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EXHIBIT 10.11
Enterworks, Inc.
SERIES A CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
Dated as of December 30, 1999
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TABLE OF CONTENTS
PAGE NO.
1. Authorization and Sale of Shares................................................1
1.1. Authorization.........................................................1
1.2. Sale of Shares........................................................1
1.3. Use of Proceeds.......................................................1
2. The Closing.....................................................................1
3. Representations of the Company..................................................2
3.1. Organization and Standing.............................................2
3.2. Capitalization........................................................3
3.3. Subsidiaries, Etc.....................................................3
3.4. Securityholder Lists and Agreements...................................3
3.5. Issuance of Shares....................................................4
3.6. Authority for Agreement; No Conflict..................................4
3.7. Governmental Consents.................................................4
3.8. Litigation............................................................5
3.9. Financial Statements..................................................5
3.10. Absence of Undisclosed Liabilities....................................5
3.11. Taxes.................................................................5
3.12. Property and Assets...................................................6
3.13. Intellectual Property.................................................6
3.14. Insurance.............................................................7
3.15. Material Contracts and Obligations....................................7
3.16. Compliance............................................................8
3.17. Absence of Changes....................................................8
3.18. Employees.............................................................9
3.19. ERISA.................................................................9
3.20. Books and Records.....................................................9
3.21. Permits...............................................................9
3.22. Environmental Matters.................................................9
4. Certain Disclosures by the Company.............................................11
4.1. Disclosures..........................................................11
4.2. Projections..........................................................11
5. Representations of the Purchasers..............................................12
5.1. Investment...........................................................12
5.2. Authority............................................................12
5.3. Experience...........................................................12
6. Conditions to the Obligations of the Purchasers................................13
6.1. Accuracy of Representations and Warranties...........................13
6.2. Performance..........................................................13
6.3. Opinion of Counsel...................................................13
6.4. Ancillary Agreements.................................................13
6.5. Certificates and Documents...........................................13
6.6. Minimum Investment...................................................14
6.7. Compliance Certificates..............................................14
6.8. Other Matters........................................................14
7. Condition to the Obligations of the Company....................................14
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7.1. Accuracy of Representations and Warranties...........................14
8. Affirmative Covenants of the Company...........................................14
8.1. Inspection and Observation...........................................14
8.2. Financial Statements and Other Information...........................15
8.3. Material Changes and Litigation......................................16
8.4. Directors............................................................16
8.5. Reservation of Common Stock..........................................16
8.6. Termination of Covenants.............................................16
9. Transfer of Shares.............................................................16
9.1. Restricted Shares....................................................16
9.2. Requirements for Transfer............................................17
9.3. Legend...............................................................17
10. Miscellaneous..................................................................18
10.1. Successors and Assigns...............................................18
10.2. Confidentiality......................................................18
10.3. Survival of Representations and Warranties...........................18
10.4. Expenses.............................................................18
10.5. Brokers..............................................................19
10.6. Severability.........................................................19
10.7. Specific Performance.................................................19
10.8. Governing Law........................................................19
10.9. Notices..............................................................19
10.10. Complete Agreement...................................................20
10.11. Amendments and Waivers...............................................20
10.12. Pronouns.............................................................20
10.13. Counterparts; Facsimile Signatures...................................20
10.14. Section Headings.....................................................20
11. Definitions....................................................................20
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EXHIBITS
Exhibit A - List of Purchasers
Exhibit B - Certificate of Amendment
Exhibit C - Exceptions to Representations
Exhibit D - Form of Employee Agreement
Exhibit E - Opinions of Counsel
Exhibit F - Stockholders' Voting Agreement
Exhibit G - Investor Rights Agreement
Exhibit H - Co-Sale Agreement
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Enterworks, Inc.
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
This Agreement dated as of December 30, 1999 is entered into by and
among Enterworks, Inc., a Delaware corporation (the "Company"), Telos
Corporation, a Maryland corporation ("Telos Maryland") and the individuals and
entities listed on Exhibit A hereto (the "Purchasers").
In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:
1. Authorization and Sale of Shares.
1.1. Authorization. The Company has, or before the Closing (as
defined in Section 2) will have, duly authorized the sale and issuance, pursuant
to the terms of this Agreement, of up to 21,739,127 shares of its Series A
Convertible Preferred Stock, $.01 par value per share (the "Series A
Preferred"), having the rights, restrictions, privileges and preferences set
forth in the Certificate of Amendment attached hereto as Exhibit B (the
"Certificate of Amendment"). The Company has, or before the Closing will have,
adopted and filed the Certificate of Amendment with the Secretary of State of
the State of Delaware.
1.2. Sale of Shares. Subject to the terms and conditions of
this Agreement, at the Closing the Company will sell and issue to each of the
Purchasers, and each of the Purchasers will purchase, the number of shares of
Series A Preferred set forth opposite such Purchaser's name on Exhibit A for the
purchase price of $1.15 per share (the "Purchase Price"). The shares of Series A
Preferred sold under this Agreement (whether at the Closing or any Subsequent
Closing) are referred to as the "Shares." The sale of Shares to each of the
Purchasers is a separate sale.
1.3. Use of Proceeds. The Company will use (a) $5,000,000 of
the net proceeds from the sale of the Shares to repurchase from Telos
Corporation, a California corporation and a wholly owned subsidiary of Telos
("Telos California"; together with Telos California, the "Telos Companies")
5,000,000 shares of the Company's issued and outstanding common stock, $.01 par
value per share ("Common Stock"), owned by Telos at a price of $1.00 per share
in cash, and (b) the remaining proceeds for general corporate purposes,
including working capital, research and development, sales and marketing
programs and repayment of approximately $586,000 of principal plus accrued
interest of outstanding senior subordinated notes payable.
2. The Closing. (a) The closing (the "Closing") of the sale and
purchase of the Shares under this Agreement shall take place at the offices of
Xxxx and Xxxx LLP, 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx at 10:00 a.m. on
December 30, 1999, or at such other time, date and place as are mutually
agreeable to the Company and the Purchasers, but in no event later than December
31, 1999. At the Closing, the Company shall deliver to each of the Purchasers a
certificate for the number of Shares being purchased at the Closing by such
Purchaser, registered
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in the name of such Purchaser, against payment to the Company of the Purchase
Price, by wire transfer, check, cancellation of indebtedness or other method
acceptable to the Company. The date of the Closing is hereinafter referred to as
the "Closing Date." If at the Closing any of the conditions specified in Section
6 shall not have been fulfilled, each of the Purchasers shall, at his or its
election, be relieved of all of his or its obligations under this Agreement
without thereby waiving any other rights he or it may have by reason of such
failure or such non-fulfillment.
