EXHIBIT 2
EXECUTION COPY
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SECURITIES PURCHASE AGREEMENT
by and among
OPTIKA INC.
▇▇▇▇▇▇ ▇▇▇▇▇▇ CAPITAL PARTNERS L.P.
and
The Parties Listed On The Signature Page Hereto
As of
February 9, 2000
TABLE OF CONTENTS
PAGE
ARTICLE I ISSUANCE AND SALE OF PREFERRED STOCK AND WARRANTS.........1
1.1. Issuance, Purchase and Sale.........................1
1.2. The Closing; Deliveries.............................2
1.3 Capitalized Terms...................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............2
2.1. Organization; Subsidiaries...........................2
2.2. Due Authorization....................................4
2.3. Capitalization.......................................5
2.4. SEC Reports..........................................6
2.5. Financial Statements.................................6
2.6. Absence of Certain Changes...........................7
2.7. Litigation...........................................8
2.8. Title to Properties; Insurance.......................8
2.9. Consents; No Violations..............................9
2.10. Holding Company Act and Investment Company Act......10
2.11. Taxes...............................................10
2.12. Employee Benefit Plans..............................11
2.13. Intellectual Property...............................13
2.14. Compliance with Laws................................16
2.15. Commitments.........................................17
2.16. Brokers or Finders..................................18
2.17. Related Party Transactions..........................18
2.18. Section 203 of the DGCL; Takeover Statute...........19
2.19. Proprietary Information of Third Parties............19
2.20. Disclosure..........................................20
2.21. Year 2000...........................................20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS..........21
3.1. Acquisition for Investment..........................21
3.2. Restricted Securities...............................21
3.3. No Brokers or Finders...............................21
3.4. Accredited Investor.................................21
3.5 Organization........................................21
3.6. Due Authorization...................................21
3.7. Consents; No Violations.............................22
3.8. Availability of Funds...............................22
3.9 Trading Price.......................................22
ARTICLE IV COVENANTS.................................................22
4.1. Conduct of Business by the Company Pending the
Closing.............................................22
4.2. No Solicitation.....................................25
4.3. Press Releases; Interim Public Filings..............25
4.4. Consents; Approvals.................................25
4.5. Listing.............................................26
4.6. Board Representation; VCOC..........................26
4.7. Committees..........................................28
4.8. Certificate of Designation..........................29
4.9. Cooperation.........................................29
4.10. Covenants to Provide Information....................29
4.11. Reserve Shares......................................30
4.12. Notice of Breach....................................30
4.13. Transfer Taxes......................................31
4.14. Indemnification.....................................31
4.15. Use of Proceeds.....................................31
4.16. Registration Rights Agreement.......................31
4.17. Future Issuances....................................31
ARTICLE V CONDITIONS................................................32
5.1. Conditions to Obligations of the Purchasers and
the Company.........................................32
5.2. Conditions to Obligations of the Purchasers.........32
5.3. Conditions to Obligations of the Company............33
ARTICLE VI TERMINATION...............................................34
6.1. Termination.........................................34
6.2. Effect of Termination...............................35
ARTICLE VII SURVIVAL; CERTAIN REMEDIES................................35
7.1. Survival............................................35
7.2. Indemnification.....................................35
ARTICLE VIII MISCELLANEOUS.............................................36
8.1. Defined Terms; Interpretations......................36
8.2. Fees and Expenses...................................43
8.3. Public Announcements................................43
8.4. Restrictive Legends.................................44
8.5. Further Assurances..................................44
8.6. Successors and Assigns..............................44
8.7. Entire Agreement....................................44
8.8. Notices.............................................45
8.9. Amendments..........................................46
8.10. Counterparts........................................46
8.11. Headings............................................46
8.12. Nouns and Pronouns..................................46
8.13. Governing Law.......................................47
8.14. Submission to Jurisdiction..........................47
8.15. Waiver of Jury Trial................................47
8.16. Severability........................................47
Exhibit 1.2(b) Form of Warrant Agreement
Exhibit 2.2 Form of Certificate of Designation
Exhibit 5.1(iii) Consents
Exhibit 5.2(iv) Form of Management Stockholders Agreement
Exhibit 5.2(v) Form of Registration Rights Agreement
Exhibit 5.2(viii) Form of Opinion of The E*Law Group
INDEX OF DEFINED TERMS
SECTION
Affiliate...............................................................8.1
Agreement..........................................................preamble
Board...................................................................8.1
Board of Directors......................................................8.1
Certificate of Designation..............................................2.2
Claim Notice.........................................................7.2(c)
Closing..............................................................1.2(a)
Closing Date.........................................................1.2(a)
Code....................................................................8.1
Commitments............................................................2.15
Common Stock.......................................................recitals
Company............................................................preamble
Company Intellectual Property...........................................8.1
Compensation and Benefit Plans..........................................8.1
Consents................................................................4.4
DGCL....................................................................8.1
Encumbrances.........................................................2.1(b)
Environmental Claim......................................................38
Environmental Laws......................................................8.1
Environmental Permits....................................................17
ERISA...................................................................8.1
ERISA Affiliate.........................................................8.1
Exchange Act............................................................8.1
Existing Rights Agreement..............................................4.16
GAAP....................................................................2.5
Governmental Entity.....................................................8.1
Hazardous Materials......................................................39
HSR Act.................................................................8.1
Intellectual Property...................................................8.1
IRS.....................................................................8.1
Knowledge...............................................................8.1
Latest Balance Sheet....................................................2.5
Laws....................................................................8.1
Leased Real Property....................................................8.1
Licenses............................................................2.14(a)
Litigation...........................................................2.7(a)
Losses..................................................................8.1
M&A Transaction.........................................................4.2
Material Adverse Effect.................................................8.1
Multi-Employer Plan.................................................2.12(c)
NASDAQ..................................................................8.1
Non-Listed Commitments.................................................2.15
Non-Voting Observer..................................................4.6(d)
Options.................................................................2.3
Owned Real Property.....................................................8.1
Ownership Threshold..................................................4.6(b)
PCBs.....................................................................39
Permitted Encumbrances..................................................8.1
Person..................................................................8.1
Preferred Stock....................................................recitals
Purchase Price..........................................................1.1
Purchaser..........................................................preamble
Purchaser Indemnified Person.........................................7.2(a)
Purchasers.........................................................preamble
Purchasers' Deductible...............................................7.2(a)
Purchasers' Designee.................................................4.6(b)
Purchasers' Designee Notice..........................................4.6(c)
Purchasers' Expenses....................................................8.2
Quarterly Financials................................................4.10(a)
Registration Rights Agreement.....................................5.2(a)(v)
Related Parties.........................................................8.1
Release.................................................................8.1
Return..................................................................8.1
SEC.....................................................................8.1
SEC Reports.............................................................2.4
Securities Act..........................................................8.1
Shareholders Agreements..........................................5.2(a)(iv)
Significant Shareholders................................................8.1
Subsidiaries.........................................................2.1(b)
Subsidiary...........................................................2.1(b)
Tax.....................................................................8.1
Taxes...................................................................8.1
Terminating Breach...................................................6.1(d)
Third Party.............................................................8.1
Transaction Documents...................................................8.1
TWCP...............................................................preamble
Warrant Agreement....................................................1.2(b)
Warrants...........................................................recitals
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of February 9,
2000 (this "Agreement"), by and among OPTIKA INC., a Delaware corporation
(the "Company"), ▇▇▇▇▇▇ ▇▇▇▇▇▇ Capital Partners, L.P., a Delaware limited
partnership ("TWCP") and the entities listed on the signature pages hereto
under the caption "Purchasers" (TWCP and each such entity, a "Purchaser"
and collectively with TWCP, the "Purchasers").
W I T N E S S E T H :
WHEREAS, upon the terms and subject to the conditions set
forth in this Agreement, the Company wishes to sell to the Purchasers, and
the Purchasers wish to purchase from the Company, (i) an aggregate of
731,851 shares of Series A Convertible Preferred Stock, par value $0.001
per share (the "Preferred Stock") of the Company, the terms of which are
set forth in the Certificate of Designation in the form of Exhibit 2.2
hereto and (ii) warrants (the "Warrants") to purchase an aggregate of
307,298 shares of the Company's Common Stock, par value $0.001 per share
(the "Common Stock"), the terms of which are set forth in the Warrant
Agreement attached in the form of Exhibit 1.2(b);
WHEREAS, the Purchasers and the Company desire to provide
for the purchase and sale of the Preferred Stock and Warrants to establish
certain rights and obligations in connection therewith, including the
execution and delivery by the Company and the Purchasers of the
Registration Rights Agreement in the form of Exhibit 5.2(v); and
WHEREAS, concurrently with the execution and delivery of
this Agreement, each of the Designated Stockholders are executing and
delivering a Shareholders Agreement with the Purchasers in the form of
Exhibit 5.2(iv).
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants and agreements set forth in
this Agreement, the parties hereto agree as follows:
ARTICLE I
ISSUANCE AND SALE OF PREFERRED STOCK AND WARRANTS
1.1. Issuance, Purchase and Sale. Upon the terms and conditions
set forth herein, at the Closing, the Company shall sell to the Purchasers,
and the Purchasers shall purchase from the Company, the Preferred Stock and
Warrants for an aggregate purchase price of $15,000,018.10, (the "Purchase
Price"). Each Purchaser shall, in exchange for the payment by such
Purchaser of the portion of the Purchase Price set forth opposite such
Purchaser's name on Schedule A receive the number of shares of Preferred
Stock and Warrants to purchase the number of shares of Common Stock set
forth opposite such Purchaser's name on Schedule A. The designations of the
Purchasers hereunder are several and not joint and no Purchaser shall have
any liability to any Person for the performance or non-performance by any
other Purchaser hereunder. The parties agree that the aggregate Purchase
Price shall be allocated for income tax purposes between the Preferred
Stock and the Warrants as set forth in Schedule B hereto.
1.2. The Closing; Deliveries. (a) The closing of the purchase and
sale of the Preferred Stock and Warrants hereunder (the "Closing") shall
take place at the offices of the Company at 9:00 a.m. on February 23, 2000
or such earlier date as may be specified by notice within two business days
of the Closing and mutually agreed to by the Company and the Purchasers, in
each case, subject to the satisfaction or waiver of the conditions to the
Closing set forth in Article V (other than those conditions that by their
nature are to be satisfied at such Closing, but subject to the satisfaction
or waiver of those conditions) (the date of the Closing, a "Closing Date").
(b) At the Closing, the Company shall deliver to the
Purchasers certificates representing the shares of Preferred Stock and
Warrants being purchased by the Purchasers at the Closing, each registered
in the name of the Purchaser or its nominee or designee in such amounts as
each Purchaser shall inform the Company prior to the Closing. Delivery of
such certificates shall be made against receipt by the Company of the
Purchase Price payable in connection with the Closing, which shall be paid
by wire transfer of immediately available funds to an account designated at
least three business days prior to the applicable Closing Date by the
Company. The Warrants shall be in the form attached as an exhibit to the
Warrant Agreement (the "Warrant Agreement"), attached in the form of
Exhibit 1.2(b)
1.3 Capitalized Terms. Capitalized terms not otherwise defined
herein shall have the meaning ascribed to such terms in Section 8.1.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the
Purchasers, as of the date hereof and as of the Closing Date, as follows:
2.1. Organization; Subsidiaries. (a) The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to
carry on its business as it is now being conducted. The Company is duly
qualified and licensed as a foreign corporation to do business, and is in
good standing (and has paid all relevant franchise or analogous Taxes), in
each jurisdiction where the character of its assets owned or held under
lease or the nature of its business makes such qualification necessary,
except where the failure to so qualify or be licensed do not and could not
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect. The minute books (containing the records of meetings of
stockholders, the Board of Directors, and any committees of the Board of
Directors), stock record books and certificate books of the Company contain
true, complete and accurate records in all material respects of all
corporate actions taken at any such meetings and other corporate governance
matters, the stock ownership of the Company and the transfer of the shares
of its capital stock since January 1, 1997. Complete and correct copies of
all of the foregoing have previously been made available to the Purchasers.
(b) Schedule 2.1(b) sets forth a complete and correct list
of each corporation, limited liability company, partnership, business
association or other Person with respect to which the Company has, directly
or indirectly, ownership of or rights with respect to securities or other
interests having the power to elect a majority of such Person's board of
directors or analogous or similar governing body, or otherwise having the
power to direct the management, business or policies of that corporation,
limited liability company, partnership, business association or other
Person (each, a "Subsidiary" and, collectively, the "Subsidiaries"). Except
as set forth on Schedule 2.1(b), the Company owns, either directly or
indirectly through one or more Subsidiaries, all of the capital stock or
other equity interests of the Subsidiaries free and clear of all liens,
charges, claims, security interests, restrictions, options, proxies, voting
trusts or other encumbrances ("Encumbrances"), other than transfer
restrictions imposed by applicable federal and state securities laws.
Except as set forth on Schedule 2.1(b) all of the issued and outstanding
shares of capital stock or other equity interests of each Subsidiary held
directly or indirectly by the Company have been duly authorized and are
validly issued, fully paid and nonassessable. No shares of capital stock or
other equity interests of any Subsidiary are entitled to preemptive rights.
