the Corporation and set forth in the Interim Balance Sheet are
adequate for all such liabilities at the applicable date thereof. To the Best
Knowledge of the Corporation and the Founders, there are no loss contingencies
(as such term is used in Statement of Financial Accounting Standards No. 5
issued by the Financial Accounting Standards Board in March 1975) which are not
adequately provided for in the Interim Balance Sheet as required by said
Statement No. 5.
3.10. Absence of Changes. Since the Interim Balance Sheet Date there has
not been (a) any material adverse change in the financial condition, results of
operations, assets, liabilities or business of the Corporation and the
Subsidiaries, taken as a whole, (b) any material borrowing or agreement to
borrow any funds or any liability or obligation of any nature whatsoever
(contingent or otherwise) incurred by the Corporation or any of the
Subsidiaries, other than liabilities or obligations incurred in the ordinary
course of business, (c) any material asset or property of the Corporation or any
of the Subsidiaries made subject to a material Encumbrance of any kind, (d) any
waiver of any valuable right of the Corporation or any of the Subsidiaries, or
the cancellation of any debt or claim held by the Corporation or any of the
Subsidiaries, (e) any payment of dividends on, or other distributions with
respect to, or any direct or indirect redemption or acquisition of, any shares
of the capital stock of the Corporation, or any agreement or commitment
therefor, (f) any issuance of any stock, bond or other security of the
Corporation or any of the Subsidiaries or any agreement or commitment therefor
(including, without limitation, options, warrants or rights or agreements or
commitments to purchase such securities or grant such options, warrants or
rights), (g) any mortgage, pledge, sale, assignment or transfer
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of any material tangible or intangible assets of the Corporation or any of the
Subsidiaries, except, with respect to tangible assets, in the ordinary course of
business, (h) any loan of more than $25,000 individually or $200,000 in the
aggregate at any one time outstanding by the Corporation or any of the
Subsidiaries to any officer, director, employee, consultant or stockholder of
the Corporation or any of the Subsidiaries, or any agreement or commitment
therefor, (i) any damage, destruction or loss (whether or not covered by
insurance) materially affecting the business, assets, properties, operations or
condition, financial or otherwise, or results of operations of the Corporation
and the Subsidiaries, taken as a whole, (j) any extraordinary increase, direct
or indirect, in the compensation paid or payable to any officer, director,
employee, consultant or agent of the Corporation or any of the Subsidiaries or
(k) any change in the accounting methods, practices or policies followed by the
Corporation in the preparation of the Financial Statements or any change in
depreciation or amortization policies or rates theretofore adopted in the
preparation of the Financial Statements.
3.11. Title to Assets, Properties and Rights. The Corporation and the
Subsidiaries have good and marketable title to all material properties,
interests in properties and assets, real, personal and mixed, tangible or
intangible, used in the conduct of their business, free and clear of all
material mortgages, judgments, claims, liens, security interests, pledges,
escrows, charges or other encumbrances of any kind or character whatsoever,
whether or not related to credit or the borrowing of money ("Encumbrances"),
except for (i) Encumbrances disclosed in the Financial Statements; (ii)
Encumbrances for current Taxes (as defined in Section 3.20) not yet due and
payable or which are past due and being contested in good faith; (iii)
mechanics', materialmens', carriers', warehousemens', landlords' and similar
liens securing obligations not yet delinquent or which are being contested in
good faith; (iv) such imperfections of title, covenants, encroachments and
Encumbrances as do not, in any material respect, detract from the value or
interfere with the present or proposed use of the properties or assets subject
thereto or affected thereby; and (v) security interests in personal property
taken by or granted to a person or entity who, by making advances or incurring
an obligation, gives value to enable the Corporation to acquire rights in or the
use of such property or asset, provided that such security interest does not
extend to or cover any other property and the total cost to the Corporation that
would be required to discharge such security interest in full does not exceed
the value so given by such person or entity to the Corporation.
3.12. Burdensome Restrictions. To the Best Knowledge of the Corporation
and the Founders, neither the Corporation nor any of the Subsidiaries is
obligated under any contract or
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agreement or subject to any charter or other corporate restriction which
presently materially adversely affects, or in the future would reasonably be
expected to materially adversely affect, the business, properties, assets or
condition (financial or otherwise) of the Corporation and the Subsidiaries,
taken as a whole.
3.13. Intellectual Property Rights. (a) Section 3.13 of the Disclosure
Schedule sets forth each copyright, trademark, service ▇▇▇▇, tradename or patent
owned by the Corporation or any of the Subsidiaries or in which the Corporation
or any of the Subsidiaries asserts proprietary rights, and each Federal, state
or foreign registration thereof or application relating to the registration
thereof.
(i) To the Best Knowledge of the Corporation and the Founders, the
Corporation and the Subsidiaries own or have the right to use all
Intellectual Property Rights material to the conduct of their business as
presently conducted (the "Requisite Rights"). The Corporation and the
Subsidiaries have the right to use, sell, license and bring actions for
the infringement of the Intellectual Property Rights owned by them. To the
Best Knowledge of the Corporation and the Founders, the Corporation and
the Subsidiaries have the right to sell and license all products and
services sold or licensed by them.
(ii) To the Best Knowledge of the Corporation and the Founders, no
material royalties, honorariums, fees or other amounts are payable by the
Corporation or any of the Subsidiaries to other persons by reason of the
ownership, sale, lease, license or use of the Requisite Rights.
(iii) No product, service or process manufactured, marketed, sold or
used, or currently proposed to be manufactured, marketed, sold or used, by
the Corporation or any of the Subsidiaries, to the Best Knowledge of the
Corporation and the Founders, violates, or will violate, any license or
infringes, or will infringe, any current Intellectual Property Rights of
another; and there is no pending or, to the Best Knowledge of the
Corporation and the Founders, threatened claim or litigation against the
Corporation or any of the Subsidiaries (nor does there exist any basis
therefor) contesting the validity of or right to use any of the foregoing,
nor has the Corporation or any of the Subsidiaries received any notice
that any of the Requisite Rights or the operation or proposed operation of
the business of the Corporation and the Subsidiaries conflicts, or will
conflict, with the asserted Intellectual Property Rights of others, nor,
to the Best Knowledge of the Corporation and the Founders, does there
exist any basis for any such conflict, in each case, where such violation,
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claim, litigation or conflict would reasonably be expected to have a
material adverse effect on the business, properties, assets or condition
(financial or otherwise) of the Corporation and the Subsidiaries, taken as
a whole.
(iv) To the Best Knowledge of the Corporation and the Founders, no
third party is infringing or has infringed on any of the Requisite Rights.
(b) As used herein, the term "Intellectual Property Rights" means
all industrial and intellectual property rights, including, without limitation,
Proprietary Technology, patents, patent applications, patent rights, trademarks,
trademark applications, trade names, service marks, service ▇▇▇▇ applications,
copyrights, know-how, certificates of public convenience and necessity,
franchises, licenses, trade secrets, proprietary processes and formulae. As used
herein, "Proprietary Technology" means all source and object code, algorithms,
architecture, structure, display screens, layouts, processes, inventions, trade
secrets, know-how, development tools and other proprietary rights owned by the
Corporation pertaining to any product or service manufactured, marketed or sold,
or proposed to be manufactured, marketed or sold (as the case may be), by the
Corporation or used, employed or exploited in the development, license, sale,
marketing, distribution or maintenance thereof, and all documentation and media
constituting, describing or relating to the above, including, without
limitation, manuals, memoranda, know-how, notebooks, patents and patent
applications, trademarks and trademark applications, copyrights and copyright
applications, records and disclosures.
3.14. Employment of Officers, Employees and Consultants. No third party
has asserted or, to the Best Knowledge of the Corporation and the Founders, may
assert any valid claim against the Corporation, any Subsidiary or any of the
Designated Persons with respect to (a) the continued employment by, or
association with, the Corporation or any Subsidiary of any of the present
officers or employees of or consultants to the Corporation or any Subsidiary
(collectively, the "Designated Persons") or (b) the use, in connection with any
business presently conducted or proposed to be conducted by the Corporation and
the Subsidiaries or any of the Designated Persons of any information that the
Corporation and the Subsidiaries or any of the Designated Persons would be
prohibited from using under any prior agreements or arrangements or any legal
considerations applicable to unfair competition, trade secrets or proprietary
information, in either case, where such claim would reasonably be expected to
have a material adverse effect on the business, properties, assets or condition
(financial or otherwise) of the Corporation and the Subsidiaries, taken as a
whole.