(b) If all 21,739,127 Shares are not sold at the Closing, the Company
may sell, at any time prior to 60 days after the Closing, in one or more
closings (each, a "Subsequent Closing"), the remaining unsold Shares at the
Purchase Price, to purchasers (each, an "Additional Purchaser") listed on a
schedule heretofore delivered to the Purchasers signatory hereto. At each
Subsequent Closing, (i) the Company and each Additional Purchaser shall execute
and deliver a counterpart signature page hereto, whereupon such Additional
Purchaser shall become a "Purchaser" hereunder and the Shares purchased by such
Additional Purchaser shall be deemed to be "Shares" for purposes of this
Agreement, and (ii) the Company shall cause Exhibit A hereto be amended to
reflect the purchases made by the Additional Purchasers at each Subsequent
Closing. At each Subsequent Closing, the Company shall deliver to each
Additional Purchaser a certificate for the number of Shares being purchased at
the Subsequent Closing by such Additional Purchaser, registered in the name of
such Additional Purchaser, against payment to the Company of the Purchase Price
in the manner specified above. The Company shall deliver to each Purchaser,
within 15 days after any Subsequent Closing, written notice of such Subsequent
Closing (which notice shall specify the names of each Additional Purchaser and
the number of shares of Series A Preferred issued to each).
3. Representations of the Company. Except as disclosed by the Company
in Exhibit C hereto, the Company hereby represents and warrants to each of the
Purchasers that the statements contained in this Section 3 are true, complete
and correct. Exhibit C shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Section 3, and the
disclosures in any paragraph of Exhibit C shall qualify only the corresponding
paragraph of this Section 3, unless it would be apparent to a reasonable reader
of Exhibit C that such disclosures modify other paragraphs of this Section 3.
3.1. Organization and Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to conduct its
business as presently conducted and as proposed to be conducted by it and to
enter into and perform this Agreement and all other agreements required to be
executed by the Company at or prior to the Closing pursuant to Section 6.4 (the
"Ancillary Agreements") and to carry out the transactions contemplated by this
Agreement and the Ancillary Agreements. The Company is duly qualified to do
business as a foreign corporation and is in good standing in the Commonwealth of
Virginia and in every other jurisdiction in which the failure so to qualify
would have a material adverse effect on the business, prospects, assets or
condition (financial or otherwise) of the Company (a "Company Material Adverse
Effect"). The Company has furnished to the Purchasers true and complete copies
of its Certificate of Incorporation and By-Laws, each as amended to date and
presently in effect. The Company has at all times complied with all provisions
of its Certificate of Incorporation and By-laws and is not in default under, or
in violation of, any such provision.
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3.2. Capitalization. The authorized capital stock of the
Company (immediately prior to the Closing) consists of (i) 75,000,000 shares of
common stock, $.01 par value per share (the "Common Stock"), of which (A)
26,087,600 shares are issued and outstanding as of the date hereof (including
the 5,000,000 shares to be repurchased from Telos California but excluding
1,000,000 shares that have already been contributed from Telos California to the
Company), (B) 12,742,900 shares have been reserved for issuance pursuant to the
Enterworks, Inc. 1996 Stock Option Plan, (C) a total of 6,705,960 shares have
been reserved for issuance, immediately prior to the Closing, (i) in exchange
for senior subordinated notes of the Company and (ii) to Telos, all in the
manner described in the portion of the Confidential Private Placement Memorandum
of the Company dated October 8, 1999 (as supplemented through the date hereof,
the "Memorandum") that is attached to Section 3.2 of Exhibit C hereto, (D)
2,048,725 shares have been reserved for issuance upon exercise of warrants held
by certain senior subordinated noteholders, (E) 350,000 shares have been
reserved for issuance upon exercise of warrants held by Bank of America, N.A.
and (F) 1,054,560 shares have been reserved for issuance to the Company's agent,
Deutsche Bank Alex. Xxxxx, and (ii) 25,000,000 shares of Preferred Stock, $.01
par value per share, of which 21,739,127 shares have been designated as Series A
Preferred, none of which shares are issued or outstanding. All of the issued and
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable. Except as provided in this Agreement or
referred to in the portion of the Memorandum that is attached to Section 3.2 of
Exhibit C hereto, (i) no subscription, warrant, option, convertible security or
other right (contingent or otherwise), including without limitation any
preemptive rights, rights of first refusal or other similar rights, to purchase
or acquire any shares of capital stock of the Company from the Company is
authorized or outstanding, (ii) the Company has no obligation (contingent or
otherwise) to issue any subscription, warrant, option, convertible security or
other such right or to issue or distribute to holders of any shares of its
capital stock any evidences of indebtedness or assets of the Company, (iii) the
Company has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any shares of its capital stock or any interest therein or to
pay any dividend or make any other distribution in respect thereof, and (iv)
there are no outstanding or authorized stock appreciation, phantom stock or
similar rights with respect to the Company. All of the issued and outstanding
shares of capital stock of the Company have been offered, issued and sold by the
Company in compliance with applicable federal and state securities laws.
3.3. Subsidiaries, Etc. The Company has no subsidiaries and
does not own or control, directly or indirectly, any shares of capital stock of
any other corporation or any interest in any partnership, joint venture or other
non-corporate business enterprise.
3.4. Securityholder Lists and Agreements. The portion of the
Memorandum that is attached to Section 3.2 of Exhibit C hereto contains a true
and complete list of the securityholdings of all officers, directors and 5%
stockholders of the Company, showing the number of shares of Common Stock or
other securities of the Company held of record by each such securityholder as of
the date of this Agreement and, in the case of options, warrants and other
convertible securities, the number and type of securities issuable thereunder.
Except as provided in this Agreement or referred to in the portion of the
Memorandum that is attached to Section 3.2 of Exhibit C hereto, there are no
agreements, written or oral, between the Company and any holder of its
securities, or, to the best of the Company's knowledge, among any holders of its
securities, relating to the acquisition (including without limitation rights of
first refusal,
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anti-dilution or pre-emptive rights), disposition, registration under the
Securities Act of 1933, as amended (the "Securities Act"), or voting of the
capital stock of the Company.
3.5. Issuance of Shares. The issuance, sale and delivery of
the Shares in accordance with this Agreement, and the issuance and delivery of
the shares of Common Stock issuable upon conversion of the Shares, have been, or
will be on or prior to the Closing, duly authorized by all necessary corporate
action on the part of the Company, and all such shares have been duly reserved
for issuance. The Shares when so issued, sold and delivered against payment
therefor in accordance with the provisions of this Agreement, and the shares of
Common Stock issuable upon conversion of the Shares, when issued upon such
conversion, will be duly and validly issued, fully paid and nonassessable.