Except as set forth on Schedule 2.1(b) or disclosed in the SEC Reports,
there are no outstanding subscription rights, options, warrants,
convertible or exchangeable securities or other rights of any character
whatsoever relating to issued or unissued capital stock or other equity
interests of any Subsidiary, or any Commitments of any character whatsoever
relating to issued or unissued capital stock or other equity interests of
any Subsidiary or pursuant to which the Company or any Subsidiary is or may
become bound to issue or grant additional shares of its capital stock or
other equity interests or related subscription rights, options, warrants,
convertible or exchangeable securities or other rights, or to grant
preemptive rights. Except as set forth on Schedule 2.1(b) or disclosed in
the SEC Reports, there are no voting trusts, stockholders agreements,
proxies or other Commitments or understandings to which any Subsidiary is a
party with respect to the voting or transfer of any capital stock or other
equity interest of any Subsidiary. Except for (i) the Subsidiaries, (ii)
assets held in benefit plans, (iii) corporate treasury transactions and
(iv) as set forth on Schedule 2.1(b), the Company does not own, directly or
indirectly, any interest in any corporation, limited liability company,
partnership, business association or other Person.
(c) Each Subsidiary is a corporation, limited liability
company, partnership, business association or other Person duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization and has the requisite power and authority to carry on its
business as it is now being conducted. Except as set forth on Schedule
2.1(c), each Subsidiary is duly qualified and licensed to do business, and
is in good standing (and has paid all relevant franchise or analogous
taxes), in each jurisdiction where the character of its assets owned or
held under lease or the nature of the business conducted by it makes such
qualification necessary, except where the failure of any such Subsidiary to
so qualify or be licensed individually or in the aggregate do not and could
not reasonably be expected to have a Material Adverse Effect. The minute
books or other records (containing the records of meetings of stockholders
or other holders of other equity interests, the board of directors or other
similar governing body, and any committees thereof), the stock ownership or
analogous records and the certificate books of each of the Subsidiaries
contain in all material respects true, complete and accurate records of all
actions taken at any such meetings and other governance matters, the stock
or other equity ownership of each of such Subsidiaries and the transfer of
the shares of its capital stock or other equity interest since January 1,
1997. Complete and correct copies of all of the foregoing have previously
been made available to the Purchasers.
2.2. Due Authorization. The Company has all right, corporate
power and authority to enter into this Agreement and each of the other
Transaction Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by
the Company of this Agreement and each of the other Transaction Documents
to which it is a party, the issuance and sale of the Preferred Stock and
the Warrants by the Company and the compliance by the Company with each of
the provisions of this Agreement and each of the other Transaction
Documents to which it is a party (including the reservation and issuance of
the shares of Common Stock on any conversion of the Preferred Stock or any
exercise of the Warrants (collectively, the "Common Shares") and the
consummation by the Company of the transactions contemplated hereby and
thereby) (a) are within the corporate power and authority of the Company
and (b) have been duly authorized by all requisite corporate proceedings on
the part of the Board of Directors and, if applicable, to the stockholders
of the Company. This Agreement has been, and each of the other Transaction
Documents to which the Company is a party when executed and delivered by
the Company will be, duly and validly executed and delivered by the
Company, and this Agreement constitutes, and each of such other Transaction
Documents (other than the Preferred Shares) when executed and delivered by
the Company will constitute, a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as
enforceability against the Company may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar Laws now or hereafter in
effect relating to the rights of creditors generally and by legal and
equitable limitations on the enforceability of specific remedies
(regardless of whether enforcement is considered in a proceeding in equity
or at law). The shares of Preferred Stock and all Common Shares issuable
upon conversion of the Preferred Stock and exercise of the Warrants have
been validly reserved for issuance, and upon payment of the Purchase Price
in the case of the Preferred Stock and Warrants and upon conversion of the
Preferred Stock or the exchange of the Warrants in the case of the Common
Shares, such shares of Preferred Stock, Warrants and Common Shares, as the
case may be, will be duly and validly issued and outstanding, fully paid,
and nonassessable and issued free of preemptive rights. The terms,
designations, powers, preferences and relative participation, optional and
other special rights, qualifications, limitations and restrictions of the
Preferred Stock will be set forth in the Certificate of Designation of the
Preferred Stock (the "Certificate of Designation"), the form of which is
attached as Exhibit 2.2.
2.3. Capitalization. The authorized capital stock of the Company
consists of (i) 25,000,000 shares of Common Stock, par value $0.001 per
share, and (ii) 2,000,000 shares of preferred stock, par value $0.001 per
share. As of the date hereof, (a) 7,589,129 shares of Common Stock were
issued and outstanding, (b) options ("Options") to purchase an aggregate of
2,270,437 shares of Common Stock under the Company's 1994 Employee Stock
Option Plan (the "Company Option Plan") were outstanding, 2,270,437 shares
of Common Stock were reserved for issuance upon the exercise of outstanding
Options and 57,545 shares were reserved for future grant not authorized
prior to the date of this Agreement under the Company Option Plan, (c)
warrants ("Settlement Warrants") to purchase an aggregate of 9,738 shares
of Common Stock upon exercise were outstanding, (d) 583 shares of Common
Stock ("Restricted Stock") were reserved for issuance under the Company's
Employee Stock Purchase Plan (the "Stock Purchase Plan"), (e) no shares of
Common Stock were held by the Company in its treasury or by any of the
Subsidiaries of the Company and (f) except for the Preferred Stock
designated by the Certificate of Designation, no shares of preferred stock
of the Company have been issued or are outstanding. The Company has not
adopted any shareholders rights plan with respect to its Common Stock. The
Company has no outstanding bonds, debentures, notes or other obligations or
securities entitling the holders thereof to vote (or which are convertible
or exercisable for securities having the right to vote) with the
stockholders of the Company on any matter. A complete and correct list of
each outstanding Option and Settlement Warrants, the holders and the
exercise price thereof is set forth on Schedule 2.3, and, as to each such
Option, whether the same is vested. Since December 31, 1999, the Company
(i) has not issued any shares of Common Stock other than (x) upon exercise
of Options or Warrants, and (y) the issuance of at least 85% of fair market
value of 39,336 shares of Restricted Stock under the Company's Stock
Purchase Plan, (ii) has granted at fair market value Options to purchase an
aggregate of 210,500 shares of Common Stock under the Company Option Plan
and (iii) has not split, combined or reclassified any of its shares of
capital stock. All of the issued and outstanding shares of Common Stock
have been duly authorized and are validly issued, fully paid and
nonassessable and free of preemptive rights. Except as set forth on
Schedule 2.3 or pursuant to the Transaction Documents, there are no
outstanding subscription rights, options, warrants, convertible or
exchangeable securities or other rights of any character whatsoever
relating to issued or unissued capital stock of the Company, or any
Commitments of any character whatsoever relating to issued or unissued
capital stock of the Company or pursuant to which the Company or any of the
Subsidiaries is or may become bound to issue or grant additional shares of
its capital stock or related subscription rights, options, warrants,
convertible or exchangeable securities or other rights, or to grant
preemptive rights. Except as set forth on Schedule 2.3, (i) the Company has
not agreed to register any securities under the Securities Act or under any
state securities law or granted registration rights to any Person or entity
and (ii) there are no voting trusts, stockholders agreements, proxies or
other Commitments or understandings in effect to which the Company is a
party or of which it has Knowledge with respect to the voting or transfer
of any of the shares of Common Stock. To the extent that any options,
warrants or any of the other rights described above are outstanding,
neither the issuance and sale of the Preferred Stock and the Warrants, nor
any issuance of Common Shares on conversion or exercise thereof will result
in an adjustment of the exercise or conversion price or number of shares
issuable upon the exercise or conversion of any such options, warrants or
other rights.
2.4. SEC Reports. The Company has timely filed all registration
statements, proxy or information statements, reports and other documents
required to be filed by it with the SEC under the Exchange Act from and
after July 25, 1996 (collectively, the "SEC Reports"). Each SEC Report was
as of their respective dates in compliance as to form in all material
respects with the applicable requirements of the Securities Act and did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
2.5. Financial Statements. Each of the consolidated balance
sheets of the Company included or incorporated by reference into the SEC
Reports (including the related notes and schedules) fairly presents the
consolidated financial position of the Company and its consolidated
Subsidiaries as of its date, and each of the consolidated statements of
earnings and cash flows of the Company included or incorporated by
references into the SEC Reports (including any related schedules and or
notes) fairly presents the results of operations, earnings or cash flows,
as the case may be, of the Company and its consolidated Subsidiaries for
the respective periods set forth therein, in each case in accordance with
generally accepted accounting principles ("GAAP") consistently applied for
the periods involved, except as noted therein and subject, as to interim
statements, to normal year-end audit adjustments, none of which has had or
would be reasonably expected to have a Material Adverse Effect. Except as
set forth on Schedule 2.5 or disclosed in the SEC Reports, neither the
Company nor any Subsidiary has any liability or obligation (whether
accrued, absolute, contingent, unliquidated or otherwise, whether known or
unknown, whether due or to become due and regardless of when asserted),
except (i) liabilities and obligations in the respective amounts reflected
or reserved against in the Company's consolidated balance sheet as of
December 31, 1999 (the "Latest Balance Sheet"), (ii) liabilities and
obligations incurred in the ordinary course of business since December 31,
1999 which individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect or (iii) under Commitments in
accordance with the terms and conditions thereof which are not required by
GAAP to be reflected on the Latest Balance Sheet except Commitments that
are required to be disclosed pursuant to Section 2.15 and are not so
disclosed.
2.6. Absence of Certain Changes. Except as set forth on Schedule
2.6, as disclosed in the SEC Reports, or pursuant to the transactions
contemplated by this Agreement and the other Transaction Documents, since
September 30, 1999: (i) the business of the Company and the Subsidiaries
taken as a whole has been conducted in the ordinary course of business
consistent with past practice, (ii) the Company and its Subsidiaries have
not (a) suffered any change, event or development or series of changes,
events or developments which individually or in the aggregate has had or
could reasonably be expected to have a Material Adverse Effect, (b)
suffered any damage, destruction or casualty loss to its physical
properties (whether or not covered by insurance) which individually or in
the aggregate has resulted or could reasonably be expected to result in a
Material Adverse Effect or (c) been the subject of any material Litigation
or threatened or commenced investigation by a Governmental Entity and (iii)
there has not been (a) any declaration, setting aside or payment of any
dividend or other distribution with respect to the capital stock of the
Company or its Subsidiaries (other than wholly-owned Subsidiaries) or any
repurchase, redemption or any other acquisition by the Company or its
Subsidiaries of any outstanding shares of capital stock or other securities
of, or other ownership interests in, the Company or its Subsidiaries, (b)
any material change in accounting principles, practices or methods, (c) any
entry into or amendment of any employment agreement with, or any increase
in the rate or terms (including, without limitation, any acceleration of
the right to receive payment) of compensation payable or to become payable
by the Company or any of its Subsidiaries to, their respective directors,
officers or employees, except increases in the ordinary course of business
in accordance with the past practice of the Company, (d) any increase in
the rate or terms (including, without limitation, any acceleration of the
right to receive payment) of any bonus, insurance, pension or other
employee benefit plan or arrangement covering any such directors, officers
or employees, except increases in the ordinary course of business in
accordance with the past practice of the Company, or (e) any material
revaluation by the Company or any of its Subsidiaries of any of their
respective assets, including, without limitation, write-downs of inventory
or write-offs of accounts receivable except in the ordinary course of
business in accordance with the Company's past practices prior to December
31, 1999.
2.7. Litigation. (a) Except as set forth on Schedule 2.7(a) or as
disclosed in the SEC Reports, there is no material claim, action, suit,
investigation or proceeding ("Litigation") pending or, to the Knowledge of
the Company, threatened against the Company or any of the Subsidiaries or
involving any of their respective properties or assets by or before any
court, arbitrator or other Governmental Entity.
(b) Except as set forth on Schedule 2.7(b) or as disclosed
in the SEC Reports, neither the Company nor any of the Subsidiaries is in
default under or in breach of any order, judgment or decree of any court,
arbitrator or other Governmental Entity, and neither the Company nor any of
the Subsidiaries is a party or subject to any order, judgment or decree of
any court, arbitrator or other Governmental Entity.
2.8. Title to Properties; Insurance. (a) Except as set forth on
Schedule 2.8(a), the Company and the Subsidiaries have good and valid title
to, or, in the case of property leased by them, a valid and subsisting
leasehold interest in, their respective material properties and assets,
free of all Encumbrances except for Permitted Encumbrances.
(b) The SEC Reports list all Owned Real Property. With
respect to the Owned Real Property, (i) the Company and its Subsidiaries
have good and marketable title in fee simple to the Owned Real Property,
free and clear of all Encumbrances except for Permitted Encumbrances, (ii)
there are no outstanding options or rights of first refusal in favor of any
other Person to purchase the Owned Real Property or any portion thereof or
interest therein, and (iii) there are no leases, subleases, licenses,
options, rights, concessions or other Commitments affecting any portion of
the Owned Real Property.
(c) The SEC Reports list all material Leased Real Property.
With respect to the Leased Real Property, the Company and the Subsidiaries
have good and valid leasehold estates in the Leased Real Property, free and
clear of all Encumbrances except for Permitted Encumbrances and
Encumbrances set forth on Schedule 2.8(a). Except as set forth on Schedule
2.8(c), (A) each lease or sublease relating to the Leased Real Property is
legal, valid, binding and enforceable in accordance with its terms against
the Company and to the Company's Knowledge, against the other parties
thereto, and in full force and effect and (B) the execution and delivery of
this Agreement and the consummation of the transactions contemplated by
this Agreement will not cause a breach or require any third party consent
or notification under any such lease or sublease.