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3.15. ERISA Plans and Contracts. (a) For purposes of this Agreement, the
term "Employee Plan" means each employee bonus, retirement, pension, profit
sharing, stock option, stock appreciation, stock purchase, incentive, deferred
compensation, hospitalization, medical, dental, vision, life and other health
and disability (whether provided by insurance or otherwise), severance,
termination and other plan, program, arrangement, policy or payroll practice
providing employee benefits, including, without limitation, each "employee
benefit plan" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended to the date hereof ("ERISA"), and including
plans which have been frozen or terminated during the five-year period ending on
the date of this Agreement, in each instance maintained by the Corporation or to
which the Corporation contributes or has contributed and under which any person
presently employed by the Corporation (an "Employee") or formerly so employed by
the Corporation (a "Former Employee") participates or had accrued any rights or
under which the Corporation is liable in respect of an Employee or Former
Employee. As used in this Section 3.15, the term "Corporation" will include,
where applicable, the Subsidiaries. The terms "Employee" and "Former Employee"
will include, where applicable, the beneficiaries and dependents of an Employee
or Former Employee. Section 3.15 of the Disclosure Schedule lists or describes
all Employee Plans.
(b) The Corporation does not maintain or contribute to any material
Employee Plan.
(c) No Employee Plan is or has been since the enactment of ERISA a
"multiemployer plan" as defined in Section 3(37) of ERISA. No complete or
partial withdrawal from any multiemployer plan has occurred which could subject
the Corporation to material "withdrawal liability" as defined in Section 4201 of
ERISA.
(d) Contributions, premiums, benefits or other payments required to
be made by the Corporation or any subsidiary thereof to or with respect to any
Employee Plan for all periods preceding the date of this Agreement have been
made or properly accrued as liabilities on the Financial Statements, and the
Corporation will not have any material liability (actual or contingent) under
any insurance policy (or ancillary agreement relating to such insurance policy)
in the nature of a retroactive rate adjustment or loss sharing or similar
arrangement.
(e) Each Employee Plan which is intended to be qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), is
so qualified and has been so qualified during the period from its adoption to
date, and each trust forming a part thereof is exempt from tax pursuant to
Section 501(a) of the Code. The Corporation has furnished to
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▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP, special counsel to the Investors, true,
correct and complete copies of the most recent Internal Revenue Service
determination letters with respect to any such Employee Plans, which
determination letters are all favorable and relate to each such Employee Plan as
amended to comply with the Tax Equity and Fiscal Responsibility Act of 1982, the
Deficit Reduction Act of 1984 and the Retirement Equity Act of 1984. Each
Employee Plan has been amended to the extent required to comply with the Tax
Reform Act of 1986, and has been maintained in material compliance with its
terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations, including, without limitation, ERISA and the Code
(including the provisions thereof which are effective with respect to such
Employee Plans as of the date hereof but which do not require amendments to have
been made to the applicable Employee Plans as of the date hereof), which are
applicable to such Employee Plans.
(f) No Employee Plan provides benefits, including, without
limitation, death or medical benefits (whether or not insured) with respect to
Employees or Former Employees beyond their retirement or other termination of
service other than (i) coverage mandated by applicable laws, (ii) death benefits
under any "employee welfare benefit plan" or "employee pension benefit plan" (as
defined in Sections 3(1) and 3(2) of ERISA, respectively), (iii) retirement
benefits under any employee pension benefit plans, (iv) deferred compensation
benefits accrued as liabilities on the Financial Statements, (v) severance
benefits or (vi) rights to purchase capital stock of the Corporation.
(g) To the Best Knowledge of the Corporation and the Founders, no
facts or circumstances exist, no actions have been taken or omitted to be taken,
nothing has occurred and nothing will occur as a result of the execution,
delivery and performance of this Agreement, such that the Corporation could be
subject (directly or indirectly, such as through an indemnification, guarantee
or similar agreement or obligation) to any material liability for any claims,
judgments, damages, penalties, taxes (including excise taxes), assessments or
similar terms, including, without limitation, any claim by a plan or by the
Pension Benefit Guaranty Corporation under Section 412 of the Code or under
Title IV of ERISA, with respect to any of the Employee Plans or any "employee
benefit plan" (as defined in Section 3(3) of ERISA) currently or formerly
maintained by a business entity that is or has been aggregated with, or treated
as the same employer as, the Corporation for any purpose under ERISA or the Code
(other than liability for benefit payments incurred in the normal operations of
any such Employee Plan for periods preceding the Closing Date), nor does the
Corporation have any such material liability. Without limiting the scope of the
previous sentence, none of the Corporation or any Employee
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Plan has, since the inception of each Employee Plan, violated the "prohibited
transaction" provisions of Section 4975(c) and (d) of the Code or Sections 406
and 408 of ERISA such that a material liability has or could result therefrom.
(h) There has been no material failure to comply with the
continuation health care coverage requirements of Section 4980B of the Code and
Sections 601 through 608 of ERISA, with respect to each Employee or Former
Employee and any other employee or former employee of the Corporation and, to
the Best Knowledge of the Corporation and the Founders, any member of a
"controlled group of corporations" (as defined in Section 1563(a) of the Code)
that included the Corporation ("COBRA Employee") and any "qualified beneficiary"
(as defined in 4980B(g)(1) of the Code) of any COBRA Employee that could result
in a material liability for the Corporation.
3.16. Agreements. Neither the Corporation nor any Subsidiary is currently
a party to any written or, to the Best Knowledge of the Corporation and the
Founders, oral contract not made in the ordinary course of business and, whether
or not made in the ordinary course of business, neither the Corporation nor any
Subsidiary is a party to any written or, to the Best Knowledge of the
Corporation and the Founders, oral: (a) contract with any labor union; (b)
contract for the future purchase of fixed assets or for the future purchase of
materials, supplies or equipment in excess of normal operating requirements; (c)
contract for the employment of any officer, individual employee or other person
on a full-time basis or any material contract with any person on a consulting
basis; (d) agreement or indenture relating to the borrowing of money or to the
mortgaging, pledging or otherwise placing a lien on any material assets of the
Corporation or any Subsidiary; (e) guaranty of any material obligation for
borrowed money or otherwise; (f) lease or agreement under which the Corporation
or any Subsidiary is lessee of or holds or operates any material property, real
or personal, owned by any other party; (g) lease or agreement under which the
Corporation is lessor of or permits any third party to hold or operate any
property, real or personal, owned or controlled by the Corporation; (h)
agreement or other commitment for capital expenditures in excess of $250,000;
(i) contract, agreement or commitment under which the Corporation or any
Subsidiary is obligated to pay any broker's fees, finder's fees or any such
similar fees, to any third party; or (j) any other contract, agreement,
arrangement or understanding which is material to the business of the
Corporation and the Subsidiaries, taken as a whole, or which is material to a
prudent investor's understanding of the business of the Corporation and the
Subsidiaries, taken as a whole (collectively, the "Contracts"). To the Best
Knowledge of the Corporation and the Founders, (x) all such contracts and
agreements constitute the valid and binding obligations of the respective
parties thereto, enforceable in accordance with their
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terms, and (y) neither the Corporation or any Subsidiary, as the case may be,
nor any other party thereto is in default thereunder and there exists no
condition, event or act which constitutes, or which after notice, lapse of time
or both, would constitute, a default by the Corporation or any Subsidiary, as
the case may be, or any other party thereunder.
3.17. Compliance; Licenses and Permits. To the Best Knowledge of the
Corporation and the Founders, the Corporation and the Subsidiaries have complied
in all material respects with all Federal, state, local or foreign laws,
ordinances, regulations or orders applicable to their business as presently or
previously conducted. To the Best Knowledge of the Corporation and the Founders,
the Corporation and the Subsidiaries have all material Federal, state, local and
foreign governmental licenses and permits which are required for the conduct of
their business presently or previously conducted, which licenses and permits are
in full force and effect, and no violations are outstanding or uncured with
respect to any such licenses or permits and no proceeding is pending or
threatened to revoke or limit any thereof. Section 3.17 of the Disclosure
Schedule lists all material Federal, state, local and foreign governmental
licenses and permits of the Corporation and, to the Best Knowledge of the
Corporation and the Founders, the Subsidiaries which are used in or relate to
its business.
3.18. Labor Relations; Employees. At March 31, 1997, the Corporation and
the Subsidiaries had 224 full-time employees, including the Founders. (i)
Neither the Corporation nor any Subsidiary is delinquent in payments, in any
material respect, to any of its employees for any wages or salaries or, to the
Best Knowledge of the Corporation and the Founders, commissions, bonuses or
other direct compensation for any services performed by them to the date hereof
or amounts required to be reimbursed to such employees, (ii) there is no labor
strike, dispute, slowdown or stoppage actually pending or threatened against or
involving the Corporation or any Subsidiary and (iii) neither any grievance nor
any arbitration proceeding arising out of or under collective bargaining
agreements is pending and no claim therefor has been asserted.