3.6. Authority for Agreement; No Conflict. The execution,
delivery and performance by the Company of this Agreement and the Ancillary
Agreements, and the consummation by the Company of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary corporate and
stockholders action. This Agreement has been, and the Ancillary Agreements when
executed at the Closing will be, duly executed and delivered by the Company and
constitute valid and binding obligations of the Company enforceable in
accordance with their respective terms, subject as to enforcement of remedies to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting generally the enforcement of creditors' rights and subject to a
court's discretionary authority with respect to the granting of a decree
ordering specific performance or other equitable remedies. The execution of and
performance of the transactions contemplated by this Agreement and the Ancillary
Agreements and compliance with their respective provisions by the Company will
not (a) conflict with or violate any provision of the Certificate of
Incorporation or By-laws of the Company, (b) require on the part of the Company
any filing with, or any permit, authorization, consent or approval of, any
court, arbitrational tribunal, administrative agency or commission or other
governmental or regulatory authority or agency (each of the foregoing is
hereafter referred to as a "Governmental Entity"), (c) conflict with, result in
a breach of, constitute (with or without due notice or lapse of time or both) a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest (as defined below) or other arrangement to which
the Company is a party or by which the Company is bound or to which its assets
are subject, other than any of the foregoing events listed in this clause (c)
which do not and will not, individually or in the aggregate, have a Company
Material Adverse Effect, (d) result in the imposition of any Security Interest
upon any assets of the Company or (e) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company or any of its
properties or assets. For purposes of this Agreement, "Security Interest" means
any mortgage, pledge, security interest, encumbrance, charge, or other lien
(whether arising by contract or by operation of law).
3.7. Governmental Consents. No consent, approval, waiver,
permit, order or authorization of, or registration, qualification, designation,
declaration or filing with, any Governmental Entity or any other individual or
entity is required on the part of the Company in connection with the execution
and delivery of this Agreement or the Ancillary Agreements, the offer, issuance,
sale and delivery of the Shares, the issuance and delivery of the shares of
Common Stock issuable upon conversion of the Shares or the other transactions to
be
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consummated at the Closing, as contemplated by this Agreement and the Ancillary
Agreements, except such filings as shall have been made prior to and shall be
effective on and as of the Closing and such filings required to be made after
the Closing under applicable federal and state securities laws, all of which
filings are specified in Exhibit C. Based on the representations made by each of
the Purchasers in Section 5 of this Agreement, the offer and sale of the Shares
to each of the Purchasers will be in compliance with applicable federal and
state securities laws.
3.8. Litigation. There is no action, suit or proceeding, or
governmental inquiry or investigation, pending, or, to the best of the Company's
knowledge, any threat thereof, against the Company or any of its officers,
directors or stockholders, which questions the validity of this Agreement or the
right of the Company to enter into it, or which might result, either
individually or in the aggregate, in a Company Material Adverse Effect, nor is
there any litigation pending, or, to the best of the Company's knowledge, any
threat thereof, against the Company or any of its officers, directors or
stockholders by reason of the past employment relationships of any of its
executives, the proposed activities of the Company, or negotiations by the
Company or any of its officers, directors or stockholders with possible
investors in the Company. The Company is not subject to any outstanding
judgement, order or decree.
3.9. Financial Statements. The Company has furnished to each
of the Purchasers a complete and correct copy of (i) the audited balance sheet
of the Company at December 31, 1998 and the related audited statements of
operations and cash flows for the fiscal year then ended, and (ii) the unaudited
balance sheet of the Company (the "Balance Sheet") at September 30, 1999 (the
"Balance Sheet Date") and the related statements of operations and cash flow for
the nine months then ended, (collectively, the "Financial Statements"). In all
material respects, the Financial Statements, are in accordance with the books
and records of the Company and present fairly the financial condition and
results of operations of the Company, at the dates and for the periods
indicated, and have been prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied, except that the unaudited
Financial Statements may not be in accordance with GAAP because of the absence
of footnotes normally contained therein and are subject to normal year-end audit
adjustments which in the aggregate are not expected to be material.
3.10. Absence of Undisclosed Liabilities. The Company does not
have any material liability (whether absolute or contingent), except for (a)
liabilities shown on the Balance Sheet, (b) liabilities which have arisen since
the Balance Sheet Date in the ordinary course of business and which are similar
in nature and amount to the liabilities which arose during the comparable period
of time in the immediately preceding fiscal period and (c) contractual and other
liabilities incurred in the ordinary course of business which are not required
by GAAP to be reflected on a balance sheet.
3.11. Taxes. The amounts shown on the Balance Sheet as
provision for taxes are sufficient in all material respects for payment of all
accrued and unpaid federal, state, county, local and foreign taxes for the
period then ended and all prior periods. Except for matters which will not,
individually or in the aggregate, have a Company Material Adverse Effect, the
consolidated group of which the Company is a member has filed or has obtained
presently effective extensions with respect to all federal, state, county, local
and foreign tax returns which are required to be filed by it, such returns are
true and correct and all taxes shown thereon to be due have been timely paid.
Federal income tax returns of the Company have not been audited by
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the Internal Revenue Service, and no controversy with respect to taxes of any
type is pending or, to the best of the Company's knowledge, threatened. Except
for matters which will not, individually or in the aggregate, have a Company
Material Adverse Effect, the Company has withheld or collected from each payment
made to its employees the amount of all taxes required to be withheld or
collected therefrom and has paid all such amounts to the appropriate taxing
authorities when due. Neither the Company nor any of its stockholders has ever
filed (a) an election pursuant to Section 1362 of the Internal Revenue Code of
1986, as amended (the "Code"), that the Company be taxed as an S Corporation or
(b) consent pursuant to Section 341(f) of the Code relating to collapsible
corporations.
3.12. Property and Assets. The Company has good title to, or a
valid leasehold interest in, all of its material properties and assets,
including all properties and assets reflected in the Balance Sheet, except those
disposed of since the date thereof in the ordinary course of business, and none
of such properties or assets is subject to any Security Interest other than
those the material terms of which are described in the Balance Sheet or in
Exhibit C.
3.13. Intellectual Property.
(a) Except for matters which will not, in the
aggregate, have a Company Material Adverse Effect, the Company owns, free and
clear of all Security Interests, or has the valid right to use all Intellectual
Property (as defined below in this Section 3.13) used by it in its business as
currently conducted or as currently proposed to be conducted. Except for matters
which will not, in the aggregate, have a Company Material Adverse Effect, no
other person or entity (other than licensors of software that is generally
commercially available, licensors of Intellectual Property under the agreements
disclosed pursuant to paragraph (d) below and non-exclusive licensees of the
Company's Intellectual Property in the ordinary course of the Company's
business) has any rights to any of the Intellectual Property owned or used by
the Company. To the Company's best knowledge, no other person or entity is
infringing, violating or misappropriating any of the Intellectual Property that
the Company owns. For purposes of this Agreement, "Intellectual Property" means
all (i) patents and patent applications, (ii) copyrights and registrations
thereof, (iii) mask works and registrations and applications for registration
thereof, (iv) computer software, data and documentation, (v) trade secrets and
confidential business information, whether patentable or unpatentable and
whether or not reduced to practice, know-how, manufacturing and production
processes and techniques, research and development information, copyrightable
works, financial, marketing and business data, pricing and cost information,
business and marketing plans and customer and supplier lists and information,
(vi) trademarks, service marks, trade names, domain names and applications and
registrations therefor and (vii) other proprietary rights relating to any of the
foregoing.
(b) To the best of the Company's knowledge, none of
the activities or business conducted by the Company or proposed to be conducted
by the Company infringes, violates or constitutes a misappropriation of (or in
the past infringed, violated or constituted a misappropriation of) any
Intellectual Property of any other person or entity. The Company has not
received any complaint, claim or notice alleging any such infringement,
violation or misappropriation, and to the knowledge of the Company, there is no
basis for any such complaint, claim or notice.