(d) Schedule 2.8(d) sets forth a complete and correct list
of all insurance coverage carried by the Company and the Subsidiaries,
including for each policy the type and scope of coverage, the carrier and
the amount of coverage, including directors' and officers' liability
insurance. All of the material assets of the Company and the Subsidiaries
and all aspects of the Company's and the Subsidiaries' businesses that are
of insurable character are covered by insurance with reputable insurers
against risks of liability, casualty and fire and other losses and
liabilities customarily obtained by other similarly situated public
companies to cover comparable businesses and assets in amounts, scope and
coverage (and with deductibles) which are consistent with prudent industry
practice by other similarly situated public companies. Neither the Company
nor any of the Subsidiaries is in default in a material respect with
respect to any of its obligations under any insurance policy maintained by
it. All such policies are in full force and effect and no premiums with
respect thereto are past due and owed. Except as set forth on Schedule
2.8(d), there are no claims by the Company or any of the Subsidiaries under
any of such policies to which any insurance company is denying liability or
defending under a reservation of rights or similar clause. Except as set
forth on Schedule 2.8(d), neither the Company nor any of the Subsidiaries
has received notice of any pending or threatened termination of any of such
policies or any premium increases for the current policy period with
respect to any of such policies, and the consummation of the transactions
contemplated by this Agreement or any of the other Transaction Documents
will not result in any such termination or premium increase. The Company
maintains a directors' and officers' insurance policy with both the
National Union Fire Insurance Company and the Federal Insurance Company
(complete and correct copies of which have previously been delivered to the
Purchasers), which will both, upon the election or appointment of either
the Preferred Stock Designee or the Purchaser's Designee, include such
designee as a covered person.
2.9. Consents; No Violations. Except as set forth on Schedule
2.9, neither the execution, delivery or performance by the Company of this
Agreement or any of the other Transaction Documents to which it is a party
nor the consummation of the transactions contemplated hereby or thereby
will (a) conflict with, or result in a breach or a violation of, any
provision of the certificate of incorporation or by-laws of the Company or
any Subsidiary; (b) constitute, with or without notice or the passage of
time or both, a breach, violation or default, create an Encumbrance, or
give rise to any right of termination, modification, cancellation,
prepayment, suspension, limitation, revocation or acceleration, under (i)
any Law or (ii) any Commitment to which the Company or any of the
Subsidiaries is a party or pursuant to which any of them or any of their
assets or properties is subject, except, with respect to the matters set
forth in this clause (b), for breaches, violations, defaults, Encumbrances,
or rights of termination, modification, cancellation, prepayment,
suspension, limitation, revocation or acceleration, which, individually or
in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect or adversely affect the ability of the Company to consummate
the transactions contemplated by this Agreement or any other Transaction
Document to which it is a party; or (c) require any consent, approval or
authorization of, notification to, filing with, or exemption or waiver by,
any Governmental Entity or any other Person on the part of the Company or
any of the Subsidiaries except for filings required under the Exchange Act
and, in the case of Restructuring Rights Agreement, the Securities Act and
state "blue sky" laws.
2.10. Holding Company Act and Investment Company Act. Neither the
Company nor any of the Subsidiaries is: (i) a "public utility company" or a
"holding company," or an "affiliate" or a "subsidiary company" of a
"holding company," or an "affiliate" of such a "subsidiary company," as
such terms are defined in the Public Utility Holding Company Act of 1935,
as amended, or (ii) a "public utility," as defined in the Federal Power
Act, as amended, or (iii) an "investment company" or an "affiliated person"
thereof or an "affiliated person" of any such "affiliated person," as such
terms are defined in the Investment Company Act of 1940, as amended.
2.11. Taxes. (a) Except as disclosed in Schedule 2.11(a), the
Company and each of the Subsidiaries has timely filed all Returns required
by Law to have been filed by it and has paid all Taxes required to be paid
by it including, without limitation, any Tax levied upon any of its
properties, assets, income or franchises. All such Returns were complete
and correct in all material respects. All amounts required to be collected
or withheld by the Company and each of the Subsidiaries has been collected
or withheld and any such amounts that are required to be remitted to any
taxing authority have been duly remitted. The accruals and reserves for
Taxes on the Latest Balance Sheet are complete and adequate in all material
respects to cover any liability of the Company and each of its Subsidiaries
for Taxes for periods through December 31, 1999. The accruals and reserves
for deferred tax liabilities on the Latest Balance Sheet are adequate to
cover any such liability in accordance with GAAP.
(b) Schedule 2.11(b) contains a list of states, territories
and jurisdictions (whether foreign or domestic) in which the Company or any
of the Subsidiaries currently files an income, franchise, sales or use
Return. Except as set forth on Schedule 2.11(b), (i) neither the IRS nor
any other taxing authority has asserted in writing any claim involving a
material amount of Taxes, or to the Knowledge of the Company, is
threatening to assert any claims involving a material amount of Taxes,
against the Company or any of the Subsidiaries, (ii) neither the Company
nor any of the Subsidiaries has been a member of a consolidated, combined
or unitary group for federal or state or foreign income Tax purposes that
included any member other than the current members of the consolidated
federal income tax group of which the Company is the common parent, (iii)
there are no Returns with respect to which an audit or examination is in
progress or with respect to which a written notification of intent to audit
or examine has been received by the Company or any of the Subsidiaries from
the IRS or any other taxing authority that relate to Taxes for which the
Company or any of the Subsidiaries could be liable, (iv) neither the
Company nor any of the Subsidiaries is or has been a party to any Tax
sharing agreement (except for agreements with Subsidiaries providing for
the sharing of liabilities on a pro rata basis) that will remain in effect
and under which the Company or any such Subsidiary could have any material
liability for Taxes, (v) there are no liens for Taxes upon any assets of
the Company or any of the Subsidiaries (other than liens for Taxes not yet
due and payable), except for liens which individually or in the aggregate
do not and could not reasonably be expected to have a Material Adverse
Effect, (vi) neither the Company nor any of the Subsidiaries has agreed or
is required to include in income during the current year or any future
taxable period any material adjustment pursuant to Section 481 of the Code
(or similar provisions of foreign, state or local law) by reason of a
change in accounting method or otherwise, and the IRS has not proposed any
such adjustment, and (vii) complete copies of all income Tax Returns filed
by the Company and each of the Subsidiaries for taxable periods commencing
on or after January 1, 1994 have been provided to, or made available to,
the Purchasers.
2.12. Employee Benefit Plans. (a) Schedule 2.12 sets forth a
complete and correct list of (i) all of the Compensation and Benefit Plans
that are intended to qualify with the applicable requirements of Article
401(a) of the Code and (ii) all employment, severance and change of control
agreements with employees, former employees, officers, former officers,
directors, former directors or the beneficiaries of any of the foregoing or
pursuant to which the Company or any Subsidiary has or may have any
liability in excess of $100,000. Except with respect to any Multi-Employer
Plan, the Company has heretofore delivered or made available to the
Purchasers true and complete copies of all Compensation and Benefit Plans
and any amendments thereto (or if a Compensation and Benefit Plan is not in
written form, a written description thereof), any related trust or other
funding agreement or vehicle, the most recent reports or summaries required
under ERISA or the Code and, with respect to each Compensation and Benefit
Plan intended to qualify under Article 401 of the Code, the most recent
determination letter received from the IRS.
(b) Except where the failure to do so could not individually
or in the aggregate reasonably be expected to have a Material Adverse
Effect, the Company and each Subsidiary have performed all obligations
required to be performed by them under each Compensation and Benefit Plan
and neither the Company nor any Subsidiary is in default under or in
violation of, any Compensation and Benefit Plan. Each Compensation and
Benefit Plan has in all material respects been established, operated,
maintained and administered, as the case may be, in accordance with its
terms and is in compliance in all material respects with all applicable
Laws, statutes, orders, rules and regulations, including, but not limited
to, ERISA and the Code.
(c) At no time during the seven (7) year period immediately
preceding the date of this Agreement has the Company, or any ERISA
Affiliate contributed to or been required to contribute to, or incurred any
withdrawal liabilities (within the meaning of Section 4201 of ERISA) to any
"Multi-Employer Plan" within the meaning of Sections 3(37) or 4001(a)(3) of
ERISA (a "Multi-Employer Plan").
(d) Neither the Company, any Subsidiary, nor any ERISA
Affiliate presently sponsors, maintains or contributes to, nor is the
Company, any Subsidiary or any ERISA Affiliate required to sponsor,
maintain or contribute to, nor has the Company, any Subsidiary or any ERISA
Affiliate (other than where the Company, such Subsidiary or such ERISA
Affiliate has no continuing material obligation or liability) ever
sponsored, maintained, contributed to or been required to contribute to,
any Compensation and Benefit Plan which is an "employee pension benefit
plan" within the meaning of Article 3(2) of ERISA and which is subject to
Title IV of ERISA.
(e) Neither the Company, any Subsidiary nor any ERISA
Affiliate (i) maintains or contributes to any Compensation and Benefit Plan
which provides, or has any liability to provide, life insurance, medical or
dental benefits to any employee upon his retirement or termination of
employment, except as may be required by Article 4980B of the Code or as
would not reasonably be expected to have individually or in the aggregate a
Material Adverse Effect; or (ii) has ever represented to, promised or
contracted with (whether in oral or written form) any employee (either
individually or to employees as a group) that such employee would be
provided with life insurance, medical or dental benefits upon retirement or
termination of employment, except to the extent required by Article 4980B
of the Code or as would not reasonably be expected to have individually or
in the aggregate a Material Adverse Effect.
(f) There are no pending, or to the Knowledge of the
Company, threatened claims by or on behalf of any Compensation and Benefit
Plan by any employee or beneficiary covered under any such Compensation and
Benefit Plan, or otherwise involving any such Compensation and Benefit
Plan, that individually or in the aggregate could reasonably be expected to
have a Material Adverse Effect.
(g) Except as otherwise set forth on Schedule 2.12(g), there
is no Commitment covering any employee or former employee of the Company or
any Subsidiary that, individually or in the aggregate, would be reasonably
likely to give rise to the payment of any amount that would result in a
material loss of tax deductions pursuant to the terms of Article 162(m) of
the Code.
(h) Except where the failure to do so could not individually
or in the aggregate reasonably be expected to have a Material Adverse
Effect, the Company and each Subsidiary (i) is in compliance with all
applicable federal, state and local laws, rules and regulations (domestic
and foreign) respecting employment, employment practices, labor, terms and
conditions of employment and wages and hours, in each case, with respect to
employees; (ii) has withheld all amounts required by Law or by Commitment
to be withheld from the wages, salaries and other payments to employees;
(iii) is not liable for any arrears of wages or any taxes or any penalty
for failure to comply with any of the foregoing; and (iv) is not liable for
any payment to any trust or other fund or to any Governmental Entity with
respect to unemployment compensation benefits, social security or other
benefits for employees.
(i) No work stoppage or labor strike against the Company or
any Subsidiary by employees is pending, or to the knowledge of the Company,
threatened. Except for such matters that could not individually or in the
aggregate reasonably be expected to have a Material Adverse Effect, neither
the Company nor any Subsidiary (i) is involved in, or to the knowledge of
the Company, threatened with any labor dispute, grievance, or Litigation
relating to labor matters involving any employees, including, without
limitation, violation of any federal, state or local labor, safety or
employment laws (domestic or foreign), charges of unfair labor practices or
discrimination complaints or (ii) has engaged in any unfair labor practices
within the meaning of the National Labor Relations Act or the Railway Labor
Act.
(j) Except as set forth in Schedule 2.12(j) the execution,
delivery and performance by the Company of the transactions contemplated by
this Agreement and the other Transaction Documents to which it is a party
will not (either alone or upon the occurrence of any additional or
subsequent events) constitute an event under any Compensation and Benefit
Plan, trust or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits
with respect to any employee. No payment or benefit which will or may be
made by the Company, any Subsidiary, the Purchasers or any of their
respective Affiliates in connection with the transactions contemplated by
this Agreement or any of the other Transaction Documents with respect to
any employee will be characterized as an "excess parachute payment" within
the meaning of Article 280G(b)(1) of the Code.
2.13. Intellectual Property. (a) Each item of Company
Intellectual Property which is a patent, patent application, trademark,
trademark application, service ▇▇▇▇, service ▇▇▇▇ application, logo, trade
name, domain name, corporate name, copyright registration, copyright
application, mask work registration, mask work application, license,
sublicense, is set forth on Schedule 2.13(a).
(b) Except as disclosed on Schedule 2.13(b): (i) the Company
or a Subsidiary owns or has the right to use pursuant to a valid license,
sub-license or other agreement all Company Intellectual Property, except
where the absence of any thereof could not individually or in the aggregate
reasonably be expected to have a Material Adverse Effect and the
consummation of the transactions contemplated hereby will not alter or
impair any such rights;
(ii) to the Company's Knowledge, neither the Company
nor any of the Subsidiaries has interfered with, infringed upon or
misappropriated any Intellectual Property rights of third parties, except
for interferences, infringements and misappropriations which could not
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect, and neither the Company nor any Subsidiary has received any
written claim, demand or notice alleging any such interference,
infringement or misappropriation (including any claim that the Company must
license or refrain from using any Intellectual Property rights of any third
party);
(iii) to the Company's Knowledge, no third party has
interfered with, infringed upon or misappropriated any Intellectual
Property rights of the Company or any Subsidiary, except for interferences,
infringements and misappropriations which could not individually or in the
aggregate reasonably be expected to have a Material Adverse Effect except
as set forth on Schedule 2.13(b):
(iv) each item of Company Intellectual Property will be
owned or available for use by the Company on identical terms and conditions
immediately subsequent to the Closing hereunder;
(v) all registered patents, trademarks, service marks
and copyrights listed on Schedule 2.13(a) are valid and subsisting and in
full force and effect and are not subject to any taxes or other fees except
for periodic filing and maintenance fees;
(vi) the Company is not aware of any notice, claim or
assertion that any item of Company Intellectual Property is invalid nor is
the Company aware of any facts that would cause a reasonable person to
conclude that any item of Company Intellectual Property is invalid;
(vii) Company Intellectual Property is all the
Intellectual Property that is necessary for the Company's business as
currently conducted; and
(viii) the Company has taken commercially reasonable
action to maintain and protect each item of Company Intellectual Property.