3.19. Litigation. There is no action, suit, customer claim, proceeding or
investigation at law or in equity or by or before any governmental
instrumentality or other agency now pending nor, to the Best Knowledge of the
Corporation and the Founders, threatened against, or affecting the assets or
properties of, the Corporation or, to the Best Knowledge of the Corporation and
the Founders, any Subsidiary, an adverse outcome in which would have a material
adverse effect on the business, properties, assets or condition (financial or
otherwise) of the Corporation and the Subsidiaries, taken as a whole (including,
without limitation, any action, suit, claim, proceeding or
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litigation involving the claims contemplated by Sections 3.13 and 3.14), nor
does there exist any basis for any such action, suit, customer claim, proceeding
or investigation.
3.20. Tax Matters. The Corporation and the Subsidiaries (in the case of
any foreign Taxes, to the Best Knowledge of the Corporation and the Founders)
have (a) filed all state, local and foreign tax returns, declarations of
estimated tax, tax reports, information returns and statements (collectively,
the "Returns") required to be filed by them prior to the Closing (other than
those for which extensions shall have been granted prior to the Closing)
relating to any Taxes (as defined below) with respect to any income, properties
or operations of the Corporation and the Subsidiaries prior to the Closing; (b)
as of the time of filing, the Returns were complete and correct in all material
respects and all Taxes shown on the Returns to be due have been paid or adequate
reserves have been made therefor; (c) neither the Corporation nor any Subsidiary
is delinquent in the payment of any Taxes, other than Taxes for which the
Corporation or any Subsidiary has requested an extension of time within which to
file any Return or the payment of which is being contested in good faith; (d)
there are no pending tax audits of any Returns of the Corporation; (e) no tax
liens have been filed and no deficiency or addition to Taxes, interest or
penalties for any Taxes with respect to any income, properties or operations of
the Corporation or any Subsidiary has been proposed, asserted or assessed in
writing other than for Taxes, the payment of which is being contested in good
faith; (f) neither the Corporation nor any Subsidiary has granted any extension
of the statute of limitations applicable to any Return or other Tax claim with
respect to any income, properties or operations of the Corporation or any
Subsidiary; (g) the Corporation has not, during the five-year period preceding
the date hereof, been a personal holding company within the meaning of Section
542 of the Code; and (h) the Corporation has not made any election under Section
341(f) of the Code. As used in this Agreement, the term "Tax" shall mean any of
the Taxes and the term "Taxes" shall mean, with respect to any person or entity,
(i) all income taxes (including any tax on or based upon net income, or gross
income, or income as specially defined, or earnings, or profits, or selected
items of income, earnings or profits) and all gross receipts, sales, use, ad
valorem, transfer, franchise, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property or windfall profits taxes,
alternative or add-on minimum taxes, customs duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any taxing
authority (domestic or foreign) on such person or entity and (ii) any liability
for the payment of any amount of the type described in the immediately preceding
clause (i) as a result of being a "transferee" (within the meaning of Section
6901 of the
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Code or any other applicable law) of another person or entity or a member of an
affiliated or combined group.
3.21. Related Party Transactions. No current stockholder, director,
officer or employee of the Corporation, nor any "associate" (as defined in the
rules and regulations promulgated under the Securities Act) of any such person,
is presently, directly or indirectly through his, her or its affiliation with
any other person or entity, a party to any transaction with the Corporation or
any Subsidiary, providing for the furnishing of services by or to, or rental of
real or personal property from or to, or otherwise requiring cash payments to or
by any such person, in any such case, that would be disclosable pursuant to Item
404 of Regulation S-K promulgated by the Securities and Exchange Commission. For
the purposes of this Agreement, a transaction of the type described in this
Section 3.20 is sometimes herein referred to as a "Related Party Transaction."
3.22. Offerees. Except as set forth in Section 3.22 of the Disclosure
Schedule, the Corporation has not, during the past 12 months, offered any Series
A Preferred Stock or Common Stock, or any security or securities similar to any
thereof, for sale to, or solicited any offers to buy any of the foregoing from,
or otherwise approached or negotiated in respect thereof, with any person or
persons other than the Investors and a limited number of institutional or other
sophisticated investors and other than pursuant to employee stock option plans
or agreements.
3.23. Offering Exemption. Assuming the accuracy of the representations and
warranties of the Investors set forth in Section 4 hereof, the offering and sale
of the Series A Preferred Shares and the Reserved Common Shares upon conversion
of the Series A Preferred Shares are or will be exempt from registration under
the Securities Act; and the aforesaid offering and sale is and will be exempt
from registration under applicable state securities and "blue sky" laws. The
Corporation has made or will make all requisite filings and has taken or will
take all action necessary to be taken to comply with such state securities or
blue sky laws.
3.24. Brokers. Neither the Corporation, the Founders nor any of the
officers, directors, employees or stockholders of the Corporation has employed
any broker or finder in connection with the transactions contemplated by this
Agreement and no brokerage, finders, broken deal or other fees of any kind are
payable to any person upon the execution and delivery of this Agreement or upon
the consummation of the transactions contemplated hereby.
3.25. Registration Rights. Except as contemplated by the Registration
Rights Agreement, no person has any right to
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cause the Corporation to effect the registration under the Securities Act of any
shares of Common Stock or any other securities (including debt securities) of
the Corporation.
3.26. Use of Proceeds. The net proceeds received by the Corporation from
the sale of the Series A Preferred Shares shall be used by the Corporation for
the purposes set forth in Section 3.26 of the Disclosure Schedule.
3.27. Insurance. All of the insurable properties of the Corporation and
the Subsidiaries are insured for their respective benefit in amounts and against
all risks that are normal and customary for persons operating similar businesses
and properties in the localities where such businesses and properties are
located under policies in effect and issued by insurers of recognized
responsibility.
3.28. Disclosure. Neither this Agreement nor any other document,
certificate, instrument or written statement furnished or made available to
▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP, special counsel to the Investors, or the
Investors by or on behalf of the Corporation pursuant to this Agreement,
including, without limitation, the Disclosure Schedule, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein, viewed as a whole,
not misleading. There is no fact which materially adversely affects, or in the
future would, insofar as the Corporation and the Founders may reasonably
foresee, materially adversely affect, the business, operations, affairs,
condition (financial or otherwise), properties or assets of the Corporation
which has not been set forth in this Agreement or in the other Documents,
certificates, instruments or written statements furnished to ▇'▇▇▇▇▇▇▇▇ Graev &
Karabell, LLP, special counsel to the Investors, or the Investors by or on
behalf of the Corporation pursuant to this Agreement.
3.29. Definition of "Best Knowledge". As used herein, the term the "Best
Knowledge" shall mean and include (a) actual knowledge and (b) that knowledge
which a prudent businessperson could have obtained in the management of his or
her business affairs after making due inquiry and exercising due diligence with
respect thereto. In connection with the foregoing, the knowledge of the
Corporation shall be defined as the knowledge (both actual and constructive) of
any of the Founders or the Chief Financial Officer of the Corporation.
3.30. Predecessor Company. All references to the Corporation in this
Section 3 shall be deemed to include the Corporation and any predecessor
thereto, including, without limitation, Mobius Management Systems, Inc., a New
York corporation ("NY Mobius").
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SECTION 4. Representations and Warranties of the Investors. (a) Each
Investor severally represents and warrants to the Corporation, as to itself,
that (i) such Investor is and will be acquiring the Series A Preferred Shares to
be purchased by such Investor hereunder and, in the event that such Investor
should acquire any Reserved Common Shares, that such Investor will be acquiring
such Reserved Common Shares, for its own account, for investment and not with a
view to the distribution thereof within the meaning of the Securities Act.
(b) Each Investor understands that (i) the Preferred Shares have not
been, and that the Reserved Common Shares will not be, registered under the
Securities Act, by reason of their issuance by the Corporation in transactions
exempt from the registration requirements of the Securities Act and (ii) the
Series A Preferred Shares and the Reserved Common Shares must be held by such
Investor indefinitely unless a subsequent disposition thereof is registered
under the Securities Act or is exempt from registration.
(c) Each Investor further understands that, with respect to the
Reserved Common Shares, the exemption from registration afforded by Rule 144
(the provisions of which are known to such Investor) promulgated under the
Securities Act depends on the satisfaction of various conditions, and that, if
applicable, Rule 144 may only afford the basis for sales only in limited
amounts.
(d) Each Investor severally represents and warrants, as to itself,
that it is an "accredited investor" as such term is defined in Rule 501(a)
promulgated under the Securities Act.
(e) Each Investor severally agrees, as to itself, that the
Corporation may place a legend on the certificates delivered hereunder stating
that the Series A Preferred Shares and any Reserved Common Shares have not been
registered under the Securities Act, and, therefore cannot be offered, sold or
transferred unless they are registered under the Securities Act or an exemption
from such registration is available, and that the Corporation may place stop
transfer orders on the transfer books of the Corporation.