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(c) Exhibit C hereto identifies each (i) patent that
has been issued or assigned to the Company with respect to any of its
Intellectual Property, (ii) pending patent application that the Company has made
with respect to any of its Intellectual Property, (iii) any copyright or
trademark registration or application with respect to the Company's Intellectual
Property, and (iv) material license or other material agreements pursuant to
which the Company has granted any rights to any third party with respect to any
of its Intellectual Property.
(d) Exhibit C hereto identifies each agreement with a
third party pursuant to which the Company obtains rights to Intellectual
Property material to the business of the Company (other than software that is
generally commercially available) that is owned by a party other than the
Company. Other than license fees for software that is generally commercially
available, the Company is not obligated to pay any royalties or other
compensation to any third party in respect of its ownership, use or license of
any of its Intellectual Property.
(e) The Company has taken commercially reasonable
precautions (i) to protect its rights in its Intellectual Property and (ii) to
maintain the confidentiality of its trade secrets, know-how and other
confidential Intellectual Property, and to the Company's knowledge, there have
been no acts or omissions (other than those made based on reasonable, good faith
business decisions) by the officers, directors, shareholders and employees of
the Company the result of which would be to materially compromise the rights of
the Company to apply for or enforce appropriate legal protection of the
Company's Intellectual Property.
(f) Except for matters which will not have a Company
Material Adverse Effect, all of the Company's Intellectual Property has been
created by employees of the Company within the scope of their employment by the
Company or by independent contractors of the Company who have executed
agreements expressly assigning all right, title and interest in such
Intellectual Property to the Company, and no portion of the Company's
Intellectual Property was otherwise jointly developed with any third party.
3.14. Insurance. The Company maintains valid policies of
workers' compensation insurance and of insurance with respect to its properties
and business of the kinds and in the amounts not less than is customarily
obtained by corporations of established reputation engaged in the same or
similar business and similarly situated, including, without limitation,
insurance against loss, damage, fire, theft, public liability and other risks.
3.15. Material Contracts and Obligations. The Company has
identified and made available to the Purchasers all material agreements or
commitments of any nature (whether written or oral) to which the Company is a
party or by which it is bound, including without limitation (a) any agreement
which requires future expenditures by the Company in excess of $100,000 or which
might result in payments to the Company in excess of $100,000, (b) any
employment and consulting agreements, employee benefit, bonus, pension,
profit-sharing, stock option, stock purchase and similar plans and arrangements,
(c) any marketing, reseller or other similar channel agreement, (d) any
agreement with any current or former stockholder, officer or director of the
Company, or any "affiliate" or "associate" of such persons (as such terms are
defined in the rules and regulations promulgated under the Securities Act),
including without limitation any agreement or other arrangement providing for
the furnishing of services by, rental of real or personal property from, or
otherwise requiring payments to, any such person or entity, (e) any agreement
under which the Company is restricted from carrying on any business
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anywhere in the world, (f) any agreement relating to indebtedness for borrowed
money, (g) any agreement for the disposition of a material portion of the
Company's assets (other than for the sale of inventory in the ordinary course of
business), and (h) any agreement for the acquisition of the business or shares
of another party. Exhibit C sets forth a list of contracts described in clauses
(a), (d), (e), (f), (g) and (h) above. The Company has delivered to the
Purchasers copies of such of the foregoing agreements (or an accurate summary of
any oral agreement) to the extent requested. All of such agreements and
contracts are valid, binding and in full force and effect, in accordance with
their respective terms as to the Company and, to the knowledge of the Company,
as to each other party thereto. Neither the Company, nor, to the Company's
knowledge, any other party to such agreements is in default of any of its
obligations under any of the agreements or contracts listed on Exhibit C, in a
manner which could have a Company Material Adverse Effect.
3.16. Compliance; Merger Discussions.
(a) The Company has, in all material respects,
complied with all laws, regulations and orders applicable to its present and
proposed business and has all material permits and licenses required thereby.
There is no term or provision of any mortgage, indenture, contract, agreement or
instrument to which the Company is a party or by which it is bound, or, to the
best of the Company's knowledge, of any provision of any state or federal
judgment, decree, order, statute, rule or regulation applicable to or binding
upon the Company, which materially adversely affects or, so far as the Company
may now foresee, in the future is reasonably likely to result in or have a
Company Material Adverse Effect. To the best of the Company's knowledge, none of
the employees of the Company is in violation of any material term of any
contract or covenant (either with the Company or with another entity) relating
to employment, patents, assignment of inventions, proprietary information
disclosure, non-competition or non-solicitation.
(b) Neither the Company nor Telos Maryland has
engaged in the past three (3) months in any discussion (i) with any
representative of any corporation or corporations regarding the merger of the
Company or Telos California with or into any such corporation or corporations as
a result of which a majority of the stock of the surviving or resulting entity
would not be held by persons who were stockholders of Enterworks or Telos
California (as the case may be) immediately prior to such merger, (ii) with any
representative of any corporation, partnership, association or other business
entity or any individual regarding the sale, conveyance or disposition of all or
substantially all of the assets of the Company or Telos California or a
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company or Telos California would be disposed
of, or (iii) regarding any other form of liquidation, dissolution or winding up
of the Company or Telos California.
3.17. Absence of Changes. Since the Balance Sheet Date, there
has been no material adverse change in the business, prospects, condition
(financial or otherwise), or results of operations of the Company, other than
changes occurring in the ordinary course of business (which ordinary course
changes have not, individually or in the aggregate, had a Company Material
Adverse Effect); provided, however, that the Purchasers acknowledge that the
Company has continued to incur losses since the Balance Sheet Date.
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13
3.18. Employees. Employees of the Company who have access to
confidential or proprietary information of the Company have executed and
delivered agreements in the form of Exhibit E and all of such agreements are in
full force and effect. The Company has complied in all material respects with
all applicable laws relating to wages, hours, equal opportunity, collective
bargaining, workers' compensation insurance and the payment of social security
and other taxes. None of the employees of the Company is represented by any
labor union, and there is no labor strike or other labor trouble pending with
respect to the Company (including, without limitation, any organizational drive)
or, to the best of the Company's knowledge, threatened.
3.19. ERISA. The Company complies in all material respects
with the requirements of the Employee Retirement Income Security Act of 1974, as
amended.
3.20. Books and Records. The minute books of the Company
contain complete and accurate records of resolutions adopted at meetings and
other corporate actions of its stockholders and its Board of Directors and
committees thereof. The stock ledger of the Company is complete and reflects all
issuances, transfers, repurchases and cancellations of shares of capital stock
of the Company.