(c) With respect to each item of Company Intellectual
Property, except as set forth in Schedule 2.13(c):
(i) the Company possess all right, title and interest
in and to the item, free and clear of any Encumbrance, license or other
restriction;
(ii) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling or charge;
(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or, to the
knowledge of the Company, is threatened which challenges the legality,
validity, enforceability, use or ownership of the item;
(iv) the Company has never agreed to indemnify any
person for or against any interference, infringement, misappropriation or
other conflict with respect to the item;
(v) each license, sublicense, agreement or permission
disclosed on Schedule 2.13(a) is legal, valid, binding, enforceable and in
full force and effect and will continue to be legal, valid, binding,
enforceable against the Company, and, to the Company's Knowledge, the other
party thereto and in full force and effect on identical terms following the
Closing;
(vi) no party to any license, sublicense, agreement or
permission disclosed on Schedule 2.13(a) is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification or acceleration
thereunder;
(vii) no party to any license, sublicense, agreement or
permission disclosed on Schedule 2.13(a) has repudiated in writing any
provision thereof;
(viii) with respect to any sublicense disclosed on
Schedule 2.13(a), the representations and warranties set forth in
subsections (v) through (vii) above are true and correct with respect to
the underlying license;
(ix) with respect to each license, sublicense,
agreement or permission disclosed on Schedule 2.13(a), the underlying item
of Intellectual Property is not subject to any outstanding injunction,
judgment, order, decree, ruling or charge;
(x) with respect to each license, sublicense, agreement
or permission disclosed on Schedule 2.13(a), no action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand is pending or to
the Company's Knowledge is threatened which challenges the legality,
validity or enforceability of the underlying item of Intellectual Property;
and
(xi) with respect to each license, sublicense,
agreement or permission disclosed on Schedule 2.13(a), the Company has not
granted any sublicense or similar right with respect to the license,
sublicense, agreement or permission.
(d) The continued operation of the Company's business as
presently conducted will not interfere with, infringe upon, misappropriate,
or otherwise come into conflict with, any Intellectual Property rights of
third parties.
(e) The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments
of any nature) or other agreement, or subject to any judgment, decree or
order of any court or administrative agency, that would interfere with the
use such employee's best efforts to promote the interest of the Company or
that would conflict with the Company's business as presently conducted or
the Company Intellectual Property.
(f) Neither the execution nor delivery of this Agreement nor
the carrying on of the Company's business as currently conducted by the
employees of the Company, nor the conduct of the Company's business as
presently conducted, will, to the Company's knowledge, conflict with or
result in a breach of the terms, conditions of provisions of, or constitute
a default under, any contract, covenant or instrument under which any or
such employees is now obligated.
(g) The Company does not and will not need, in order to
conduct the Company's business as presently conducted, to utilize any
inventions of any of its employees, former employees (or persons it
currently intends to hire) made while not employed by the Company and the
rights to which have not been fully assigned to the Company.
(h) The Company has obtained valid and effective assignments
from all of its employees, former employees, independent contractors, and
former independent contractors (collectively defined herein as "Inventors")
of all of such Inventors' rights in any Intellectual Property developed by
such Inventors while employed by or under contract with the Company.
(i) For each item of Company Intellectual Property which is
an application, including but not limited to patent applications, trademark
applications, service ▇▇▇▇ applications, copyright applications, or mask
work applications, the Company has the right to require the applicant to
transfer ownership to the Company of the application and of the
registration once it issues.
(j) The Company has taken reasonable precautions to protect
the secrecy, confidentiality, and value of its trade secrets, and has
entered into confidential information/non-disclosure agreements with each
of its officers, employees, and independent contractors.
2.14. Compliance with Laws. (a) Except as set forth on Schedule
2.14(a) or as disclosed in the SEC Reports, the Company and the
Subsidiaries are in compliance in all material respects with all Laws, and
since September 30, 1999 neither the Company nor any Subsidiary has
received any notice of any alleged violation of Law applicable to it that
could reasonably be expected to have a Material Adverse Effect. The Company
and the Subsidiaries have all material licenses, franchise permits,
consents, registrations, certificates, and other governmental or regulatory
permits, authorizations or approvals required for the operation of the
business as presently conducted and for the ownership, lease or operation
of the Company's and its Subsidiaries' properties except where the failure
to do so could not reasonably be expected to have a Material Adverse Effect
(collectively, "Licenses"). Except as set forth on Schedule 2.14(a), the
Company and the Subsidiaries have all Licenses, and all of such Licenses
are valid and in full force and effect, and the Company and the
Subsidiaries have duly performed and are in compliance in all material
respects with all of their obligations under such Licenses. No event has
occurred with respect to any of such Licenses that allows, or after notice
or lapse of time or both would allow, the suspension, limitation,
revocation, non-renewal or termination thereof that, individually or in the
aggregate, has had or would reasonably be expected to have a Material
Adverse Effect, and no terminations of any License or proceedings to
suspend, limit, revoke or terminate any License have been threatened. The
Company has made available for inspection by the Purchasers copies of all
material correspondence between the Company or any of the Subsidiaries, on
the one hand, and the SEC on the other hand.
(b) Neither the Company nor any Subsidiary has offered or
agreed to offer anything of value to any government official, political
party or candidate for governmental or political office (or any person that
the Company knows, or has reason to know, will offer anything of value to
any governmental official, political party or candidate for governmental or
political office), such that the Company or any of the Subsidiaries have
violated the Foreign Corrupt Practices Act of 1977, as amended.
(c) Except as set forth on Schedule 2.14(c) and except as
would not, individually or in the aggregate, have a Material Adverse
Effect:
(i) the Company and each of its Subsidiaries is in
compliance with applicable Environmental Laws;
(ii) the Company and each of its Subsidiaries has
obtained or has applied for all applicable environmental, health and safety
permits, licenses, variances, approvals and authorizations required under
Environmental Laws (collectively, the "Environmental Permits") necessary
for the conduct of its operations;
(iii) there is no Environmental Claim pending or, to
the knowledge of the Company, threatened (A) against the Company or any of
its Subsidiaries, (B) against any Person whose liability for any
Environmental Claim has been retained or assumed contractually by the
Company or any of its Subsidiaries, or (C) against any real property which
the Company or any of its Subsidiaries owns, leases or operates; and
(iv) to the Knowledge of the Company, there have been
no Releases of any Hazardous Materials that would be reasonably likely to
form the basis of any Environmental Claim against the Company or any of its
Subsidiaries.
2.15. Commitments. Schedule 2.15 sets forth a complete and
correct list of each written and, if material, oral contract, agreement,
understanding, arrangement and commitment of any nature whatsoever,
including all amendments thereof and supplements thereto ("Commitments") of
the following types to which the Company or any Subsidiary is a party or by
or to which the Company or any Subsidiary or any of their properties may be
bound or subject as of the date hereof: (i) Commitments containing
covenants purporting to limit the freedom of the Company or any Subsidiary
to compete in any line of business in any geographic area or to hire any
individual or group of individuals, (ii) Commitments or related series of
Commitments relating to capital expenditures in excess of $3,000,000, (iii)
(x) Commitments or related series of Commitments relating to the lease or
sublease of or sale or purchase of personal property involving any annual
expense or price in excess of $3,000,000, and (y) each material lease or
sublease of real property or Commitments relating to the sale or purchase
of material real property, (iv) Commitments relating to indentures,
mortgages, promissory notes, loan agreements, guarantees, letters of credit
or other agreements or instruments of the Company or any Subsidiary or
Commitments for or relating to the borrowing or the lending of money by or
to the Company or any Subsidiary in excess of $3,000,000 or providing for
any right of first refusal or the creation of any Encumbrance upon any of
the assets or properties of the Company or any Subsidiary, (v) Commitments
relating to the acquisition or disposition of any operating business or the
capital stock of any Person that has not been consummated or that has been
consummated but contains representations, warranties, covenants,
guarantees, indemnities or other obligations that remain in effect, (vi)
Commitments relating to any material Litigation, (vii) Commitments under
which the Company or any Subsidiary agrees to indemnify any Person, (viii)
Commitments in respect of any joint venture, partnership or other similar
arrangement, (ix) Commitments with any Governmental Entity; (x) other
Commitments or related series of Commitments which involve payments of over
$3,000,000 or which are otherwise material (excluding license and
maintenance contracts entered with customers of the Company entered into in
the ordinary course of business consistent with past practice (such
excluded Commitments, "Non-Listed Commitments"). All such listed
Commitments and all Non-Listed Commitments are valid and binding
obligations of the Company and each Subsidiary, as the case may be, and, to
the Knowledge of the Company, are the valid and binding obligation of each
other party thereto except where the failure to be so valid and binding
individually or in the aggregate do not and could not reasonably be
expected to have a Material Adverse Effect. Neither the Company nor any
Subsidiary nor, to the Knowledge of the Company, any other party is in
material violation of or in material default in respect of, nor has there
occurred an event or condition which with the passage of time or giving of
notice (or both) would constitute a default under, any listed Commitment or
Non-Listed Commitment, except for default which individually and in the
aggregate do not and could not be reasonably expected to have a Material
Adverse Effect.
2.16. Brokers or Finders. No agent, broker, investment banker or
other Person is or will be entitled to any broker's or finder's fee or any
other commission or similar fee in connection with any of the transactions
contemplated by this Agreement or the other Transaction Documents based on
arrangements made by or on behalf of the Company or any of the
Subsidiaries, or any Affiliate of any of the foregoing.
2.17. Related Party Transactions. Except as disclosed in the SEC
Reports and Schedule 2.17, there are no transactions and Commitments
between or involving the Company or any of the Subsidiaries, on the one
hand, and any Related Party, on the other hand, engaged in or entered into
since December 31, 1998 (including those initiated prior to such date and
continued or continuing following such date).
2.18. Section 203 of the DGCL; Takeover Statute. The Board of
Directors shall have adopted a resolution to the effect that the
restrictions contained in Section 203 of the DGCL applicable to a "business
combination" (as defined in such Section) will not apply to the execution,
delivery or performance of this Agreement or any of the other Transaction
Documents or the consummation of the transactions contemplated hereby or
thereby. The execution, delivery and performance of this Agreement or any
of the other Transaction Documents and the consummation of the transactions
contemplated hereby or thereby will not cause to be applicable to the
Company any "fair price," "moratorium," "control share acquisition" or
other similar antitakeover statute or regulation enacted under state or
federal laws.
2.19. Proprietary Information of Third Parties. Except as set
forth on Schedule 2.19, and except as would not, individually or in the
aggregate, have a Material Adverse Effect:
(i) to the Company's Knowledge, no Third Party has claimed
that any Person employed by or affiliated with the Company has (a) violated
or may be violating any of the terms or conditions of his employment,
non-competition or non-disclosure agreement with such Third Party, (b)
disclosed or may be disclosing or utilized or may be utilizing any trade
secret or proprietary information or documentation of such Third Party or
(c) interfered or may be interfering in the employment relationship between
such Third Party and any of its present or former employees. No Third Party
has requested information from the Company which suggests that such a claim
might be contemplated;
(ii) to the Company's Knowledge, no Person employed by or
affiliated with the Company has employed or proposes to employ any trade
secret or any information or documentation proprietary to any former
employer, and to the best of the Company's Knowledge, no Person employed by
or affiliated with the Company has violated any confidential relationship
which such Person may have had with any Third Party, in connection with the
development, manufacture or sale of any product or proposed product or the
development, manufacture or sale of any product or proposed product or the
development or sale of any service or proposed service of the Company, and
the Company has no reason to believe there will be any such employment or
violation; and
(iii) none of the execution or delivery of this Agreement,
or the carrying on of the business of the Company as officers, employees or
agents by any officer, director or key employee of the Company, or the
conduct or proposed conduct of the business of the Company, will conflict
with or result in a breach of the terms, conditions or provisions of or
constitute a default under any contract, covenant or instrument under which
any such Person is obligated.
2.20. Disclosure. Neither this Agreement nor any other
Transaction Document, nor any schedule or exhibit hereto or thereto, nor
any certificate furnished to the Purchasers by or on behalf of the Company
in connection with the transactions contemplated hereby and thereby,
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading. The financial information disclosed by the Company
to the Purchasers with respect to the financial condition, results of
operation and cash flows of the Company for the year ending December 31,
1999 attached as Exhibit 2.20 hereto have been reasonably prepared in
accordance with GAAP consistently applied for the period involved, and
reflect the best currently available estimates and judgment of the
Company's management as to the financial performance of the Company and the
Subsidiaries for such period and to be reflected in the Company's SEC
Reports for such period and any public announcements and conferences with
analysts with respect thereto.
2.21. Year 2000. (a) The Company has conducted an inventory and
assessment of all software, computers, network equipment, technical
infrastructure, production equipment and other equipment and systems that
are material to the operation of its business and that rely on, utilize or
perform date or time processing ("Systems") to insure that the Systems are
Year 2000 Compliant.
(b) Any failure of any of the Company's System to be Year
2000 Compliant has not had and is not reasonably expected to have a
Material Adverse Effect.