(f) Each Investor severally represents and warrants that (i) the
source of funds for the acquisition by such Investor of Series A Preferred
Shares does not constitute "plan assets" for purposes of Title I of ERISA and
(ii) the acquisition of Series A Preferred Shares by the Investor and the
transactions contemplated hereby shall neither (x) cause the Corporation to
become a member of a controlled group of corporations or to be under common
control with other trades or businesses within the meaning of Sections 414(b),
(c), (m) or (o) of the Code or for
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purposes of Title IV of ERISA nor (y) subject the Corporation to any liability,
contingent or otherwise, with respect to any employee pension benefit plan (as
defined in Section 3(2) of ERISA).
(g) No Investor will acquire Reserved Common Shares upon conversion
of the Series A Preferred Shares to be purchased by such Investor hereunder if
such transaction would cause the Corporation to become either (i) a member of a
controlled group of corporations or to be under common control with other trades
or businesses within the meaning of Sections 414(b), (c), (m) or (o) of the Code
or for purposes of Title IV of ERISA or (ii) subject to any liability,
contingent or otherwise, with respect to any employee pension benefit plan (as
defined in Section 3(2) of ERISA).
(h) No Investor will transfer any Series A Preferred Shares acquired
hereunder, nor any Reserved Common Shares acquired upon the conversion of Series
A Preferred Shares, if such transfer either (i) may give rise to a prohibited
transaction under Section 406 of ERISA or Section 4975 of the Code or (ii) could
cause the Corporation to become either (x) a member of a controlled group of
corporations or to be under common control with other trades or businesses
within the meaning of Sections 414(b), (c), (m) or (o) of the Code or for
purposes of Title IV of ERISA or (y) subject the Corporation to any liability,
contingent or otherwise, with respect to any employee pension benefit plan (as
defined in Section 3(2) of ERISA).
(i) Each Investor severally represents and acknowledges that neither
the Corporation nor the Founders have made, or are making, any representation or
warranty with respect to the Corporation, the Series A Preferred Stock, the
Common Stock, this Agreement or the transactions contemplated hereby except as
expressly set forth in this Agreement, the other Documents or the Disclosure
Schedule. No representation or warranty of the Corporation or the Founders of
any kind is intended, inferred or relied upon by such Investor with respect to
the economic return which may accrue as a result of an investment in the Series
A Preferred Stock or Common Stock pursuant to this Agreement. Prior to making an
investment decision regarding the Series A Preferred Stock, (A) each Investor
carefully considered all relevant factors and consulted its own experienced
counsel, accountant and tax, business and other advisors in connection with the
transactions contemplated by this Agreement and (B) each Investor has been
provided the full opportunity to ask questions of, and has received answers
thereto satisfactory to such Investor from, the Corporation, the Founders and
their representatives regarding the Corporation, and each Investor has been
provided with full access to all of the books, records, properties, officers and
employees of the Corporation and has obtained all additional information
requested
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by such Investor of the Corporation and its representatives; provided, however,
that neither such consideration, consultation, opportunity nor access shall in
any way obviate or diminish the representations and warranties of the
Corporation and the Founders contained in this Agreement, the other Documents or
the Disclosure Schedule.
SECTION 5. Conditions Precedent to the Closing. The several obligations of
the Investors to purchase and pay for Series A Preferred Shares at the Closing
are subject to satisfaction of the following conditions precedent:
5.1. Corporate Proceedings. All corporate and other proceedings to be
taken and all waivers and consents approvals, qualifications and/or
registrations required to be obtained or effected in connection with the
execution, delivery and performance of the Documents and the transactions
contemplated thereby, including, but not limited to, the reservation, issuance,
sale and delivery of the Series A Preferred Shares and the Reserved Common
Shares, shall have been taken, obtained or effected (except for the filing of
any notice subsequent to such Closing which may be required under applicable
Federal and state securities or "blue sky" laws which, if required, shall be
filed on a timely basis as may be so required), and all documents incident
thereto shall be satisfactory in form and substance to the Investors and to
their special counsel, ▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP. The Investors and
▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP, shall have received all such originals or
certified or other copies of such documents as have been reasonably requested.
5.2. Opinion of Counsel. The Investors shall have received from Kramer,
Levin, Naftalis & ▇▇▇▇▇▇▇, counsel for the Corporation, its favorable opinion
addressed to the Investors, dated the date of the Closing, substantially in the
form of Exhibit D attached hereto.
5.3. Payment of Legal Fees. Simultaneously with the Closing, the
Corporation shall pay to ▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP, special counsel to
the Investors, its fees (up to a maximum of $25,000) and charges incurred in
connection with the transactions contemplated hereby.
5.4. Filing of Certificates. The Certificate of Incorporation and the
Certificate of Designation shall have been filed with and accepted by the
Secretary of State of the State of Delaware, and a copy of each of the
Certificate of Incorporation and the Certificate of Designation, certified by
the Secretary of State of the State of Delaware, shall have been delivered to
the Investors.
5.5. Stockholders' Agreement. A stockholders' agreement (the
"Stockholders' Agreement") among the Corporation,
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the Investors and the Founders, in the form of Exhibit E hereto, shall have been
executed and delivered by the Corporation and such parties. In addition, the
Corporation and such parties shall have complied with all of the terms and
conditions of the Stockholders' Agreement, including, among other things, the
placement of the legends required to be placed on securities owned by such
parties.
5.6. Registration Rights Agreement. A registration rights agreement (the
"Registration Rights Agreement") among the Corporation and the Investors, in the
form of Exhibit F hereto, shall have been duly executed and delivered by the
Corporation and such parties. In addition, the Corporation and such parties
shall have complied with all of the terms and conditions of the Registration
Rights Agreement, including, among other things, the placement of any legend
required to be placed on securities owned by such parties.
5.7. Board of Directors. Effective immediately upon the consummation of
the Closing, the Board of Directors of the Corporation shall be comprised of the
following individuals, all of whom shall have been duly elected as directors:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
5.8. Reincorporation. NY Mobius shall have been merged with and into the
Corporation (the "Merger"); the separate existence of NY Mobius shall have
ceased and the Corporation shall possess all of the rights, privileges, powers
and franchises as well of a public as of a private nature of NY Mobius, as
provided by the Delaware General Corporation Law; and, in connection therewith,
all consents, authorizations, orders or approvals of, and filings with, any
Federal, state, municipal, foreign or other governmental court, department,
commission, board, bureau, agency or instrumentality or any other person
required for or in connection with the Merger shall have been obtained or made,
except for those consents, authorizations, orders, approvals or filings the
failure to so obtain or have made would not have a material adverse effect on
the Corporation and its Subsidiaries, taken as a whole.
5.9. Termination of Prior Stockholders' Agreement. The Stockholders'
Agreement dated August 14, 1981, as amended, among NY Mobius and the Founders
shall have been terminated by a written instrument executed by all of the
parties thereto.
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SECTION 6. Information Rights.
6.1. Access to Records. The Corporation shall afford to the Investors and
their employees, counsel and other authorized representatives free and full
access, upon reasonable advance notice, to all of the books, records and
properties of the Corporation and to all officers and employees of the
Corporation, for any reasonable purpose whatsoever. Each Investor shall use
reasonable efforts to maintain the confidentiality of any confidential and
proprietary information so obtained by it; provided, however, that the foregoing
shall in no way limit or otherwise restrict the ability of any Investor or such
authorized representatives to disclose any such information concerning the
Corporation which it may be required to disclose (i) to its partners or limited
partners to the extent required to satisfy its fiduciary obligations to such
persons, provided that such partners or limited partners agree for the benefit
of the Corporation to maintain the confidentiality of such information, or (ii)
pursuant to or as required by law, provided that the disclosing party shall
provide the Corporation with prompt notice of any such legal requirement so that
the Corporation may seek an appropriate protective order.
6.2. Financial Reports. The Corporation agrees to furnish each Investor
with the following:
(a) Monthly Statements. Within 30 days after the end of each monthly
accounting period, an unaudited financial report of the Corporation, which
report shall be prepared in accordance with generally accepted accounting
principles consistently applied, and which shall include the following:
(i) a profit and loss statement for such monthly accounting
period, together with a cumulative profit and loss statement from
the first day of the current year to the last day of, such monthly
accounting period;
(ii) a balance sheet as at the last day of such monthly
accounting period;
(iii) a cash flow analysis for such monthly accounting period
on a cumulative basis for the fiscal year to date;
(iv) a schedule showing all expenditures of a capital nature
in excess of $100,000 individually during such monthly accounting
period; and
(v) a comparison between the actual figures for such monthly
accounting period, the comparable
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figures (with respect to clauses (i) and (ii) only) for the prior
year (if any) and the comparable figures included in the Budget (as
defined in Section 6.2(h) hereof) for such monthly accounting
period, with an explanation of any material differences between
them;
certified by the chief executive officer and chief financial officer of
the Corporation as being prepared in accordance with generally accepted
accounting principles (except with respect to footnote disclosure and
subject to normal year-end audit adjustments) consistently applied and
accompanied by a statement showing the number of shares of each class and
series of capital stock, and securities convertible into or exercisable
for shares of capital stock, of the Corporation outstanding at the end of
such monthly accounting period, the number of shares of Common Stock
issuable upon conversion or exercise of any outstanding securities
convertible or exercisable for Common Stock and the exchange ratio or
exercise price applicable thereto, all in sufficient detail to permit the
Investors to calculate their percentage equity ownership interest in the
Corporation.