3.21. Permits. Exhibit C sets forth a list of all material
permits, licenses, registrations, certificates, orders or approvals from any
Governmental Entity ("Permits") issued to or held by the Company. Such listed
Permits are the only Permits that are required for the Company to conduct its
business as presently or proposed to be conducted, except for those the absence
of which would not, individually or in the aggregate, have a Company Material
Adverse Effect. Each such Permit is in full force and effect and, to the best of
the knowledge of the Company, no suspension or cancellation of such Permit is
threatened and there is no basis for believing that such Permit will not be
renewable upon expiration.
3.22. Environmental Matters.
(a) The Company has complied in all material respects
with all applicable Environmental Laws (as defined below in this Section
3.22(a)). There is no pending or, to the knowledge of the Company, threatened
civil or criminal litigation, written notice of violation, formal administrative
proceeding, or investigation, inquiry or information request by any Governmental
Entity, relating to any Environmental Law involving the Company. For purposes of
this Agreement, "Environmental Law" means any federal, state or local law,
statute, rule or regulation or the common law relating to the protection of
human health or the environment, including without limitation CERCLA (as defined
below), the Resource Conservation and Recovery Act of 1976, any statute,
regulation or order pertaining to (i) treatment, storage, disposal, generation
and transportation of industrial, toxic or hazardous materials or substances or
solid or hazardous waste; (ii) air, water and noise pollution; (iii) groundwater
and soil contamination; (iv) the release or threatened release into the
environment of industrial, toxic or hazardous materials or substances, or solid
or hazardous waste, including without limitation, emissions, discharges,
injections, spills, escapes or dumping of pollutants, contaminants, or
chemicals; (v) the protection of wild life, marine life and wetlands, including
without limitation all endangered and threatened species; (vi) storage tanks,
vessels, abandoned or discarded barrels, containers and other closed
receptacles; (vii) health and safety of employees and other persons; and (viii)
manufacture, processing, use, distribution, treatment, storage, disposal,
transportation or handling of pollutants, contaminants, toxic or
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14
hazardous materials or substances or oil or petroleum products or solid or
hazardous waste. As used in this Section 3.22, the terms "release" and
"environment" shall have the meaning set forth in the federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA").
(b) Neither the Company, nor to the best knowledge of
the Company, any third party has released any Materials of Environmental Concern
(as defined below in this Section 3.22(b)) into the environment at any parcel of
real property or any facility formerly or currently owned, operated or
controlled by the Company. The Company is not aware of any releases of Materials
of Environmental Concern at parcels of real property of facilities other than
those owned, operated or controlled by the Company that could reasonably be
expected to have an impact on the real property or facilities owned, operated or
controlled by the Company. For purposes of this Agreement, "Materials of
Environmental Concern" means any chemicals, pollutants or contaminants,
hazardous substances (as such term is defined under CERCLA), solid wastes and
hazardous wastes (as such terms are defined under the federal Resource
Conservation and Recovery Act), toxic materials, oil or petroleum and petroleum
products, or any other material subject to regulation under any Environmental
Law.
(c) The Company is not aware of any material
environmental liability of the solid and hazardous waste transporters and
treatment, storage and disposal facilities that have been utilized by the
Company.
(d) Set forth in Exhibit C is a list of all
environmental reports, investigations and audits of which the Company is aware
(whether conducted by or on behalf of the Company or a third party, and whether
done at the initiative of the Company or directed by a Governmental Entity or
other third party) issued or conducted during the five years preceding the date
hereof relating to premises currently or previously owned or operated by the
Company. Complete and accurate copies of each such report, or the results of
each such investigation or audit, have been provided to special counsel for the
Purchasers.
3.23. Investment Company. The Company is not an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended (the "1940 Act").
3.24. Year 2000. The Company hereby represents that, except as
set forth on Section 3.24 of Exhibit C, all information technology presently
expected to be used by the Company following December 31, 1999 in the
administration and the business operations of the Company, including, without
limitation, in all products and services (i) provided by the Company, whether to
third parties or for internal use or (ii) to the best of the Company's knowledge
after reasonable investigation, used in combination with any information
technology of its suppliers or vendors, accurately processes or will process
date and time date (including, but not limited to calculating, comparing and
sequencing) from, into and between the years 1999 and 2000 and the twentieth
century and the twenty-first century, including leap year calculations and
neither performance nor functionality of such technology will be materially
affected by dates prior to, during and after the year 2000. Except as set forth
in Exhibit C, the Company has no obligations under warranty agreements, service
agreements or otherwise to remedy any information technology defect relating to
the year 2000. The costs, expenses and liabilities incurred by the Company in
connection with achieving and maintaining such Year 2000
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15
compliance have not been material and the Company presently expects that any
additional costs will not be material.
3.25. Relationship with General Electric Company. Except as
set forth in Section 3.25 of Exhibit C, to the best of its knowledge the Company
does not have any equity, creditor or similar relationship (including, without
limitation any investment in, or any debtor, revolving credit, leasing or
creditor relationship, or any material vendor or vendee relationship) with
General Electric Company or any subsidiary thereof.
3.26. Disclosures. Neither this Agreement nor any Exhibit
hereto nor the Memorandum (including any Supplement thereto), contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading.
3.27. Projections. Although the projections furnished in
conjunction with the Memorandum were prepared in good faith based on reasonable
assumptions and represent a reasonable estimate of future results based on
information available as of the date of the Memorandum, it is not possible to
predict whether the Company will attain, surpass or fall short of the projected
results.
4. Certain Disclosures by Telos.
4.1. Organization and Standing. Telos is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland and has full corporate power and authority to conduct its business as
presently conducted and as proposed to be conducted by it and to enter into and
perform this Agreement and the Ancillary Agreement and to carry out the
transactions contemplated by this Agreement and the Ancillary Agreements.
4.2. Stock Ownership. All of the issued and outstanding shares
of capital stock of the Company are duly authorized, validly issued, fully paid,
nonassessable and 26,000,000 of such shares are held of record and beneficially
by Telos California, which is a wholly owned subsidiary of Telos, and
beneficially by Telos, free and clear of any restrictions on transfer (other
than a pledge to Bank of America, N.A. and restrictions under the Securities Act
and state securities laws), claims, security interests, options, warrants,
rights, contracts, calls, commitments, equities and demands. Except as
contemplated by this Agreement, there are no outstanding or authorized options,
warrants, rights, agreements or commitments to which either Telos or Telos
California or any subsidiary is a party or which are binding on any of them
providing for the issuance, disposition or acquisition of any capital stock of
the Company and there are no outstanding stock appreciation, phantom stock or
similar rights with respect to the Company. There are no voting trusts, proxies
or other agreements or understandings with respect to the voting of any capital
stock the Company.
4.3. Authority for Agreement; No Conflict. The execution,
delivery and performance by Telos of this Agreement and the Ancillary
Agreements, and the consummation by Telos of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary corporate action.
This Agreement has been, and the Ancillary Agreements when executed at the
Closing will be, duly executed and delivered by Telos and constitute valid and
binding obligations of Telos enforceable in accordance with their respective
terms, subject as to
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16
enforcement of remedies to applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting generally the enforcement of creditors'
rights and subject to a court's discretionary authority with respect to the
granting of a decree ordering specific performance or other equitable remedies.