(c) In addition to upgrading its own Systems, the Company
has contacted certain significant suppliers to determine whether their
Systems are Year 2000 Compliant. The Company has not received any
information which would indicate that the Systems of its suppliers are not
Year 2000 Compliant to the extent the same could reasonably be expected to
result in any significant disruption to the Company's sources of supplies.
(d) "Year 2000 Compliant" means a System has at all times:
(i) consistently and accurately handled and processed date and time
information and data values before, during and after January 1, 2000,
including but not limited to accepting date input, providing date output,
and performing calculations on or utilizing dates or portions of dates;
(ii) function accurately and in accordance with its specifications without
interruption, abnormal endings, degradation, change in operation or other
impact, or disruption of other systems, resulting from processing date or
time data with values, before, during and after January 1, 2000; (iii)
respond to and process two-digit date input in a way that resolves any
ambiguity as to century; and (iv) store and provide output of date
information in ways that are unambiguous as to century.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
The Purchasers, severally and not jointly, hereby represent
and warrant to the Company, as of the date hereof and as of the Closing
Date, as follows:
3.1. Acquisition for Investment. Each Purchaser is acquiring the
Preferred Stock and the Warrants for its own account, for investment and
not with a view to the distribution thereof within the meaning of the
Securities Act.
3.2. Restricted Securities. Each Purchaser understands that (i)
the Preferred Stock, the Warrants and any Common Shares issuable upon
conversion or exercise thereof will not be registered under the Securities
Act or any state securities Laws by reason of their issuance by the Company
in a transaction exempt from the registration requirements thereof and (ii)
the shares of the Preferred Stock, the Warrants and any Common Shares
issuable upon conversion or exercise thereof may not be sold unless such
disposition is registered under the Securities Act and applicable state
securities Laws or is exempt from registration thereunder.
3.3. No Brokers or Finders. No agent, broker, investment banker
or other Person is or will be entitled to any broker's or finder's fee or
any other commission or similar fee in connection with the transactions
contemplated by this Agreement or the other Transaction Documents based on
arrangements made by or on behalf of the Purchasers.
3.4. Accredited Investor. Each Purchaser is an "accredited
investor" (as defined in Rule 501(a) under the Securities Act).
3.5 Organization. Each Purchaser is a limited partnership duly
organized, validly existing and in good standing under the Laws of the
State of Delaware (except for RKB Capital, L.P., which is organized,
validly existing and in good standing under the Laws of the State of
Minnesota) and has the requisite power and authority to carry on its
business as it is now being conducted.
3.6. Due Authorization. Each Purchaser has all right, power and
authority to enter into this Agreement and the other Transaction Documents
to which it is a party and to consummate the transactions contemplated
hereby and thereby. The execution and delivery by each Purchaser of this
Agreement and the other Transaction Documents to which it is a party and
the consummation by it of the transactions contemplated hereby and thereby
(a) are within its power and authority and (b) have been duly authorized by
all necessary action on the part of such entity. This Agreement
constitutes, and each of the other Transaction Documents to which it is a
party will constitute upon execution and delivery by each Purchaser, a
valid and binding agreement of such entity enforceable against such entity
in accordance with their respective terms, except as enforceability against
each Purchaser may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws now or hereafter in effect
relating to the rights of creditors generally and by legal and equitable
limitations on the enforceability of specific remedies (regardless of
whether enforcement is considered in a proceeding in equity or at law).
3.7. Consents; No Violations. Neither the execution, delivery or
performance by each Purchaser of this Agreement and the other Transaction
Documents nor the consummation of the transactions contemplated hereby or
thereby will (a) conflict with, or result in a breach or a violation of,
any provision of the organizational documents of such entity; (b)
constitute, with or without notice or the passage of time or both, a
breach, violation or default, create an Encumbrance, or give rise to any
right of termination, modification, cancellation, prepayment, suspension,
limitation, revocation or acceleration, under (i) any Law, or (ii) any
Commitment of such entity, or to which such entity or any of its assets or
properties is subject, except, with respect to the matters set forth in
clause (ii), for breaches, violations, defaults, Encumbrances, or rights of
termination, modification, cancellation, prepayment, suspension,
limitation, revocation or acceleration, which, individually or in the
aggregate, could not have a Material Adverse Effect on the ability of such
entity to consummate the transactions contemplated hereby; or (c) require
any consent, approval or authorization of, notification to, filing with, or
exemption or waiver by, any Governmental Entity or any other Person on the
part of such entity.
3.8. Availability of Funds. The Purchasers have or will have
available at the Closing, sufficient funds to pay the Purchase Price for
the Preferred Stock and the Warrants.
3.9 Trading Price. The Purchasers acknowledge that no
representations and warranties made by the Company in Article II herein
(including, without limitation, any reference to a Material Adverse Effect)
shall be deemed a representation as to the current or prospective trading
price of the shares of the Company's Common Stock.
ARTICLE IV
COVENANTS
4.1. Conduct of Business by the Company Pending the Closing. (a)
The Company covenants and agrees that, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Closing, unless the Purchasers otherwise agree in writing,
the Company shall, and shall cause each of the Subsidiaries to, (i) conduct
its business only in the ordinary course and consistent with past practice;
(ii) use reasonable best efforts to preserve and maintain its assets and
properties and its relationships with its customers, suppliers,
advertisers, distributors, agents, officers and employees and other Persons
with which it has significant business relationships; (iii) use reasonable
best efforts to maintain all of the material assets it owns or uses in the
ordinary course of business consistent with past practice; (iv) maintain
insurance in full force and effect substantially comparable in amount,
scope and coverage to that in effect on the date of this Agreement; (v) use
reasonable best efforts to preserve the goodwill and ongoing operations of
its business; (vi) maintain its books and records in the usual, regular and
ordinary manner, on a basis consistent with past practice; (vii) perform
and comply in all material respects with its Commitments; and (viii) comply
in all material respects with applicable Laws. Except as expressly
contemplated by this Agreement or as set forth on Schedule 4.1, between the
date of this Agreement and the Closing, the Company shall not, and shall
cause each of the Subsidiaries not to, do any of the following without the
prior written consent of the Purchasers:
(A) create any Encumbrance other than (i) Permitted Encumbrances
and (ii) Encumbrances securing indebtedness permitted by clause (D) of this
Section 4.1(a);
(B) acquire or dispose of (by merger, consolidation, or
acquisition of stock or assets) any Person, business, business line or any
material amount of assets;
(C) (i) except as provided in Schedule 4.1(a)(C) hereto, incur
any additional indebtedness other than indebtedness incurred in the
ordinary course of business under the Company's existing revolving credit
agreement and pursuant to capital leases not exceeding $750,000 in the
aggregate, or (ii) make any loans, advances or capital contributions to, or
investments in, any Person other than (x) to a Subsidiary or (y) advances
in the ordinary course of business to Persons that are not Related Parties
not exceeding $750,000 to any one such Person;
(D) change any method of accounting or accounting practice used
by the Company or any Subsidiary, other than such changes required by GAAP;
(E) (i) except as provided in Schedule 4.1(a)(E) hereto, grant or
amend any stock-related or performance awards; (ii) except with respect to
agreements which are terminable at will by the Company without any material
penalty to the Company, enter into or amend any legally binding employment,
severance, consulting or salary continuation agreements with any officers,
directors or employees or grant any increases in compensation or benefits
to employees other than increases to officers and employees in the ordinary
course of business consistent with the past practice of the Company; (iii)
adopt, amend or terminate any employee benefit plan or arrangement;
(F) except as set forth in Schedule 2.17, enter into any
transaction or Commitment with any Related Party;
(G) allow the lapse of any of the Company's or any Subsidiary's
rights of ownership or use of any material Intellectual Property right
except in the ordinary course of business consistent with past practice;
(H) (i) repurchase, redeem or otherwise acquire or exchange any
share of Common Stock or other equity interests except for repurchases of
unvested shares pursuant to the terms of the Company's Option Plan, (ii)
except as provided in Schedule 4.1(a)(E) hereto, issue or sell any
additional shares of the capital stock of, or other equity interests in,
the Company or any Subsidiary, or securities convertible into or
exchangeable for such shares or other equity interests, or issue or grant
any subscription rights, options, warrants or other rights of any character
relating to shares of such capital stock, such other equity interests or
such securities, except pursuant to the Transaction Documents and except
for issuances of Common Stock pursuant to the exercise of Options or (iii)
declare, set aside, make or pay any dividend, or make any distribution, in
respect of any shares of capital stock of the Company;
(I) amend the Company's certificate of incorporation or by-laws,
except with respect to the filing of the Certificate of Designation or for
other non-material changes, or amend any Subsidiary's charter or by-laws or
other organizational documents in any respect materially adverse to the
Company;
(K) make any material change in the Company's or any Subsidiary's
Tax accounting methods, any material new election with respect to Taxes or
any material modification or revocation of any existing election with
respect to Taxes or settle or otherwise dispose of any material Tax audit,
dispute, or other Tax proceeding, except in the ordinary course of
business;
(L) effect any stock split, reverse stock split, stock dividend,
subdivision, reclassification or similar transaction, or otherwise change
its capitalization as it exists on the date hereof;
(M) directly or indirectly redeem, purchase or otherwise acquire
any shares of its capital stock or the capital stock of any of its
Subsidiaries;
(N) sell, lease, assign, transfer or otherwise dispose of (by
merger or otherwise) any of its property, business or assets (including, without
limitation, receivables, leasehold interests or Intellectual Property and
including any sale leaseback transaction) except for (i) the sale of inventory
in the ordinary course of business, and (ii) other asset sales for fair value in
the ordinary course of business provided that the proceeds of such other asset
sales do not exceed $3,000,000 in the aggregate prior to the Closing;
(O) make any advance, loan, extension of credit or capital
contribution to, or purchase or acquire (by merger or otherwise) any stock,
bonds, notes, debentures or other securities of, or any assets constituting
a business unit of, or make any other investment in, any person, firm or
entity, except (a) extensions of trade credit and endorsements of
negotiable instruments and other negotiable documents in the ordinary
course of business, (b) investments in cash and cash equivalents, (c)
payroll and travel advances in the ordinary course of business and, (d)
investments in wholly owned Subsidiaries; or
(P) agree or publicly announce any intention to take any of
the actions restricted by this Section 4.1.
4.2. No Solicitation. From the date of this Agreement until the
earlier of the termination of this Agreement or the Closing, other than in
connection with the transactions contemplated hereby, neither the Company
nor any of the Subsidiaries shall solicit, propose or facilitate (including
by way of providing information regarding the Company or any of the
Subsidiaries or their respective businesses to any Person), directly or
indirectly, any inquiries, discussions, offers or proposals for, continue
or enter into negotiations looking toward, or enter into or consummate any
Commitment or understanding in connection with any offer or proposal
regarding, any issuance of capital stock or securities convertible into
capital stock, except as permitted under Section 4.1. In addition, the
Company agrees not to enter into, consummate or in any way commit to any
purchase or acquisition of all or any material portion of the Company and
the Subsidiaries taken as a whole, the business or assets of the Company
and the Subsidiaries taken as a whole, or any capital stock of or equity
interests in (whether newly issued or currently outstanding) the Company or
any of the Subsidiaries, and (b) any merger, business combination or
recapitalization involving the Company or any of the material Subsidiaries
or their respective businesses (each such transaction an "M&A
Transaction"). The Company agrees to promptly inform the Purchasers of the
identity of any Person making any M&A Transaction and the nature and terms
of any such M&A Transaction and to keep the Purchasers promptly and fully
informed as to the status thereof whether made before or after the date of
this Agreement.
4.3. Press Releases; Interim Public Filings. Subject to Section
8.3, the Company shall deliver to the Purchasers complete and correct
copies of all press releases and public filings relating to the Transaction
Documents, the transactions contemplated thereby and Company corporate
matters made between the date hereof and the Closing, and shall give the
Purchasers the reasonable opportunity to review and comment on such
releases and filings, in each case prior to release in the form in which it
will be issued.
4.4. Consents; Approvals. The Company shall use its reasonable
best efforts, not requiring the expenditure of a material sum or the making
of some other material accommodation, to obtain all consents, waivers,
exemptions, approvals, authorizations or orders (collectively, "Consents")
(including, without limitation (i) Consents required to avoid any breach,
violation, default, encumbrance or right of termination, modification,
cancellation, prepayment, suspension, limitation, revocation or
acceleration set forth on Schedule 2.9 or required to be set forth thereon,
(ii) all Consents pursuant to the Company's or any Subsidiary's financing
documents, including, without limitation, all indentures and credit
agreements of the Company or any Subsidiary, and (iii) all United States
and foreign governmental and regulatory rulings and approvals), and the
Company shall make all filings (including, without limitation, all filings
with United States and foreign governmental or regulatory agencies),
required or desirable in connection with the authorization, execution and
delivery of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby; provided,
however, no payment (other than filing fees related to the matters
contemplated hereby) or other accommodation shall be made by the Company in
connection with obtaining any of the foregoing without the Purchasers'
prior written consent. The Purchasers shall cooperate with the Company in
obtaining such Consents. The Company also shall use its reasonable best
efforts, not requiring the expenditure of a material sum or the making of
some other material accommodation, to obtain all necessary state securities
laws or blue sky permits and approvals required to carry out the
transactions contemplated hereby and shall furnish all information as may
be reasonably requested in connection with any such action.
4.5. Listing. The Company shall use its best efforts to
continue to have its Common Stock quoted on the NASDAQ national market system or
other comparable national exchange prior to the Closing, and for so long as any
shares of Preferred Stock, Warrants or any Common Shares issued upon conversion
or exercise of the Preferred Stock and Warrants are outstanding. Prior to the
Closing, the Company shall prepare and submit to the NASDAQ a listing
application covering the shares of Common Stock issuable upon conversion of the
Preferred Stock and exercise of the Warrants and shall obtain approval for the
listing of such shares, subject to official notice of issuance.