(b) Quarterly Reports. As soon as available, but not later than 45
days after the end of each quarterly accounting period, (i) an unaudited
consolidated financial report of the Corporation, certified by the chief
executive officer and chief financial officer of the Corporation as being
prepared in accordance with generally accepted accounting principles
consistently applied, except that such financial statements shall not
include footnotes and shall be subject to normal year-end audit
adjustments, including, with respect to such quarterly accounting period,
the statements and comparisons referred to in Section 6.2(a) (except that
such statements and comparisons shall be furnished with respect to such
quarterly, rather than monthly, accounting period) and (ii) a report by
management of the Corporation of the operating and financial highlights of
the Corporation for such quarterly accounting period which shall include
(A) a comparison between operating and financial results and the Budget
and (B) an analysis of the operations of the Corporation for the prior
quarterly accounting period.
(c) Annual Audit. As soon as available, but not later than 90 days
after the end of each fiscal year of the Corporation, audited financial
statements of the Corporation, which shall include a statement of cash
flows and statement of operations for such fiscal year and a balance sheet
as at the last day thereof, each prepared in accordance with generally
accepted accounting principles, consistently applied, and accompanied by
the report of a
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firm of independent certified public accountants of recognized standing
selected by the Board of Directors of the Corporation (the "Accountants").
The Corporation shall maintain a system of accounting sufficient to enable
its independent certified public accountants to render the report referred
to in this Section 6.2(c).
(d) Subsidiaries. If for any period the Corporation shall have any
subsidiary or subsidiaries whose accounts are consolidated with those of
the Corporation, then in respect of such period the financial statements
delivered pursuant to the foregoing Sections 6.2(a), (b) and (c) shall be
the consolidated (and, in the case of the cash flow statement delivered
pursuant to Sections 6.2(c), consolidating if normally prepared by the
Corporation) financial statements of the Corporation and all such
consolidated subsidiaries.
(e) Miscellaneous. Promptly upon becoming available:
(i) upon request, copies of all financial statements, reports,
press releases, notices, proxy statements and other documents sent
by the Corporation to its stockholders generally or released to the
public and copies of all regular and periodic reports, if any, filed
by the Corporation with the Securities and Exchange Commission, or
any securities exchange;
(ii) upon request, copies of all reports prepared for or
delivered to the management of the Corporation by its independent
public accountants; and
(iii) any other routinely collected financial or other
information available to management (including, without limitation,
routinely collected statistical data) of the Corporation or as the
Investors shall have reasonably requested on a timely basis.
(f) No Default Certificate. With the financial statements referred
to in Sections 6.2(b) and 6.2(c), the Corporation shall deliver to each of
the Investors a certificate executed by the chief executive officer and
the chief financial officer of the Corporation, and with the financial
statements of the Corporation referred to in Section 6.2(c), the
Corporation shall deliver to each of the Investors a statement of the
Accountants, in each case, to the effect that no knowledge has been
obtained of any material violation or default by the Corporation in the
performance of its agreements or covenants contained herein, in the
Documents or in any other material agreement to which
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the Corporation or any Subsidiary is a party or of the occurrence of any
condition, event or act which, with or without notice or lapse of time, or
both, would constitute such a violation or an event of default, or, if
such firm or officer shall have obtained knowledge of any such violation,
condition, event or act, it or he or she (as the case may be) shall
specify in such certificate all such violations, conditions, events and
acts and the nature and status thereof.
(g) Notice of Certain Events. The Corporation shall deliver written
notice to the Investors promptly following its receipt of notice of the
commencement of any action, suit, claim, legal or administrative or
arbitration proceeding or investigation, any of which could reasonably be
expected, on the basis of current economic conditions and other facts and
circumstances known to the Corporation at the time, to have a material
adverse effect on the Corporation and the Subsidiaries, taken as a whole.
In making such determination, the Corporation may rely on the opinion of
its counsel regarding the likelihood and extent of an adverse decision in
any litigation, administrative or arbitration proceeding or investigation
against the Corporation or any Subsidiary.
(h) Budget. The Corporation has previously delivered to each of the
Investors a budget and operating plan for the fiscal year ending June 30,
1997 (the "FY 1997 Budget"). With respect to each fiscal year commencing
with the fiscal year ending June 30, 1998, the Corporation shall, not
later than 30 days prior to the commencement of each such fiscal year,
prepare and deliver to the Investors one copy of a budget and operating
plan (together with the FY 1997 Budget, each a "Budget") of the
Corporation (containing monthly and quarterly breakdowns of income and
cash flow). The Budget shall be accepted as the Budget for such fiscal
year when it has been approved by the Board of Directors of the
Corporation. The Budget shall be reviewed by the Corporation periodically
and all material changes therein and all material deviations therefrom
shall be resubmitted to the Board in advance and shall be accepted when
approved by the Board of Directors.
6.3. Designated Offering. Notwithstanding the foregoing provisions of this
Section 6, the rights of the Investors and the obligations of the Corporation
under this Section 6, except those contained in Section 6.2(e)(i) (which shall
survive), shall terminate upon the consummation of a firm commitment
underwritten public offering of the Common Shares under the Securities Act,
which results in aggregate net cash proceeds of not less than $20,000,000, at an
offering price per
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share (as constituted on the date hereof) of not less than $586.66 (a
"Designated Offering").
SECTION 7. Additional Agreements of the Corporation.
7.1. Meetings of the Board of Directors. The Board of Directors shall
call, and use its best efforts to have, regular meetings not less often than
quarterly. The Corporation shall pay all reasonable travel expenses and other
out-of-pocket disbursements incurred by any director designated by the Investors
in connection with attending meetings of the Board of Directors of the
Corporation.
7.2. Right of First Offer. (a) Except in the case of Excluded Securities
(as hereinafter defined), the Corporation shall not issue, sell or exchange,
agree to issue, sell or exchange, or reserve or set aside for issuance, sale or
exchange, any (i) Common Shares, (ii) any other equity security of the
Corporation, (iii) any debt security of the Corporation which by its terms is
convertible into or exchangeable for any equity security of the Corporation or
has any other equity feature, (iv) any security of the Corporation that is a
combination of debt and equity or (v) any option, warrant or other right to
subscribe for, purchase or otherwise acquire any equity security or any such
debt security of the Corporation, unless in each case the Corporation shall have
first offered to sell to each Investor such Investor's Proportionate Percentage
(as hereinafter defined) of such securities (the "Offered Securities") (and to
sell thereto such Offered Securities not subscribed for by the other Investors
as hereinafter provided), at a price and on such other terms as shall have been
specified by the Corporation in writing delivered to such Investors (the
"Offer"), which Offer by its terms shall remain open and irrevocable for a
period of 15 days from the date it is delivered by the Corporation to the
Investors.
(b) Notice of each Investor's intention to accept, in whole or in
part, an Offer shall be evidenced by a writing signed by such Investor and
delivered to the Corporation prior to the end of the 15-day period of such
Offer, setting forth such portion of the Offered Securities as such Investor
elects to purchase (the "Notice of Acceptance"). If any Investor shall subscribe
for less than its Proportionate Percentage of the Offered Securities to be sold,
the other subscribing Investors shall be entitled to purchase the balance of
that Investor's Proportionate Percentage in the same proportion in which they
were entitled to purchase the Offered Securities in the first place (excluding
for such purposes such Investor). The Corporation shall notify each Investor
five days following the expiration of the 15-day period described above of the
amount of Offered Securities which each Investor may purchase pursuant to the
foregoing sentence, and each Investor shall then have five
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days from the delivery of such notice to indicate such additional amount, if
any, that such Investor wishes to purchase.
(c) In the event that Notices of Acceptance are not given by the
Investors in respect of all the Offered Securities, the Corporation shall have
90 days from the expiration of the foregoing 15-day or 25-day period, whichever
is applicable, to sell all or any part of such Offered Securities as to which
Notices of Acceptance have not been given by the Investors (the "Refused
Securities") to any other person or persons, but only upon terms and conditions
in all respects, including, without limitation, unit price and interest rates,
which are no more favorable, in the aggregate, to such other person or persons
or less favorable to the Corporation than those set forth in the Offer. Upon the
closing, which shall include full payment to the Corporation, of the sale to
such other person or persons of all the Refused Securities, the Investors shall
purchase from the Corporation, and the Corporation shall sell to the Investors,
the Offered Securities in respect of which Notices of Acceptance were delivered
to the Corporation by the Investors, on the terms specified in the Offer.