The execution of and performance of the transactions contemplated by this
Agreement and the Ancillary Agreements and compliance with their respective
provisions by Telos will not (a) conflict with or violate any provisions of the
Certificate of Incorporation or By-laws of Telos, (b) require on the part of
Telos any filing with, or any permit, authorization, consent or approval of, any
Governmental Entity, (c) conflict with, result in a breach of, constitute (with
or without due notice or lapse of time or both) a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, or require any notice, consent or waiver under, any contract, lease,
sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest or
other arrangement to which Telos is a party or by which Telos is bound or to
which its assets are subject, other than any of the foregoing events listed in
this clause (c) which do not and will not, individually or in the aggregate,
have a Company Material Adverse Effect, (d) result in the imposition of any
Security Interest upon any assets of Telos or (e) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Telos or any
of its properties or assets.
4.4. Litigation. There is no action, suit or proceeding, or
governmental inquiry or investigation, pending, or, to best of Telos' knowledge,
any basis therefor or threat thereof, against the Telos Companies or the
Company, which questions the validity of this Agreement or the right of Telos or
the Company to enter into it.
5. Representations of the Purchasers. Each of the Purchasers severally
represents and warrants to the Company as follows:
5.1. Investment. Such Purchaser is acquiring the Shares, and
the shares of Common Stock into which the Shares may be converted, for his, her
or its own account for investment and not with a view to, or for sale in
connection with, any distribution thereof, nor with any present intention of
distributing or selling the same; and, except as contemplated by this Agreement
and the Exhibits hereto, such Purchaser has no present or contemplated
agreement, undertaking, arrangement, obligation, indebtedness or commitment
providing for the disposition thereof. Such Purchaser is an "accredited
investor" as defined in Rule 501(a) under the Securities Act.
5.2. Authority. Such Purchaser has full power and authority to
enter into and to perform this Agreement in accordance with its terms. Any
Purchaser which is a corporation, partnership or trust represents that it has
not been organized, reorganized or recapitalized specifically for the purpose of
investing in the Company.
5.3. Experience. Such Purchaser has carefully reviewed the
representations concerning the Company contained in this Agreement, has read the
Memorandum and has made detailed inquiry concerning the Company, its business
and its personnel; the officers of the Company have made available to such
Purchaser any and all written information which he, she or it has requested and
have answered to such Purchaser's satisfaction all inquiries made by such
Purchaser; and such Purchaser has sufficient knowledge and experience in finance
and business
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17
that he, she or it is capable of evaluating the risks and merits of his, her or
its investment in the Company and such Purchaser is able financially to bear the
risks thereof.
6. Conditions to the Obligations of the Purchasers. The obligation of
each of the Purchasers to purchase Shares at the Closing is subject to the
fulfillment, or the waiver by such Purchaser, of each of the following
conditions on or before the Closing:
6.1. Accuracy of Representations and Warranties. Each
representation and warranty contained in Sections 3 and 4 shall be true on and
as of the Closing Date with the same effect as though such representation and
warranty had been made on and as of that date.
6.2. Performance. The Company shall have performed and
complied with all agreements and conditions contained in this Agreement required
to be performed or complied with by the Company prior to or at the Closing.
6.3. Opinion of Counsel. Each Purchaser shall have received
opinions from Xxx Xxxxxx, Esq., counsel for the Company, Xxxxxxx Xxxxxxxx, Esq.
counsel for Telos, and Xxxx and Xxxx, LLP, special counsel to the Company, dated
the Closing Date, addressed to the Purchasers, and satisfactory in form and
substance to each Purchaser, to the effect set forth on Exhibit E.
6.4. Ancillary Agreements.
(a) Stockholders' Voting Agreement. The Stockholders'
Voting Agreement attached hereto as Exhibit F (the "Stockholders' Voting
Agreement") shall have been executed and delivered by each of the Purchasers and
by each of the other stockholders of the Company who are parties thereto. All
such action shall have been taken as may be necessary to elect a Board of
Directors of the Company, effective upon the Closing, in accordance with the
Stockholders' Voting Agreement.
(b) Investor Rights Agreement. The Investor Rights
Agreement attached hereto as Exhibit G (the "Investor Rights Agreement") shall
have been executed and delivered by the Company and each of the Purchasers.
(c) Co-Sale Agreement. The Co-Sale Agreement attached
hereto as Exhibit H (the "Co-Sale Agreement") shall have been executed and
delivered by each of the Purchasers and the other parties named therein.
6.5. Certificates and Documents. The Company shall have
delivered to special counsel to the Purchasers:
(a) The Certificate of Incorporation of the Company,
as amended and in effect as of the Closing Date (including the Certificate of
Amendment), certified by the Secretary of State of the State of Delaware;
(b) Certificates, as of the most recent practicable
dates, as to the corporate good standing of the Company issued by the Secretary
of State of the State of Delaware and the Secretary of the State of the
Commonwealth of Virginia;
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(c) By-laws of the Company, certified by its
Secretary or Assistant Secretary as of the Closing Date; and
(d) Resolutions of the Board of Directors and
stockholders of the Company, authorizing and approving all matters in connection
with this Agreement and the transactions contemplated hereby, certified by the
Secretary or Assistant Secretary of the Company as of the Closing Date.
6.6. Minimum Investment. Purchasers shall have tendered at the
Closing aggregate consideration of not less than $20,000,000 for the purchase of
Shares.
6.7. Compliance Certificates. The Company shall have delivered
to the Purchasers a certificate, executed by the Chief Executive Officer or
President of the Company, dated the Closing Date, certifying to the fulfillment
of the conditions specified in Sections 6.1, 6.2, 6.4, 6.5 and 6.6 of this
Agreement.
6.8. Other Matters. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Purchasers, and the Purchasers shall
have received all such counterpart originals or certified or other copies of
such documents as they may reasonably request.
6.9. Concurrent Transactions. The exchange of outstanding
promissory notes of the Company for common stock of the Company and other
transactions described in the portion of the Memorandum which is attached to
Section 6.9 of Exhibit C hereto shall have been accomplished prior to or
simultaneously with the Closing with documentation reasonably satisfactory to
counsel for the Purchasers.
7. Condition to the Obligations of the Company. The obligations of the
Company under Section 1.2 of this Agreement are subject to fulfillment, or the
waiver, of the following condition on or before the Closing:
7.1. Accuracy of Representations and Warranties. The
representations and warranties of the Purchasers contained in Section 5 shall be
true on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of that date.
8. Affirmative Covenants of the Company.
8.1. Inspection and Observation.
(a) The Company shall permit each Purchaser, or any
authorized representative thereof, to visit and inspect the properties of the
Company, including its corporate and financial records, and to discuss its
business and finances with officers of the Company, during normal business hours
following reasonable notice and as often as may be reasonably requested.