4.6. Board Representation; VCOC. (a) Section 4 of the Certificate
of Designation provides that the holders of Preferred Stock and Warrants
shall be entitled to elect one director (the "Preferred Stock Designee") to
the Board of Directors of the Company subject to the terms set forth
therein. For so long as the Purchasers and their Affiliates, as holders of
the Preferred Stock and Warrants maintain ownership at the Ownership
Threshold, shall have the right under this Agreement and the Certificate of
Designation to designate the Preferred Stock Designee, TWCP shall have the
right, separately enforceable by it without further action required or
permitted by any of the Purchasers or their Affiliates, to designate such
Preferred Stock Designee.
(b) In the event the Certificate of Designation is no longer
in effect, and so long as the Purchasers and their Affiliates beneficially
own in the aggregate Preferred Stock, Warrants and Common Shares issuable
upon conversion or exercise thereof representing (and assuming conversion
and exercise of all such Preferred Stock and Warrants) greater than 15% of
the Common Shares (assuming such conversion and exercise) acquired by the
Purchasers in the aggregate at the Closing (and adjusting for stock splits,
stock combinations and like transactions) (such ownership threshold
referred to as the "Ownership Threshold"), TWCP shall have the right to
designate hereunder, at all times and from time to time, one director of
the Company (individuals designated pursuant to this paragraph, the
"Purchasers' Designee"). In the event of a vacancy caused by the
disqualification, removal, resignation or other cessation of service of any
Purchasers' Designee from the Board, the Board shall elect as a director
(to serve until the term of such Purchaser Designee would have expired) a
new Purchasers' Designee who has been designated by TWCP in an additional
Purchasers' Designee Notice that has been provided to the Company at least
seven (7) days prior the date of a regular meeting of the Board. TWCP shall
nominate each Purchasers' Designee pursuant to an additional Purchasers'
Designee Notice in advance of each meeting of shareholders at which such
Purchasers' Designee is to be elected.
(c) TWCP shall provide notice to the Company (the
"Purchasers' Designee Notice") as required by Section 4.6(a) above for each
Purchasers' Designee, which notice shall contain the following information:
(i) the name of the Person it has designated to become director, and (ii)
all information required by Regulation 14A and Schedule 14A under the
Exchange Act with respect to each such Purchasers' Designee. Subject to
Section 4.6(c) below, the Purchasers' Designee may be any person designated
by TWCP, including persons who are officers, directors or employees of the
Purchasers or their Affiliates.
(d) The Company agrees to include the Purchasers' Designee
to be added to or retained on the Board pursuant to this Agreement in the
slate of nominees recommended by the Board to the Company's shareholders
for election as director and shall use its reasonable efforts to cause the
election or reelection of a Purchasers' Designee to the Board at each
meeting of shareholders at which the Purchasers' Designee is up for
election, including soliciting proxies in favor of the election of such
Persons, it being understood that efforts consistent with those used for
other members of the slate recommended by the Board shall be deemed
reasonable. In the event that, notwithstanding the provisions of this
Section 4.6(d), the Purchasers' Designee is not elected to the Board then,
at the written request of TWCP made within 30 days after the date of the
shareholder meeting at which the Purchasers' Designee was not elected, the
Company shall cause, at the request of TWCP, the appointment of the
Purchaser's Designee or any other Person designated by TWCP, as a
non-voting observer (a "Non-Voting Observer") to the Board of the Company;
it being understood that TWCP may from time to time change the designation
of such Non-Voting Observer. The Company shall afford to any Purchasers'
Designee who serves as a Non-Voting Observer, on as nearly equivalent basis
as is possible (other than the right to vote) as would have been the case
if the Purchasers' Designee had been elected to the Board, the opportunity
to meaningfully participate in, express views with respect to and have
influence on the deliberations of the Board, including through receipt, at
the same time as the Board receives the same, of all information and
material as is distributed to the Board.
(e) So long as the Purchasers and their Affiliates
beneficially own in the aggregate Preferred Stock, Warrants and Common
Shares exceeding the Ownership Threshold, without the prior written consent
of TWCP, the Board of Directors shall not amend the provisions of the
by-laws of the Company, as amended in accordance with Section 5.2(x)
specifying that the size of the entire Board shall consist of eight
members.
(f) So long as the Purchasers and their Affiliates
beneficially own in the aggregate Preferred Stock, Warrants and Common
Shares exceeding the Ownership Threshold, TWCP shall have the right to
consult with and advise management of the Company on significant business
issues, including finances and accounts of the Company and management's
proposed annual operating plans, and meet with management at the Company's
facilities at mutually agreeable times for such consultation and advice,
including to review progress in achieving said plans subject to the
execution of a mutually acceptable non-disclosure agreement. The Company
agrees to consider the advice given and any proposals made by TWCP,
provided the Company should be under no obligation to accept or follow such
advice.
(g) The rights set forth in this Section 4.6 are intended to
satisfy the requirement of contractual management rights for purposes of
qualifying TWCP's interests in the Company as venture capital investments
for purposes of the Department of Labor's "plan assets" regulations, and in
the event such rights are not satisfactory for such purpose as to TWCP, the
Company and the Purchasers shall reasonably cooperate in good faith to
agree upon mutually satisfactory management rights which satisfy such
regulations.
(h) Unless otherwise agreed by the Company, the Purchasers
shall cause the Purchasers' Designee then serving on the Board or as a
Non-Voting Observer to resign from the Board or as a Non-Voting Observer
immediately at any time after the Purchasers and their Affiliates
beneficially own in the aggregate Preferred Stock, Warrants and Common
Shares less than the Ownership Threshold.
4.7. Committees. (a) The Preferred Stock Designee or Purchaser's
Designee, as the case may be, shall be granted representation (as of the
Closing Date) on all Board committees, including the audit and compensation
committees. In the event that a Non-Voting Observer is serving on the Board
as the representative for the Purchasers, such Non-Voting Observer shall be
afforded, on as nearly equivalent basis as is possible (other than the
right to vote) the opportunity to meaningfully participate in and express
views with respect to the deliberations of the committees.
(b) The Board will not establish an executive committee
authorized to exercise the power of the Board generally unless the
Purchasers are granted representation on such committee proportional to its
representation on the Board, nor will the Board establish or employ
committees (unless the Purchasers are granted proportional representation
thereon) as a means designed to circumvent or having the effect of
circumventing the rights of the Purchasers under this Agreement to
representation on the Board.
4.8. Certificate of Designation. The Company shall, prior to or
concurrently with the Closing, cause the Certificate of Designation to be
filed with the Secretary of State of the State of Delaware as set forth in
the form of the Certificate of Designation attached hereto as Exhibit 2.2.
4.9. Cooperation. Each of the Purchasers and the Company agrees
to use its reasonable best efforts to take, or cause to be taken, as
promptly as practicable all such further actions as shall be necessary to
make effective and consummate the transactions contemplated by this
Agreement.
4.10. Covenants to Provide Information. The Company covenants and
agrees with each Purchaser that so long as the Purchasers and their
Affiliates own in the aggregate Preferred Shares, Warrants and Common
Shares in excess of the Ownership Threshold, the Company shall deliver to
each Purchaser:
(a) Within 45 days after the end of each quarterly fiscal
period, (i) unaudited balance sheets and an income statement as of the end of
such period, together with statements of retained earnings and cash flow for
such period ("Quarterly Financials"), together with such analysis and
comparisons to budget as are routinely provided to the Board.
(b) Within 90 days after the end of each fiscal year, commencing
with the first fiscal year ending after the Closing, (i) audited balance
sheets and an income statement as of the end of such fiscal year, together
with statements of retained earnings and cash flow for such fiscal year,
all in reasonable detail and certified by a recognized national firm of
independent accountants selected by the Board of Directors of the Company
as presenting fairly the financial position and results of operations of
the Company and as having been prepared in accordance with GAAP
consistently applied, including their opinion thereon in the form included
in the Company's Annual Report on Form 10-K, and (ii) the accounting firm's
management letter.
(c) Promptly upon becoming available, (i) copies of all financial
statements, reports, material press releases, notices, proxy statements and
other documents sent by the Company to its shareholders or released to the
public and copies of all regular and periodic reports, if any, filed by the
Company with any securities regulatory agency or any securities exchange
and (ii) any other financial or other information available to management
of the Company as the Purchasers shall have reasonably requested on a
timely basis.
(d) If for any period the Company shall have any subsidiary or
subsidiaries whose accounts are consolidated with those of the Company,
then, in respect of such period, the financial statements and information
delivered pursuant to the foregoing paragraphs (a), (b) and (c) of this
Section 4.10 shall be the consolidated and consolidating financial
statements of the Company and all such consolidated subsidiaries.
(e) At least 30 days prior to the beginning of each fiscal year,
an annual budget for the Company for such fiscal year (displaying
anticipated statements of income and cash flows and balance sheets), and
promptly upon preparation thereof any other significant budgets prepared by
the Company and any revisions of such annual budget.
(f) Promptly (but in any event within ten business days) after
the discovery or receipt of notice of (i) any default under any material
agreement to which the Company and/or any of its Subsidiaries is a party,
which default could reasonably be expected to have a Material Adverse
Effect on the Company or any of its Subsidiaries, (ii) any other event
which could reasonably be expected to have a Material Adverse Effect on the
condition (financial or otherwise), results of operations, or business of
the Company or any of its Subsidiaries (including, without limitation, the
filing of any material litigation against the Company or any of its
Subsidiaries a statement certified by a senior executive officer of the
Company specifying the nature and period of existence thereof and what
actions the Company has taken and proposes to take with respect thereto.
(g) With reasonable promptness, such other information and
financial data concerning the Company as the Purchasers may reasonably
request.
4.11. Reserve Shares. The Company will at all times reserve and
keep available, solely for issuance and delivery upon conversion of the
Preferred Stock and the exercise of the Warrants, the number of shares of
Common Stock from time to time issuable upon conversion of all shares of
the Preferred Stock and exercise of the Warrants at the time outstanding.
All Common Shares issuable upon conversion of the Preferred Stock and the
exercise of the Warrants shall be duly authorized and, when issued upon
such conversion or exercise, shall be validly issued, fully paid and
nonassessable.
4.12. Notice of Breach. From the date hereof through the Closing,
as promptly as practicable, and in any event not later than two business
days after senior management of the Company becomes aware thereof, the
Company shall provide the Purchasers with written notice of (a) any
representation or warranty of the Company contained in this Agreement or
any other Transaction Document being untrue or inaccurate in any material
respect at any time from the date hereof to the Closing, or (b) any failure
of the Company to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by the Company under this
Agreement or any other Transaction Document.
4.13. Transfer Taxes. The Company shall be responsible for
liability with respect to any transfer, stamp or similar Taxes which may be
payable in connection with the execution, delivery and performance of this
Agreement including, without limitation, any such Taxes with respect to the
issuance of the Preferred Stock, the Warrants or the Common Shares.
4.14. Indemnification. So long as a Preferred Designee is a
director, except for amendments or modifications required by Law, the
Company shall not amend or modify any rights to indemnification now
existing in favor of the present and former directors, officers or
employees of the Company and its Subsidiaries provided in the certificate
of incorporation and by-laws of the Company or any Subsidiary in a manner
adverse to any such director, officer or employee, and the Company shall
maintain officers' and directors' liability insurance carrying the
directors of the Company with coverage no less favorable than presently in
effect.
4.15. Use of Proceeds. The proceeds from the sale of the
Preferred Stock and Warrants shall be used for general corporate purposes
as shall be determined by the Board of Directors.
4.16. Registration Rights Agreement. The Company will use its
reasonable best efforts prior to Closing to amend and restate the
Registration Rights Agreement and the amended and restated registration
rights agreement, dated May 6, 1996, as amended (the "Existing Rights
Agreement"), so that all of the registrable securities under both
agreements are covered by a single agreement, the terms of which are
approved by the mutual consent of the Company and the requisite holders of
registrable securities under each of the Registration Rights Agreement and
the Existing Rights Agreement.
4.17. Future Issuances. The Company agrees that it shall be a
condition of its issuance of any additional Common Stock (or securities
convertible into or exercisable or exchangeable for Common Stock) pursuant
to any employee benefit plan (other than the issuance of additional shares
of Common Stock upon exercise of options outstanding as of the date hereof)
that the person receiving such securities, if after receipt thereof such
person beneficially owns in excess of 1% of the outstanding shares, to
agree not to effect any public sale or distribution of equity securities of
the Company, including any public sale pursuant to Rule 144 under the
Securities Act, or any securities convertible into or exchangeable or
exercisable for such securities, during the period commencing thirty days
prior to and ending 90 days after the effective date of any underwritten
demand registration or any underwritten piggyback registration under the
Registration Rights Agreement.
ARTICLE V
CONDITIONS
5.1. Conditions to Obligations of the Purchasers and the Company.
The respective obligations of the Purchasers and the Company to consummate
the transactions contemplated hereunder shall be subject to the
satisfaction or waiver at or prior to the Closing of each of the following
conditions:
(i) No statute, rule or regulation or order of any court or
administrative agency shall be in effect which prohibits the
consummation of the transactions to be consummated at the Closing;
(ii) Any waiting period (and any extension thereof) under
the HSR Act applicable to this Agreement and the transactions
contemplated hereby shall have expired or been terminated; and
(iii) Any material required filings or Consents set forth on
Schedule 5.1(iii), if any, shall have been made or obtained.