(d) In each case, any Offered Securities not purchased by the
Investors or any other person or persons in accordance with Section 7.2(c) may
not be sold or otherwise disposed of until they are again offered to the
Investors under the procedures specified in Sections 7.2(a), (b) and (c).
(e) The rights of the Investors under this Section 7.2 shall not
apply to the following securities (the "Excluded Securities"):
(i) Class A Common Stock or Common Stock issued to officers,
employees or directors of, or consultants to, the Corporation, pursuant to
the Corporation's 1996 Stock Incentive Plan or any other agreement, plan
or arrangement approved by the Board of Directors, or options to purchase
or rights to subscribe for such Class A Common Stock or Common Stock, or
securities by their terms convertible into or exchangeable for such Class
A Common Stock or Common Stock, or options to purchase or rights to
subscribe for such convertible or exchangeable securities, in each case as
approved by the Board of Directors; provided, however, that the maximum
number of shares of Class A Common Stock and Common Stock issued or
issuable prior or subsequent to the date hereof pursuant to all such
agreements, plans and arrangements shall not exceed an aggregate of 30,000
shares (subject to adjustment to reflect stock splits, stock dividends,
stock combinations, recapitalizations and like occurrences) of Class A
Common Stock and Common Stock plus an amount equal to any increase in the
number of shares reserved for issuance pursuant to the Corporation's 1996
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Stock Incentive Plan in accordance with Section 1.5.1(c) of such Plan;
(ii) the Reserved Common Shares;
(iii) Common Shares issued as a stock dividend or upon any stock
split or other subdivision or combination of Common Shares; and
(iv) securities issued pursuant to the acquisition of another
corporation by the Corporation by merger or purchase of substantially all
of such other corporation's assets whereby the Corporation owns not less
than 51% of the voting power of such other corporation.
(f) Notwithstanding the foregoing provisions of this Section 7.2,
the rights of the Investors and the obligations of the Corporation under this
Section 7.2 shall be inapplicable to a Designated Offering and the provisions of
this Section 7.2 shall terminate (i) as to all of the Investors, upon the
consummation of a Designated Offering and (ii) as to any Investor, in the event
that such Investor's Group (as defined below) in the aggregate owns less than
one-third of the Preferred Shares (or Reserved Common Shares issued upon
conversion thereof) purchased by such Group pursuant to this Agreement (subject
to adjustment to reflect stock splits, stock dividends, stock combinations,
recapitalizations and like occurrences). As used in this Agreement, NEA Ventures
1997, NEA President's Fund L.P., New Enterprises Associates VII, L.P., New
Ventures Partners III L.P. and ▇▇▇▇▇ Ventures III, L.P. shall be deemed members
of the same Group and Oak Investment Partners VI, Limited Partnership and Oak VI
Affiliates Fund, Limited Partnership shall be deemed members of the same Group.
(g) "Proportionate Percentage" shall mean, as to each Investor, the
percentage figure that expresses the ratio that (x) the number of shares of
outstanding Common Stock then owned by such Investor on a fully-diluted basis
bears to (y) the aggregate number of shares of outstanding Common Stock on a
fully-diluted basis. For purposes solely of the computations required under
clauses (x) and (y) above, each Investor shall be treated as having converted,
exercised or exchanged all of the Corporation's securities held by such Investor
that are then convertible into or exercisable or exchangeable for Common Shares
at the rate at which such securities are convertible into or exercisable or
exchangeable for Common Shares in effect at the time of delivery by the
Corporation of the notice of the Offer contemplated by Section 7.2(a).
7.3. Securities Act Registration Statements. Except for securities of the
Corporation registered on Form S-4 or Form S-8 promulgated under the Securities
Act or any successor forms
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thereto, the Corporation shall not file any registration statement under the
Securities Act covering any securities unless it shall first have given each
Investor that may be deemed to be a controlling person of the Corporation
written notice thereof. The Corporation further covenants that each Investor
shall have the right, at any time when it may be deemed to be a controlling
person of the Corporation, to participate in the preparation of such
registration statement. In connection with any registration statement referred
to in this Section 7.3, the Corporation will indemnify, to the extent permitted
by law, each Investor that may be deemed to be a controlling person of the
Corporation, its partners, officers and directors and each person, if any, who
controls such Investor within the meaning of Section 15 of the Securities Act,
against all losses, claims, damages, liabilities and expenses caused by any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus or any preliminary prospectus or any
amendment thereof or supplement thereto or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or expenses are caused by any untrue
statement or alleged untrue statement or omission or alleged omission contained
in written information furnished to the Corporation by such Investor for use in
such registration statement. If, in connection with any such registration
statement, an Investor shall furnish written information to the Corporation for
use in the registration statement, such Investor will indemnify, to the extent
permitted by law, the Corporation, its directors, each of its officers who sign
such registration statement and each person, if any, who controls the
Corporation within the meaning of the Securities Act against all losses, claims,
damages, liabilities and expenses caused by any untrue statement or alleged
untrue statement of a material fact or any omission or alleged omission of a
material fact required to be stated in the registration statement or prospectus
or any preliminary prospectus or any amendment thereof or supplement thereto or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or alleged untrue statement or such omission or
alleged omission is contained in or omitted from information so furnished in
writing by such Investor for use therein.
7.4. Compliance. Each of the Corporation and each Subsidiary (a) in
carrying out its business will comply in all respects with all Federal, state,
local and foreign laws, ordinances, regulations and orders applicable to it, its
business and the ownership of its assets and (b) will obtain and maintain in
full force and effect all Federal, state, local and foreign governmental
licenses and permits material to and necessary in the conduct of its business
and such licenses and permits shall be maintained, in full force and effect,
except where the failure
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to so comply, obtain or maintain would not reasonably be expected to have a
material adverse effect on the business, properties, assets or condition
(financial or otherwise) of the Corporation and the Subsidiaries, taken as a
whole.
7.5. Insurance. All the insurable properties of the Corporation and the
Subsidiaries will be insured for the benefit of the Corporation or such
Subsidiary, as applicable, in amounts deemed adequate by the Corporation against
all risks usually insured against by persons operating similar properties in the
localities in which such properties are located under policies in effect and
issued by insurers of recognized responsibility.
7.6. Corporate Existence, Properties, Etc. Each of the Corporation and
each Subsidiary shall maintain, preserve and keep in full force and effect its
corporate existence and all rights, franchises, licenses and permits necessary
to the proper conduct of its business, and the ownership, lease, or operation of
its properties that, if not so maintained, could reasonably be expected to have
a material adverse effect on the Corporation and the Subsidiaries, taken as a
whole; and take all action which may be reasonably required to obtain, preserve,
renew and extend all material licenses, permits, authorizations, trade names,
trademarks, service names, service marks, copyrights and patents which are
necessary for the continuance of the operation of any such property by it.
7.7. Payment of Taxes. Each of the Corporation and each Subsidiary shall
pay all taxes, assessments and governmental charges or liens imposed upon its
income or receipts or upon any of its properties (except with respect to taxes
being contested in good faith by appropriate legal proceedings), which if not so
paid could reasonably be expected, individually or in the aggregate, to have a
material adverse effect on the Corporation and the Subsidiaries, taken as a
whole.
7.8. Termination of Certain Obligations. The Corporation's obligations set
forth in Sections 7.4, 7.5, 7.6 and 7.7 shall terminate (a) as to all of the
Investors, upon the consummation by the Corporation of a Designated Public
Offering and (b) as to any Investor, at such time as such Investor's Group in
the aggregate owns less than one-third of the Preferred Shares (or Reserved
Common Shares issued upon conversion thereof) purchased by such Group pursuant
to this Agreement (subject to adjustment to reflect stock splits, stock
dividends, stock combinations, recapitalizations and like occurrences).
SECTION 8. Restriction on Transfer. (a) Series A Preferred Stock and/or
any Common Shares issued upon conversion of such Series A Preferred Stock held
by an Investor shall not be sold, transferred, assigned, pledged, encumbered or
otherwise disposed of (each, a "Transfer") except upon the conditions
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specified in this Section 8, which conditions are intended to insure compliance
with the provisions of the Securities Act.
(b) Each certificate for shares of the capital stock of the
Corporation held by an Investor and each certificate for any such securities
issued to subsequent transferees of any such certificate shall (unless otherwise
permitted by the provisions of Sections 8(c) and 8(d)) be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. ADDITIONALLY, THE
TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN
SECTION 8 OF THE STOCK PURCHASE AGREEMENT DATED AS OF MAY 12, 1997, AMONG
MOBIUS MANAGEMENT SYSTEMS, INC. AND THE OTHER PARTIES THERETO, AND NO
TRANSFER OF THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED. UPON THE FULFILLMENT OF CERTAIN OF SUCH
CONDITIONS, MOBIUS MANAGEMENT SYSTEMS, INC. HAS AGREED TO DELIVER TO THE
HOLDER HEREOF A NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE
SECURITIES REPRESENTED HEREBY REGISTERED IN THE NAME OF THE HOLDER HEREOF.
COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF
MOBIUS MANAGEMENT SYSTEMS, INC."
(c) Each Investor agrees, prior to any Transfer of such shares
stock, to give written notice to the Corporation of such Investor's intention to
effect such Transfer and to comply in all other respects with the provisions of
this Section 8. Each such notice shall describe the manner and circumstances of
the proposed Transfer and shall be accompanied by the written opinion, addressed
to the Corporation, of counsel for the holder of such shares, stating that in
the opinion of such counsel (which opinion and counsel shall be reasonably
satisfactory to the Corporation) such proposed Transfer does not involve a
transaction requiring registration or qualification of such shares under the
Securities Act or the securities "blue sky" laws of any relevant state of the
United States; provided, however, that no such opinion of counsel shall be
necessary for a Transfer by an Investor that is a partnership to a partner of
such Investor, or a retired partner of such holder who retires after the date
hereof, or the estate of any such partner or retired partner, if in each case
the transferee agrees in writing to be subject to the terms of this Section 8 to
the same extent as if such transferee were originally a signatory to this
Agreement. Such Investor shall thereupon be entitled to Transfer such shares
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in accordance with the terms of the notice delivered by it to the Corporation.
Each certificate or other instrument evidencing the securities issued upon the
Transfer of any such shares (and each certificate or other instrument evidencing
any untransferred balance of such shares) shall bear the legend set forth in
Section 8(b) unless (x) in such opinion of counsel registration of any future
Transfer is not required by the applicable provisions of the Securities Act or
(y) the Corporation shall have waived the requirement of such legends; provided,
however, that such legend shall not be required on any certificate or other
instrument evidencing the securities issued upon such Transfer in the event such
Transfer shall be made in compliance with the requirements of Rule 144 and the
transferee is not an affiliate of the Corporation. No Investor shall Transfer
any shares until such opinion of counsel has been given (unless waived by the
Corporation or unless such opinion is not required in accordance with the
provisions of this Section 8(c)).
(d) Notwithstanding the foregoing provisions of this Section 8, the
restrictions imposed by this Section 8 upon the transferability of any shares of
the capital stock of the Corporation held by an Investor shall cease and
terminate when (i) any such shares are sold or otherwise disposed of pursuant to
an effective registration statement under the Securities Act or as otherwise
contemplated by Section 8(c) and, pursuant to Section 8(c), the securities so
transferred are not required to bear the legend set forth in Section 8(b) or
(ii) the holder of such shares has met the requirements for Transfer of such
shares pursuant to subparagraph (k) of Rule 144. Whenever the restrictions
imposed by this Section 8 shall terminate, as herein provided, each Investor
holding shares as to which such restrictions have terminated shall be entitled
to receive from the Corporation, without expense, a new certificate not bearing
the restrictive legend set forth in Section 8(b) and not containing any other
reference to the restrictions imposed by this Section 8.
SECTION 9. Fees. (a) The Corporation will pay, and save the Investors
harmless against all liability for the payment of, (i) all costs and other
expenses incurred in connection with the Corporation's performance of and
compliance with all agreements and conditions contained herein on its part to be
performed or complied with and (ii) the fees (up to a maximum of $25,000) and
charges of ▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP, special counsel to the Investors,
for its services in connection with the transactions contemplated by this
Agreement, which fees and charges will be paid by the Corporation at the Closing
and thereafter upon presentation of an invoice therefor.
(b) The Corporation further agrees that it will pay, and will save
the Investors harmless from, any and all liability with respect to any stamp or
similar taxes which may be
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determined to be payable in connection with the execution and delivery and
performance of the Documents or any modification, amendment or alteration of the
terms or provisions of the Documents, and that it will similarly pay and hold
the Investors harmless from all issue taxes in respect of the issuance of the
Reserved Shares to the Investors.
SECTION 10. Exchanges; Lost, Stolen or Mutilated Certificates. Upon
surrender by any Investor to the Corporation of any certificate representing
Series A Preferred Shares or Reserved Common Shares, the Corporation at its
expense will issue in exchange therefor, and deliver to such Investor, a new
certificate or certificates representing such shares, in such denominations as
may be requested by such Investor. Upon receipt of evidence satisfactory to the
Corporation of the loss, theft, destruction or mutilation of any certificate
representing any Series A Preferred Shares or Reserved Common Shares purchased
or acquired by an Investor upon conversion of the Series A Preferred Shares, and
in case of any such loss, theft or destruction, upon delivery of any indemnity
agreement satisfactory to the Corporation, or in case of any such mutilation,
upon surrender and cancellation of such certificate, the Corporation at its
expense will issue and deliver to such Investor a new certificate for such
Reserved Shares of like tenor, in lieu of such lost, stolen or mutilated
certificate.
SECTION 11. Survival of Representations, Warranties and Agreements, Etc.
All representations and warranties hereunder shall survive the Closing until the
earlier of (i) the one-year anniversary of the Closing and (ii) the consummation
of a Designated Offering. All representations and warranties contained in any
certificate or other written instrument delivered by the Corporation or the
Founders pursuant to this Agreement, including, without limitation, the other
Documents and the Disclosure Schedule, shall constitute representations and
warranties by the Corporation and the Founders under this Agreement. All
agreements contained herein shall survive indefinitely until, by their
respective terms, they are no longer operative.
SECTION 12. Indemnification. (a) The Corporation shall indemnify, defend
and hold the Investors harmless against all liability, loss or damage actually
suffered by the Investors, together with all reasonable costs and expenses
related thereto (including reasonable legal and accounting fees and expenses),
arising from the untruth, inaccuracy or breach of any of the representations,
warranties, covenants or agreements of the Corporation and the Founders herein
or any facts or circumstances constituting any such untruth, inaccuracy or
breach or with respect to any liability for any brokers' or finders' fees or
compensation owing or alleged to be owing in connection with the transactions
contemplated hereby. The Corporation's obligation
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to indemnify and hold the Investors harmless for the untruth, inaccuracy or
breach of any of the representations and warranties herein shall terminate on
the first anniversary of the date hereof; provided, however, that such
obligation to indemnify and hold harmless shall not so terminate with respect to
any such claim for indemnification that the Investors shall have, prior to the
first anniversary of the date hereof, previously asserted, in good faith, by
delivering a written notice of such claim, stating in reasonable detail the
facts and circumstances underlying such claim and the nature of the liability,
loss or damage for which indemnity is sought.
(b) Each Investor, severally but not jointly, shall indemnify,
defend and hold the Corporation and the Founders harmless against all liability,
loss or damage, together with all reasonable costs and expenses related thereto
(including reasonable legal and accounting fees and expenses), arising from the
untruth, inaccuracy or breach of any of the representations, warranties,
covenants or agreements of such Investor herein or any facts or circumstances
constituting any such untruth, inaccuracy or breach. The Investors' obligation
to indemnify and hold the Corporation and the Founders harmless for the untruth,
inaccuracy or breach of any of the representations and warranties herein shall
terminate on the first anniversary of the date hereof; provided, however, that
such obligation to indemnify and hold harmless shall not so terminate with
respect to any such claim for indemnification that the Corporation and the
Founders shall have, prior to the first anniversary of the date hereof,
previously asserted, in good faith, by delivering a written notice of such
claim, stating in reasonable detail the facts and circumstances underlying such
claim and the nature of the liability, loss or damage for which indemnity is
sought.
(c) This Section 12 shall be the exclusive remedy of the parties
hereto for the breach of any representation and warranty set forth herein.
SECTION 13. Remedies. In case any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by the
Corporation or the Founders, the Investors (or any Investor) may proceed to
protect and enforce its or their rights either by suit in equity and/or by
action at law, including, but not limited to, an action for damages as a result
of any such breach and/or an action for specific performance of any such
covenant or agreement contained in this Agreement.
SECTION 14. Successors and Assigns. This Agreement shall bind and inure to
the benefit of the Corporation, the Founders and the Investors and the
respective successors, assigns, heirs and personal representatives (as
applicable) of the Corporation, the Founders and the Investors. The rights
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(other than the rights set forth in Section 6.1) and duties of the Investors as
set forth herein may be freely assigned, in whole or in part, by the Investors
to any transferor of Preferred Shares (or Reserved Common Shares issued upon
conversion thereof). Any transferee (other than an Investor or partner or
affiliate thereof) to whom rights under Section 6 or 7.3 are transferred shall,
as a condition to such transfer, deliver to the Corporation a written instrument
by which such transferee identifies itself, gives the Corporation notice of the
transfer of such rights, identifies any securities of the Corporation owned or
acquired by it and agrees to be bound by the obligations imposed hereunder and
under the Stockholders' Agreement upon Investors to the same extent as if such
transferee were an Investor hereunder. A transferee to whom rights are
transferred pursuant to this Section 14 may not again transfer such rights to
any other person or entity, other than as provided in this Section 14.