(b) The Company will permit each holder who holds,
together with its Affiliates (as defined in Section 11), not less than 500,000
Shares (including shares of Common
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19
Stock into which Shares have been converted and as adjusted for stock splits,
stock dividends, recapitalizations and similar events) or any authorized
representative thereof, to attend all meetings of the Board of Directors of the
Company, shall provide him or it with such notice and other information with
respect to such meetings as are delivered to the directors of the Company and
shall reimburse all reasonable and documented out-of-pocket travel costs
incurred in connection with such attendance.
8.2. Financial Statements and Other Information.
(a) The Company shall deliver to each Purchaser:
(i) within 90 days after the end of each
fiscal year of the Company, an audited balance sheet of the Company as at the
end of such year and audited statements of income and of cash flows of the
Company for such year, certified by certified public accountants of established
national reputation selected by the Company, and prepared in accordance with
GAAP;
(ii) within 45 days after the end of each
fiscal quarter of the Company (other than the fourth quarter), an unaudited
balance sheet of the Company as at the end of such quarter, and unaudited
statements of income and of cash flows of the Company for such fiscal quarter
and for the current fiscal year to the end of such fiscal quarter; and
(iii) with reasonable promptness, such other
information and data as such Purchaser may from time to time request.
(b) The Company shall deliver to each Major Purchaser
(as defined in paragraph (d) below) copies of all press releases and such other
notices, information and data with respect to the Company as the Company
delivers to the holders of its capital stock at the same time it delivers such
items to such holders.
(c) The foregoing financial statements shall be
prepared on a consolidated basis if the Company then has any subsidiaries. The
financial statements delivered pursuant to clause (ii) of paragraph (a) shall be
accompanied by a certificate of the chief financial officer of the Company
stating that such statements have been prepared in accordance with GAAP
consistently applied (except as noted) and fairly present the financial
condition and results of operations of the Company at the date thereof and for
the periods covered thereby.
(d) For purposes of this Agreement, the term "Major
Purchaser" shall mean a Purchaser who, together with its Affiliates, purchases
not less than 500,000 Shares so long as such Purchaser who, together with its
Affiliates, continues to own not less than 500,000 Shares (as adjusted for stock
splits, stock dividends, recapitalizations and similar events). For purposes of
determining the number of Shares held by a Purchaser: (I) the foregoing numbers
shall be adjusted for any stock splits, stock dividends, recapitalizations or
similar events; (ii) Shares shall include Shares which have been converted into
Common Stock so long as such Common Stock is held by such Purchaser; and (iii)
Shares shall include Shares held by affiliates of such Purchaser and, with
respect to a Purchaser that is a corporation or partnership, Shares distributed
to and held by its shareholders and partners.
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20
8.3. Material Changes and Litigation. The Company shall
promptly notify the Purchasers of any material adverse change in the business,
prospects, assets or condition, financial or otherwise, of the Company and of
any litigation or governmental proceeding or investigation brought on threatened
against the Company or any officer, director, key employee or principal
stockholder of the Company which, if adversely determined, would be likely to
have a Company Material Adverse Effect.
8.4. Directors.
(a) The Company shall promptly reimburse in full each
director of the Company who is not an employee of the Company and who was
elected as a director solely or in part by the holders of Series A Preferred for
all of his reasonable out-of-pocket expenses incurred in attending each meeting
of the Board of Directors of the Company or any committee thereof.
(b) The Board of Directors shall meet on at least a
quarterly basis, unless otherwise agreed by a majority of the members of the
Board of Directors who are not employees of the Company or a subsidiary of the
Company.
8.5. Reservation of Common Stock. The Company shall reserve
and maintain a sufficient number of shares of Common Stock for issuance upon
conversion of all of the outstanding Shares.
8.6. Termination of Covenants. The covenants of the Company
contained in Sections 8.1 through 8.5 shall terminate, and be of no further
force or effect, upon the closing of the Company's first public offering of
Common Stock pursuant to an effective registration statement under the
Securities Act, resulting in gross proceeds to the Company of at least
$30,000,000, at a price per share to the public that is at least 150% of the
conversion price of the Series A Preferred (as adjusted for stock splits, stock
dividends, recapitalizations and similar events).
8.7. Indemnification. The Company agrees to indemnify and hold
harmless each Purchaser and its Affiliates and their respective officers,
directors and employees up to an aggregate amount not to exceed the amount paid
by such Purchaser for its Shares from and against any liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys'
fees, expenses and disbursements of any kind ("Losses") which may be imposed
upon, incurred by or asserted against such Purchaser or such other indemnified
Persons in any manner relating to or arising out of any untrue representation,
breach of warranty or failure to perform any covenants or agreement by the
Company contained herein or in any certificate or document delivered pursuant
hereby or otherwise relating to or arising out of the transactions contemplated
hereby.
9. Transfer of Shares.
9.1. Restricted Shares. "Restricted Shares" means (i) the
Shares, (ii) the shares of Common Stock issued or issuable upon conversion of
the Shares, (iii) any shares of capital stock of the Company acquired by the
Purchasers pursuant to the Investor Rights Agreement or Co-Sale Agreement, and
(iv) any other shares of capital stock of the Company issued in respect of such
shares (as a result of stock splits, stock dividends, reclassifications,
recapitalizations, or
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21
similar events); provided, however, that shares of Common Stock which are
Restricted Shares shall cease to be Restricted Shares (x) upon any sale pursuant
to a registration statement under the Securities Act, Section 4(1) of the
Securities Act or Rule 144 under the Securities Act or (y) at such time as they
become eligible for sale under Rule 144(k) under the Securities Act.
9.2. Requirements for Transfer.
(a) Restricted Shares shall not be sold or
transferred unless either (I) they first shall have been registered under the
Securities Act, or (ii) the Company first shall have been furnished with an
opinion of legal counsel, reasonably satisfactory to the Company, to the effect
that such sale or transfer is exempt from the registration requirements of the
Securities Act.
(b) Notwithstanding the foregoing, no registration or
opinion of counsel shall be required for (i) a transfer by a Purchaser which is
a corporation to a wholly owned subsidiary of such corporation, a transfer by a
Purchaser which is a partnership to a partner of such partnership or a retired
partner of such partnership who retires after the date hereof, to the estate of
any such partner or retired partner, or a transfer by a Purchaser which is a
limited liability company to a member of such limited liability company or a
retired member who resigns after the date hereof or to the estate of any such
member or retired member or a transfer by a Purchaser to an Affiliate; provided
that the transferee in each case agrees in writing to be subject to the terms of
this Section 9 to the same extent as if it were the original Purchaser
hereunder, or (ii) a transfer made in accordance with Rule 144 under the
Securities Act.
9.3. Legend. Each certificate representing Restricted Shares
shall bear a legend substantially in the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such shares are registered under
such Act or an opinion of counsel satisfactory to the Company
is obtained to the effect that such registration is not
required."
The foregoing legend shall be removed from the certificates
representing any Restricted Shares, at the request of the holder thereof, at
such time as they become eligible for resale pursuant to Rule 144(k) under the
Securities Act.