5.2. Conditions to Obligations of the Purchasers. (a) The
obligation of the Purchasers to consummate the transactions contemplated
hereunder shall be subject to the satisfaction or waiver by the Purchasers
at or prior to the Closing of each of the following conditions:
(i) Each of the representations and warranties of the
Company contained in this Agreement shall be true and correct
(disregarding for this purpose all references in such representations
and warranties to any materiality and Material Adverse Effect
qualifications) as of the Closing (except to the extent such
representations and warranties are made as of a particular date, in
which case such representations and warranties shall have been true
and correct in all material respects as of such date), except for
failures to be true and correct which individually or in the aggregate
would not reasonably be expected to have a Material Adverse Effect,
(ii) The Company in all material respects shall have
performed, satisfied and complied with each of its covenants and
agreements set forth in this Agreement to be performed, satisfied and
complied with prior to or at the Closing;
(iii) The Company shall have delivered to the Purchasers an
officer's certificate certifying as to the Company's compliance with
the conditions set forth in clauses (i) and (ii) of this Section 5.2;
(iv) The Designated Shareholders and the Company shall have
entered into Management Stockholders Agreements in the form of Exhibit
5.2(iv) (the "Shareholders Agreements"), with each of ▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇ and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and the Shareholders Agreements shall be in full
force and effect;
(v) The Company shall have executed and delivered a
Registration Rights Agreement in the form of Exhibit 5.2(v) (the
"Registration Rights Agreement"), and the Registration Rights
Agreement shall be in full force and effect;
(vi) The Certificate of Designation shall have been duly
filed with the Secretary of State of the State of Delaware and shall
be in full force and effect;
(vii) The Shares initially issuable upon conversion or
exercise, as the case may be, of the Preferred Stock and Warrants
shall have been duly authorized and reserved for issuance and such
Shares shall have been listed on the NASDAQ, subject to official
notice of issuance;
(viii) The Purchaser shall have received at the Closing an
opinion of the E*Law Group, outside counsel to the Company, in the
form of Exhibit 5.2(viii);
(ix) There shall not have occurred since September 30, 1999
any change or development or series of changes or developments
(including without limitation as a result of any change in the Law)
which has resulted in or could reasonably be expected to result
individually or in the aggregate in a Material Adverse Effect; and
(x) The Board of Directors shall have amended the by-laws of
the Company to provide that (i) the Board of Directors consists of
eight directors, one of whom shall be the Preferred Designee and (ii)
the provisions of the Certificate of Designation, to the extent
inconsistent with the by-laws, shall be expressly controlling.
5.3. Conditions to Obligations of the Company. The obligation of
the Company to consummate the transactions contemplated hereunder shall be
subject to the satisfaction or waiver at or prior to the Closing of each of
the following conditions:
(a) Each of the representations and warranties of the
Purchasers contained in this Agreement shall be true and correct
(disregarding for this purpose all references in such representations and
warranties to any materiality and/or Material Adverse Effect
qualifications) as of the Closing (except to the extent such
representations and warranties are made as of a particular date, in which
case such representations and warranties shall have been true and correct
in all material respects as of such date), except for failures to be true
and correct which individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect on the ability of the Purchasers
to fulfill their obligations hereunder;
(b) The Purchasers in all material respects shall have
performed, satisfied and complied with each of its covenants and agreements
set forth in this Agreement to be performed, satisfied and complied with
prior to or at the Closing, disregarding for this purpose all references in
such covenants and agreements to any materiality or similar qualifications;
(c) The Purchasers shall have delivered to the Company an
officer's certificate certifying as to the Purchasers' compliance with the
conditions set forth in clauses (a) and (b) of this Section 5.3.
ARTICLE VI
TERMINATION
6.1. Termination. This Agreement may be terminated at any time
prior to the Closing, upon written notice of such termination by the
terminating party to the other party setting forth the basis for such
termination:
(a) by mutual written consent of the Company and the
Purchasers at any time prior to the Closing; or
(b) by either the Purchasers or the Company if the Closing
shall not have been consummated by March 15, 2000 (provided that the right
to terminate this Agreement under this Section 6.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Closing
to occur on or before such date); or
(c) by either the Purchasers or the Company if a court of
competent jurisdiction or governmental, regulatory or administrative agency
or commission shall have issued a nonappealable final order, decree or
ruling or taken any other action having the effect of permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement; or
(d) by the Purchaser or the Company, (i) if any
representation or warranty of the other set forth in this Agreement shall
be untrue in any material respect when made to the extent that such first
party did not have actual knowledge of such breach as of the date of this
Agreement, or (ii) upon a breach in any material respect of any covenant or
agreement on the part of the other set forth in this Agreement, in each
case which would constitute a failure of the condition to Closing of the
first party (either (i) or (ii) above being a "Terminating Breach");
provided, that, if such Terminating Breach is curable within ten business
days after notice of a party's intent to terminate this Agreement, through
the exercise of reasonable efforts, and for so long as the other party
continues to exercise such reasonable efforts during such ten business day
cure period, the termination shall be effective immediately following
notice and such ten business day cure period and only if the Terminating
Breach is not cured as of such time.
6.2. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 6.1, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto
provided that Sections 7.2, 8.3, 8.8, 8.13, 8.14 and 8.15 and this Section
6.2 shall survive any termination of this Agreement.
ARTICLE VII
SURVIVAL; CERTAIN REMEDIES
7.1. Survival. If the Closing shall occur, the representations
and warranties of the parties hereto contained in this Agreement or in any
of the other Transaction Documents shall expire on the tenth business day
following the date the Company files with the SEC its Form 10-K for the
fiscal year ended December 31, 2000, except that the representations and
warranties set forth in Sections 2.11, 2.12 and 2.14(c), shall survive
until the expiration of the applicable statute of limitations (including
any extensions thereof). After the expiration of such periods, any claim by
a party hereto based upon any such representation or warranty shall be of
no further force and effect, except to the extent a party has asserted a
claim in accordance with this Article VII for breach of any such
representation or warranty prior to the expiration of such period, in which
event any representation or warranty to which such claim relates shall
survive with respect to such claim until such claim is resolved as provided
in this Article VII. The covenants and agreements of the parties hereto
contained in this Agreement or in any of the other Transaction Documents
shall survive the Closing until performed in accordance with their terms.
7.2. Indemnification. (a) The Company shall indemnify, defend and
hold harmless the Purchasers, their Affiliates, and their respective
officers, directors, partners, members, employees, agents, representatives,
successors and assigns (each a "Purchasers' Indemnified Person") from and
against all Losses incurred or suffered by a Purchaser Indemnified Person
arising from (i) the breach of any of the representations or warranties
made by the Company in this Agreement or any other Transaction Document
(without giving effect to any qualification as to materiality or Material
Adverse Effect contained in such representations and warranties), (ii) the
breach of any covenant or agreement made by the Company in this Agreement
or any other Transaction Document or (iii) any claims, investigations or
litigation brought by any Person or Governmental Entity related to the
transactions contemplated by this Agreement. Notwithstanding anything to
the contrary in this Agreement, no indemnification payment by the Company
to the Purchasers pursuant to this Section 7.2(a) with respect to any
Losses otherwise payable hereunder pursuant to clause (i) above as a result
of any one or more breaches of the representations made by the Company in
this Agreement or any other Transaction Document shall be payable (x) until
such time or the cumulative Losses directly or indirectly incurred or
suffered by the Purchasers shall exceed $1,000,000 (the "Purchasers'
Deductible") and then, (y) only to the extent the Purchasers' Losses exceed
such Purchasers' Deductible and (z) up to a maximum of $15,000,000.
(b) A party seeking indemnification under this Section 7.2
shall, promptly upon becoming aware of the facts indicating that a claim
for indemnification may be warranted, give to the party from whom
indemnification is being sought a notice of claim relating to such Loss (a
"Claim Notice"). Each Claim Notice shall specify the nature of the claim,
the applicable provision(s) of this Agreement or other instrument under
which the claim for indemnity arises, and, if possible, the amount or the
estimated amount thereof. No failure or delay in giving a Claim Notice (so
long as the same is given prior to expiration of the representation or
warranty upon which the claim is based) and no failure to include any
specific information relating to the claim (such as the amount or estimated
amount thereof) or any reference to any provision of this Agreement or
other instrument under which the claim arises shall affect the obligation
of the party from whom indemnification is sought.
ARTICLE VIII
MISCELLANEOUS
8.1. Defined Terms; Interpretations. The following terms, as
used herein, shall have the following meanings:
"Affiliate" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act.
"Agreement" shall have the meaning ascribed thereto in the
preamble.
"Board" or "Board of Directors" shall mean the Board of
Directors of the Company.
"Certificate of Designation" shall have the meaning ascribed
thereto in Section 2.2.
"Closing" shall have the meaning ascribed thereto in Section
1.2(a).
"Closing Date" shall have the meaning ascribed thereto in
Section 1.2(a).
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commitments" shall have the meaning ascribed thereto in
Section 2.15.
"Common Shares" shall have the meaning ascribed thereto in
Section 2.2.
"Common Stock" shall have the meaning ascribed thereto in
the recitals.
"Company" shall have the meaning ascribed thereto in the
preamble.
"Company Affiliates" shall have the meaning ascribed thereto
in Section 4.2.
"Company Intellectual Property" shall mean all Intellectual
Property which is used or is proposed to be used by the Company in its
business as currently conducted.
"Compensation and Benefit Plans" shall mean all material
bonus, vacation, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus,
stock purchase, restricted stock and stock option plans, all employment or
severance contracts, all medical, dental, disability, health and life
insurance plans, all other material employee benefit and fringe benefit
plans, contracts or arrangements and any applicable "change of control" or
similar provisions in any plan, contract or arrangement sponsored,
maintained or contributed to by the Company or any of its Subsidiaries for
the benefit of officers, former officers, employees, former employees,
directors, former directors, or the beneficiaries of any of the foregoing
or pursuant to which the Company or any of its Subsidiaries or ERISA
Affiliates has or may have any liability, contingent or otherwise.
"Consents" shall have the meaning ascribed thereto in
Section 4.4.
"Designated Shareholders" shall mean ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇ and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇.
"DGCL" shall mean the Delaware General Corporation Law.
"Encumbrances" shall have the meaning ascribed thereto in
Section 2.1(b).
"Environmental Claim" shall mean any and all administrative
or judicial actions, suits, demands, information requests, directives,
claims, liens, investigations, proceedings or notices of noncompliance,
violation or status as a potentially responsible person or otherwise liable
party by any Person (including any Governmental Entity) relating to or
alleging potential liability (including, without limitation, potential
responsibility for or liability for enforcement, investigatory costs,
cleanup costs, response costs, removal costs, natural resources damages,
property damages, personal injuries, fines or penalties) relating to (A)
the presence, or Release or threatened Release into the environment, of any
Hazardous Materials at any location; or (B) circumstances forming the basis
of any violation or alleged violation of any Environmental Law; or (C) any
and all claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief relating
to any Environmental Laws.
"Environmental Laws" shall mean, all applicable federal,
state and local laws, rules, requirements, regulations and judicial or
administrative opinions, orders or decrees, and any common law causes of
action, in each case relating to pollution, the environment (including,
without limitation, ambient air, surface water, groundwater, land surface
or subsurface strata) or protection of human or employee health or safety
including, without limitation, laws and regulations relating to Releases of
Hazardous Materials.
"Environmental Permits" shall have the meaning ascribed
thereto in Section 2.14(d)(ii).
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"ERISA Affiliate" shall mean each business or entity which
is a member of a "controlled group of corporations," under "common control"
or a member of an "affiliated service group" with the Company or any of its
Subsidiaries within the meaning of Article 414(b), (c) or (m) of the Code,
or required to be aggregated with the Company under Article 414(o) of the
Code, or is under "common control" with the Company, within the meaning of
Article 4001(a)(14) of ERISA, and the regulations promulgated and proposed
thereunder.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any successor federal statute, and the rules and
regulations of the SEC thereunder, all as the same shall be in effect at
the time. Reference to a particular section of the Exchange Act shall
include reference to the comparable section, if any, of any such successor
federal statute.
"Existing Rights Agreement" shall have the meaning ascribed
thereto in Section 4.16.
"GAAP" shall have the meaning ascribed thereto in Section
2.5.
"Governmental Entity" shall mean any supernational,
national, foreign, federal, state or local judicial, legislative,
executive, administrative or regulatory body or authority.
"Hazardous Materials" means (A) any petroleum or any
by-products or fractions thereof, asbestos or asbestos-containing
materials, urea formaldehyde foam insulation, any form of natural gas,
explosives, polychlorinated biphenyls ("PCBs"), radioactive materials,
ionizing radiation or electromagnetic field radiation; (B) any chemicals,
materials or substances which are included in the definition of "wastes,"
"hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous substances," "toxic substances," "toxic pollutants,"
"pollutants," "contaminants," or words of similar import under any
Environmental Law; and (C) any other chemical, material or substance,
regulated under any Environmental Law.
"HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
thereunder.