SECTION 15. Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto which form a part hereof contain
the entire agreement among the parties with respect to the subject matter hereof
and supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
SECTION 16. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by
nationally-recognized overnight courier or first class registered or certified
mail, return receipt requested, postage prepaid, addressed to such party at the
address set forth below or such other address as may hereafter be designated in
writing by such party to the other parties:
(i) if to the Corporation or the Founders, to:
Mobius Management Systems, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: President or such Founder, as the case may be;
with a copy to:
Kramer, Levin, Naftalis & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.; and
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(ii) if to the Investors, to their respective addresses set forth on
Schedule I hereto, with a copy to:
▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
All such notices, requests, consents and other communications shall be deemed to
have been delivered (a) in the case of personal delivery or delivery by
telecopy, on the date of such delivery, (b) in the case of dispatch by
nationally-recognized overnight courier, on the next business day following such
dispatch and (c) in the case of mailing, on the third business day after the
posting thereof.
SECTION 17. Changes. The terms and provisions of this Agreement may not be
modified or amended, nor may any of the provisions hereof be waived, temporarily
or permanently, except pursuant to a written instrument executed by the
Corporation and Investors holding at least 51% of the Series A Preferred Shares
(or Reserved Common Shares issued upon conversion of Series A Preferred Shares)
then held by all Investors (except that any modification, amendment or waiver
sought to be enforced against the Founders shall additionally require the
written consent of the Founders). Any modification, amendment or waiver in
compliance with the preceding sentence shall be binding on all parties hereto.
SECTION 18. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 19. Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be a
part of this Agreement.
SECTION 20. Nouns and Pronouns. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
SECTION 21. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed wholly therein.
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Very truly yours,
MOBIUS MANAGEMENT SYSTEMS, INC.
By:________________________________
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
THE FOUNDERS:
___________________________________
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
___________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
THE INVESTORS:
OAK INVESTMENT PARTNERS VI,
LIMITED PARTNERSHIP
By: Oak Associates VI, L.L.C.,
its General Partner
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By:________________________________
Managing Member
OAK VI AFFILIATES FUND,
LIMITED PARTNERSHIP
By: Oak VI Affiliates, L.L.C.,
its General Partner
By:________________________________
Managing Member
NEA VENTURES 1997
By:________________________________
▇▇▇▇▇ ▇▇▇▇▇▇
Vice President
-38-
39
NEA PRESIDENT'S FUND L.P.
By New President's Partners L.P.
By:________________________________
Name:
Title:
NEW ENTERPRISE ASSOCIATES VII L.P.
By New Enterprise Partners VII L.P.
By:________________________________
Name:
Title:
NEW VENTURE PARTNERS III L.P.
By:________________________________
General Partner
▇▇▇▇▇ VENTURES III, L.P.
By:________________________________
General Partner
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40
SCHEDULE I
Investors
========================================================================================================
Number of
Series A Preferred Shares
Name and Address of Investor Being Purchased Aggregate Purchase Price
========================================================================================================
OAK INVESTMENT PARTNERS VI, 19,989 $5,863,373.37
LIMITED PARTNERSHIP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------------------------------------------------------------------------------
OAK VI AFFILIATES FUND, LIMITED 466 $136,691.78
PARTNERSHIP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------------------------------------------------------------------------------
NEA VENTURES 1997 17 $4,986.61
▇▇▇▇ ▇▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------------------------------------------------------------------
NEA PRESIDENT'S FUND L.P. 273 $80,079.09
▇▇▇▇ ▇▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------------------------------------------------------------------
NEW ENTERPRISE ASSOCIATES VII 18,119 $5,314,846.27
L.P.
▇▇▇▇ ▇▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------------------------------------------------------------------
NEW VENTURE PARTNERS III L.P. 1,023 $300,076.59
▇▇▇▇ ▇▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------------------------------------------------------------------------
▇▇▇▇▇ VENTURES III, L.P. 1,023 $300,076.59
▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
========================================================================================================
TOTAL: 40,910 $12,000,130.30
========================================================================================================
41
================================================================================
MOBIUS MANAGEMENT SYSTEMS, INC.
-----------------------------------
STOCK PURCHASE AGREEMENT
-----------------------------------
As of May 12, 1997
================================================================================
42
TABLE OF CONTENTS
Page
----
SECTION 1. Amended and Restated Certificate of
Incorporation; Certificate of Designation.................. 1
SECTION 2. Issuance and Sale of Preferred Shares and
Reservation of Reserved Common Shares;
Closing.................................................... 1
2.1. Issuance of Preferred Shares and Reservation
of Reserved Common Shares.................................. 1
2.2. Agreement to Sell and Purchase the Series A
Preferred Shares........................................... 1
2.3. Delivery of Series A Preferred Shares......................... 2
2.4. The Closing................................................... 2
SECTION 3. Representations and Warranties of the
Corporation and the Founders............................... 2
3.1. Organization; Power and Authority;
Qualifications............................................. 2
3.2. Authorization of the Documents; No Conflicts.................. 3
3.3. Authorization of Series A Preferred Shares
and Reserved Shares........................................ 4
3.4. No Consent or Approval Required............................... 4
3.5. Capitalization................................................ 4
3.6. Subsidiaries.................................................. 6
3.7. No Defaults................................................... 6
3.8. Financial Information......................................... 6
3.9. Absence of Undisclosed Liabilities............................ 7
3.10. Absence of Changes............................................ 7
3.11. Title to Assets, Properties and Rights........................ 8
3.12. Burdensome Restrictions....................................... 8
3.13. Intellectual Property Rights.................................. 9
3.14. Employment of Officers, Employees and
Consultants............................................... 10
3.15. ERISA Plans and Contracts.................................... 10
3.16. Agreements................................................... 13
3.17. Compliance; Licenses and Permits............................. 13
3.18. Labor Relations; Employees................................... 14
3.19. Litigation................................................... 14
3.20. Tax Matters.................................................. 14
3.21. Related Party Transactions................................... 15
3.22. Offerees..................................................... 16
3.23. Offering Exemption........................................... 16
3.24. Brokers...................................................... 16
3.25. Registration Rights.......................................... 16
3.26. Use of Proceeds.............................................. 16
3.27. Insurance.................................................... 16
3.28. Disclosure................................................... 17
3.29. Definition of "Best Knowledge"............................... 17
3.30. Predecessor Company.......................................... 17
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Page
----
SECTION 4. Representations and Warranties of the
Investors................................................. 17
SECTION 5. Conditions Precedent to the Closing.......................... 19
SECTION 6. Information Rights........................................... 21
6.1. Access to Records............................................ 21
6.2. Financial Reports............................................ 22
6.3. Designated Offering.......................................... 25
SECTION 7. Additional Agreements of the Corporation..................... 25
7.1. Meetings of the Board of Directors........................... 25
7.2. Right of First Offer......................................... 25
7.3. Securities Act Registration Statements....................... 28
7.4. Compliance................................................... 29
7.5. Insurance.................................................... 29
7.6. Corporate Existence, Properties, Etc......................... 29
7.7. Payment of Taxes............................................. 29
7.8. Termination of Certain Obligations........................... 30
SECTION 8. Restriction on Transfer...................................... 30
SECTION 9. Fees......................................................... 32
SECTION 10. Exchanges; Lost, Stolen or Mutilated
Certificates.............................................. 32
SECTION 11. Survival of Representations, Warranties and
Agreements, Etc........................................... 32
SECTION 12. Indemnification.............................................. 33
SECTION 13. Remedies..................................................... 34
SECTION 14. Successors and Assigns....................................... 34
SECTION 15. Entire Agreement............................................. 34
SECTION 16. Notices...................................................... 34
SECTION 17. Changes...................................................... 35
SECTION 18. Counterparts................................................. 35
SECTION 19. Headings..................................................... 35
SECTION 20. Nouns and Pronouns........................................... 36
SECTION 21. Governing Law................................................ 36
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Page
----
iii
45
Page
----
ATTACHMENTS
SCHEDULES
Schedule I - Investors
Disclosure Schedule
EXHIBITS
Exhibit A - Restated Certificate of Incorporation
Exhibit B - Certificate of Designation
Exhibit C - By-laws
Exhibit D - Opinion of Kramer, Levin, Naftalis & ▇▇▇▇▇▇▇
Exhibit E - Stockholders' Agreement
Exhibit F - Registration Rights Agreement
iv