"Intellectual Property" shall mean (i) all inventions and
discoveries (whether patentable or unpatentable and whether or not reduced
to practice), all improvements thereto, and all patents, patent
applications and patent disclosures, together with all reissuances,
continuations, continuations-in-part, divisions, revisions, extensions and
reexaminations thereof, (ii) all trademarks, service marks, trade dress,
logos, trade names, domain names and corporate names, together with all
translations, derivations and combinations thereof and including all
goodwill associated therewith, and all applications, registrations and
renewals in connection therewith and, to the extent any applications
constitute intent-to-use applications for which no verified statement of
use has been filed, the business, or portion thereof, pertaining thereto,
(iii) all copyrightable works, all copyrights and all applications,
registrations and renewals in connection therewith, (iv) all mask works and
all applications, registrations and renewals in connection therewith, (v)
all know-how, trade secrets and confidential business information
(including ideas, research and development, formulas, compositions,
manufacturing and production process and techniques, methods, schematics,
technology, flow charts, block diagrams, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information
and business and marketing plans and proposals), (vi) all computer software
(including data and related documentation), (vii) all management
information systems, (viii) all other proprietary rights, (ix) all copies
and tangible embodiments thereof (in whatever form or medium), and (x) all
licenses, sublicenses, permissions, and agreements in connection therewith.
"IRS" shall mean the Internal Revenue Service.
"Knowledge", with respect to the Company, shall mean the
actual knowledge of each member of the Board of Directors of the Company
and the actual knowledge, after reasonable inquiry, of each executive
officer of the Company.
"Laws" shall include all foreign, federal, state, and local
laws, statutes, ordinances, rules, regulations, orders, judgments, decrees
and bodies of law, including, without limitation, (i) any of the foregoing
promulgated by any Governmental Entity and (ii) Environmental Laws.
"Leased Real Property" shall mean the real property leased
or subleased by the Company or any Subsidiary, together with, to the extent
leased or subleased by the Company or any Subsidiary, all buildings and
other structures, facilities or improvements currently or hereafter located
thereon, all fixtures, systems, equipment and items of personal property of
the Company or any Subsidiary attached or appurtenant thereto, and all
easements, licenses, rights and appurtenances relating to the foregoing.
"Licenses" shall have the meaning ascribed thereto in
Section 2.14(a).
"Litigation" shall have the meaning ascribed thereto in
Section 2.7.
"Losses" shall mean each and all of the following items:
claims, losses, liabilities, obligations, payments, damages, charges,
judgments, fines, penalties, amounts paid in settlement, costs and expenses
(including, without limitation, interest which may be imposed in connection
therewith, costs and expenses of investigation, actions, suits,
proceedings, demands, assessments and fees, expenses and disbursements of
counsel, consultants and other experts).
"M&A Transaction" shall have the meaning ascribed thereto in
Section 4.2.
"Material Adverse Effect" shall mean a material adverse
effect on the business, operations, results of operations, assets,
financial condition or prospects of the Company and its Subsidiaries taken
as a whole, it being understood and agreed that for purposes of this
Agreement, adverse events or circumstances which result from general
economic or financial market conditions or conditions generally affecting
the industry in which the Company operates shall not constitute a Material
Adverse Effect.
"Multi-Employer Plan" shall have the meaning ascribed
thereto in Section 2.12(c).
"NASDAQ" shall mean the National Association of Securities
Dealers Automated Quotation National Market System.
"Owned Real Property" shall mean the real property owned by
the Company or any Subsidiary, together with all buildings and other
structures, facilities or improvements currently or hereafter located
thereon, all fixtures, systems, equipment and items of personal property of
the Company or any Subsidiary attached or appurtenant thereto and all
easements, licenses, rights and appurtenances relating to the foregoing.
"Permitted Encumbrances" shall mean, with respect to any
asset, (i) any imperfection of title with respect to such asset which does
not materially interfere with the present occupancy or use of such asset
and the continuation of the present occupancy or use of such asset; (ii)
such covenants, conditions, restrictions, easements, encroachments or
Encumbrances that are not created pursuant to mortgages or other financing
or security documents, and any other state of facts, which do not,
individually or in the aggregate, materially interfere with the present
occupancy or use of such asset; (iii) mechanic's, materialmen's, landlord
and similar Encumbrances with respect to amounts not yet due and payable or
which are being contested in good faith through appropriate proceedings;
(iv) Encumbrances for Taxes not yet delinquent; and (v) Encumbrances
securing rental payments under capital lease arrangements; and (vi)
Encumbrances securing the Company's indebtedness under the Loan and
Security Agreement, dated March 2, 1998, as amended and other capital
leases in the ordinary course of business.
"Person" shall mean any individual, firm, corporation,
trust, limited liability company, partnership, company or other entity,
including any Governmental Entity.
"Preferred Stock" shall have the meaning ascribed thereto in
the recitals.
"Preferred Stock Designee" shall have the meaning ascribed
thereto in Section 4.6(a).
"Purchasers" shall have the meaning ascribed thereto in the
preamble and, for purposes of Article II herein, any information delivered
to the representatives of such Purchaser shall be deemed received by the
Purchasers.
"Purchasers' Designee" shall have the meaning ascribed
thereto in Section 4.6(b).
"Purchasers' Designee Notice" shall have the meaning
ascribed thereto in Section 4.6(c).
"Purchasers' Expenses" shall have the meaning ascribed
thereto in Section 8.2.
"Purchasers' Indemnified Person" shall have the meaning
ascribed thereto in Section 7.2(a).
"Quarterly Financials" shall have the meaning ascribed
thereto in Section 4.10(a).
"Related Parties" shall mean (i) Affiliates of the Company
and (ii) directors or officers of the Company and their Affiliates
(including any family members of directors and officers), but shall not
include the Subsidiaries or the directors or officers of the Subsidiaries
(except for directors or officers of the Subsidiaries who are also
directors or officers of the Company).
"Release" shall means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata).
"Return" shall mean any report, return, statement, estimate,
declaration, notice, form or other information required to be supplied to a
taxing authority in connection with Taxes.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Reports" shall have the meaning ascribed thereto in
Section 2.4.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of
the SEC thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Act shall include
reference to the comparable section, if any, of such successor federal
statute.
"Shareholders Agreement" shall have the meaning ascribed
thereto in Section 5.2(a)(iv).
"Subsidiaries" shall have the meaning ascribed thereto in
Section 2.1(b).
"Subsidiary" shall have the meaning ascribed thereto in
Section 2.1(b).
"Systems" shall have the meaning ascribed thereto in Section
2.21(a).
"Tax" and "Taxes" shall mean any federal, state, local or
foreign income, gross receipts, property, sales, use, value added, license,
excise, franchise, capital, net worth, estimated, withholding, employment,
payroll, premium, withholding, alternative or added minimum, ad valorem,
inventory, asset, gains, transfer or excise tax, or any other tax, levy,
custom, duty, impost, governmental fee or other like assessment or charge
of any kind whatsoever, (including any taxes of any other Person owing by
contract, as a transferee or successor, under Treas. Reg. ss. 1.1502-6 or
analogous state, local, or foreign law provision, or otherwise) together
with any interest, penalty or additions to tax, imposed by any Governmental
Entity.
"Terminating Breach" shall have the meaning ascribed thereto
in Section 6.1(d).
"Third Party" shall mean any Person (or group of
Persons) other than the Purchasers.
"Transaction Documents" shall mean this Agreement, the
Shareholders Agreement, the Certificate of Designation, the Registration
Rights Agreement, the Warrant Agreement, the certificates evidencing the
shares of Preferred Stock and Warrants purchased hereunder and all other
contracts, agreements, schedules, certificates and other documents being
delivered pursuant to or in connection with this Agreement or such other
documents or the transactions contemplated hereby or thereby.
"Warrant Agreement" shall have the meaning ascribed thereto
in Section 1.2(b).
"Warrants" shall have the meaning ascribed thereto in the
recitals.
8.2. Fees and Expenses. Only in the event of and at the Closing,
as an adjustment to the Purchase Price, the Company shall reimburse the
Purchasers in cash for its fees and expenses incurred in connection with
this Agreement and the transactions contemplated hereby (including, without
limitation, the fees and disbursements of its attorneys, accountants,
consultants and other advisors) (collectively, "Purchasers' Expenses");
provided, however, that the portion of the Purchasers' Expenses for which
Purchasers are reimbursed shall not exceed $175,000 in the aggregate.
8.3. Public Announcements. The Purchaser and the Company shall
consult with each other before issuing any press release with respect to
this Agreement or the transactions contemplated hereby and neither shall
issue any such press release or make any such public statement without the
prior consent of the other, which consent shall not be unreasonably
withheld; provided, however, that a party may, without the prior consent of
the other party, issue such press release or make such public statement as
may upon the advice of counsel be required by Law or the rules and
regulations of the NASDAQ, if it has used reasonable efforts to consult
with the other party prior thereto.
8.4. Restrictive Legends. No shares of Preferred Stock, Warrants
or Common Shares may be transferred without registration under the
Securities Act and applicable state securities laws unless counsel to the
Company shall advise the Company that such transfer may be effected without
such registration. Each certificate representing any of the foregoing shall
bear legends in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
8.5. Further Assurances. At any time or from time to time after
the Closing, the Company, on the one hand, and the Purchasers, on the other
hand, agree to cooperate with each other, and at the request of the other
party, to execute and deliver any further instruments or documents and to
take all such further action as the other party may reasonably request in
order to evidence or effectuate the consummation of the transactions
contemplated hereby or by the other Transaction Documents and to otherwise
carry out the intent of the parties hereunder or thereunder.
8.6. Successors and Assigns. This Agreement shall bind and inure
to the benefit of the Company and the Purchasers and the respective
successors, permitted assigns, heirs and personal representatives of the
Company and the Purchasers, provided that the Company may not assign its
rights or obligations under this Agreement to any Person without the prior
written consent of the Purchasers, and provided further that the Purchasers
may not assign its rights or obligations under this Agreement to any Person
(other than a direct or indirect wholly-owned Affiliate of the Purchasers)
without the prior written consent of the Company, which consent shall not
be unreasonably withheld or delayed. In addition, and whether or not any
express assignment has been made, the provisions of this Agreement which
are for the Purchasers' benefit as a purchaser or holder of Preferred
Stock, Warrants or Shares are also for the benefit of, and enforceable by,
any subsequent holder of such Preferred Stock, Warrants or Shares.
8.7. Entire Agreement. This Agreement and the other Transaction
Documents and the Confidentiality Agreement 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.
8.8. 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 telecopy,
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 Company, to:
Optika Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Vice President and Chief Financial Officer
with a copy to (which shall not constitute notice):
E*Law Group
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.
and to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
(ii) if to the Purchasers,
▇▇▇▇▇▇ ▇▇▇▇▇▇ Capital Partners, L.P.
▇/▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇.▇.▇.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
RKB Capital, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
with copies to (which shall not constitute notice):
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: F. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
All such notices, requests, consents and other
communications shall be deemed to have been given or made if and when
delivered personally or by overnight courier to the parties at the above
addresses or sent by electronic transmission, with confirmation received,
to the telecopy numbers specified above (or at such other address or
telecopy number for a party as shall be specified by like notice).
8.9. Amendments. The terms and provisions of this Agreement may
be modified or amended, or any of the provisions hereof waived, temporarily
or permanently, in a writing executed and delivered by the Company and the
Purchasers. No waiver of any of the provisions of this Agreement shall be
deemed to or shall constitute a waiver of any other provision hereof
(whether or not similar). No delay on the part of any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof.
Any consent or waiver (whether or not contemplated by this Agreement) to be
made by the Purchasers shall be made by a majority in interest of the
Purchasers on behalf of all the Purchasers.
8.10. 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.
8.11. 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.
8.12. 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.
8.13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW.
8.14. Submission to Jurisdiction. Each of the parties hereto
hereby irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of New York and of the United
States of America, in each case located in the County of New York, for any
Litigation arising out of or relating to this Agreement or the other
Transaction Documents and the transactions contemplated hereby and thereby
(and agrees not to commence any Litigation relating hereto or thereto
except in such courts), and further agrees that service of any process,
summons, notice or document by U.S. registered mail to its respective
address set forth in this Agreement shall be effective service of process
for any Litigation brought against it in any such court. Each of the
parties hereto hereby irrevocably and unconditionally waives any objection
to the laying of venue of any Litigation arising out of this Agreement or
the transactions contemplated hereby in the courts of the State of New York
or the United States of America, in each case located in the County of New
York, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such Litigation brought in
any such court has been brought in an inconvenient forum.
8.15. Waiver of Jury Trial. THE COMPANY AND THE PURCHASERS HEREBY
WAIVE ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION,
PROCEEDING OR LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR THE TRANSACTION DOCUMENTS.
8.16. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid,
but if any provision of this Agreement is held to be invalid or
unenforceable in any respect, such invalidity or unenforceability shall not
render invalid or unenforceable any other provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first above written.
Optika Inc.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President & CEO
[Optika Signature Page - Stock Purchase Agreement]
PURCHASERS
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▇▇▇▇▇▇ ▇▇▇▇▇▇ CAPITAL PARTNERS, L.P.
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇ Capital Partners LLC, its general partner
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners Group LLC, Its managing member
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Authorized Signatory
TWP CEO FOUNDERS' CIRCLE (AI), L.P.
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇ Capital Partners LLC, its general partner
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners Group LLC, Its managing member
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Authorized Signatory
TWP CEO FOUNDERS' CIRCLE (QP), L.P.
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇ Capital Partners LLC, its general partner
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners Group LLC, Its managing member
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Authorized Signatory
▇▇▇▇▇▇ ▇▇▇▇▇▇ CAPITAL PARTNERS EMPLOYEE FUND, L.P.
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇ Capital Partners LLC, its general partner
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners Group LLC, Its managing member
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Authorized Signatory
TWP 2000 C0-INVESTMENT FUND, L.P.
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇ Capital Partners LLC, its general partner
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners Group LLC, Its managing member
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Authorized Signatory
[Purchasers Signature Page - Securities Purchase Agreement]
PURCHASERS
RKB CAPITAL, L.P.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: General Partner
[Purchasers Signature Page - Securities Purchase Agreement]