9.4. Rule 144A Information. The Company shall, at all times
during which it is neither subject to the reporting requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), nor exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange
Act, upon the written request of any Purchaser, provide in writing to such
Purchaser and to any prospective transferee of any Restricted Shares of such
Purchaser the information concerning the Company described in Rule 144A(d)(4)
under the Securities Act ("Rule 144A Information"). The Company also shall ,
upon the written request of any Purchaser, cooperate with and assist such
Purchaser or any member of the National Association of Securities Dealers, Inc.
PORTAL system in applying to designate and thereafter maintain the eligibility
of the Restricted Shares of a written agreement to take all reasonable
precautions to
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safeguard the Rule 144A Information from disclosure to anyone other than persons
who will assist such transferee in evaluating the purchase of any Restricted
Shares.
10. Miscellaneous.
10.1. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement, and the rights and obligations of each
Purchaser hereunder, may be assigned by such Purchaser to any person or entity
to which, together with its Affiliates, at least 500,000 Shares (as adjusted for
stock splits, stock dividends, recapitalizations and similar events) are
transferred by such Purchaser, and such transferee shall be deemed a "Purchaser"
for purposes of this Agreement; provided that the transferee provides written
notice of such assignment to the Company. The Company may not assign its rights
under this Agreement.
For the purposes of this Agreement, "Affiliate" means any other person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with the referenced person or entity and includes without
limitation, (a) any person who is an officer, director, or direct or indirect
beneficial holder of at least 5% of the then outstanding capital stock of the
referenced person or entity and (b) any person of which the referenced person or
entity and/or its Affiliates (as defined in clause (a) above), directly or
indirectly, either beneficially own(s) at least 5% of the then outstanding
equity securities or constitute(s) at least a 5% equity participant.
10.2. Confidentiality. Each Purchaser agrees that he, she or
it will keep confidential and will not disclose, divulge or use for any purpose
other than to monitor his, her or its investment in the Company any
confidential, proprietary or secret information which such Purchaser may obtain
from the Company pursuant to financial statements, reports and other materials
submitted by the Company to such Purchaser pursuant to this Agreement, or
pursuant to visitation or inspection rights granted hereunder ("Confidential
Information"), unless such Confidential Information is known, or until such
Confidential Information becomes known, to the public (other than as a result of
a breach of this Section 10.2 by such Purchaser); provided, however, that a
Purchaser may disclose Confidential Information (i) to its board of directors,
investment advisers, attorneys, accountants, consultants, and other
professionals to the extent necessary to obtain their services in connection
with monitoring its investment in the Company, (ii) to any prospective purchaser
of any Shares from such Purchaser as long as such prospective purchaser agrees
in writing to be bound by the provisions of this Section 10.2, (iii) to any
affiliate of such Purchaser or to a partner, stockholder or subsidiary of such
Purchaser, provided that such affiliate agrees in writing to be bound by the
provisions of this Section 10.2, or (iv) as may otherwise be required by law or
regulation, regulatory body, stock exchange, court or administrative order, or
other agreement, provided that the Purchaser takes reasonable steps to minimize
the extent of any such required disclosure. -
10.3. Survival of Representations and Warranties. All
agreements, representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the closing of the transactions
contemplated hereby.
10.4. Expenses. The Company shall pay, at the Closing, the
reasonable fees (up to an aggregate maximum of $50,000) and disbursements of
Winston & Xxxxxx, special counsel
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23
to General Electric Investment Corporation (up to an individual maximum of
$45,000) and Xxxx, Hastings Xxxxxxxx & Xxxxxx, LLP, special counsel to Chartwell
Capital Investors II, L.P. (up to an individual maximum of $5,000), in
connection with the review of this Agreement and the other agreements
contemplated hereby and the closing of the transactions contemplated hereby.
10.5. Brokers. The Company, and each Purchaser (i) represents
and warrants to the other parties hereto that he, she or it has not retained a
finder or broker in connection with the transactions contemplated by this
Agreement, and (ii) will indemnify and save the other parties harmless from and
against any and all claims, liabilities or obligations with respect to brokerage
or finders' fees or commissions, or consulting fees in connection with the
transactions contemplated by this Agreement asserted by any person on the basis
of any statement or representation alleged to have been made by such
indemnifying party.
10.6. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
10.7. Specific Performance. In addition to any and all other
remedies that may be available at law in the event of any breach of this
Agreement, each Purchaser shall be entitled to specific performance of the
agreements and obligations of the Company hereunder and to such other injunctive
or other equitable relief as may be granted by a court of competent
jurisdiction.
10.8. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware (without
reference to the conflicts of law provisions thereof).
10.9. Notices. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be deemed
delivered (i) two business days after being sent by registered or certified
mail, return receipt requested, postage prepaid or (ii) one business day after
being sent via a reputable nationwide overnight courier service guaranteeing
next business day delivery, in each case to the intended recipient as set forth
below:
If to the Company, at 00000 Xxxxxxx Xxxx, Xxxxxxx, Xxxxxxxx 00000,
Attention: President, or at such other address or addresses as may have been
furnished in writing by the Company to the Purchasers, with copies to Xxx
Xxxxxx, Esq. in care of the Company;
If to a Purchaser, at the address set forth on Exhibit A for such
Purchaser, or at such other address or addresses as may have been furnished to
the Company in writing by such Purchaser, with a copy to Winston & Xxxxxx, 00 X.
Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000-0000, Attention: Xxxxxxxx X. Xxxxx, Esq.;
or
Any party may give any notice, request, consent or other communication
under this Agreement using any other means (including, without limitation,
personal delivery, messenger service, telecopy, first class mail or electronic
mail), but no such notice, request, consent or other communication shall be
deemed to have been duly given unless and until it is actually received by the
party for whom it is intended. Any party may change the address to which
notices, requests, consents or other communications hereunder are to be
delivered by giving the other parties notice in the manner set forth in this
Section.
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10.10. Complete Agreement. This Agreement (including its
Exhibits) and the Ancillary Agreements constitute the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings relating to such subject
matter.
10.11. Amendments and Waivers. Except as otherwise expressly
set forth in this Agreement, any term of this Agreement may be amended or
terminated and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the holders of at
least a 66 2/3% of the shares of Common Stock issued or issuable upon conversion
of the Shares. Any amendment, termination or waiver effected in accordance with
this Section 10.11 or Section 2(b) shall be binding upon each holder of any
Shares (including shares of Common Stock into which such Shares have been
converted) even if they do not execute such consent, each future holder of all
such securities and the Company. No waivers of or exceptions to any term,
condition or provision of this Agreement, in any one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of any such term,
condition or provision.
10.12. Pronouns. Whenever the context may require, any
pronouns used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural, and vice versa.
10.13. Counterparts; Facsimile Signatures. This Agreement may
be executed in any number of counterparts, each of which shall be deemed to be
an original, and all of which shall constitute one and the same document. This
Agreement may be executed by facsimile signatures.
10.14. Section Headings. The section headings are for the
convenience of the parties and in no way alter, modify, amend, limit, or
restrict the contractual obligations of the parties.
11. Definitions.
(a) For purposes of this Agreement, each of the
following defined terms is defined in the Section of this Agreement indicated
below:
Defined Term Section
------------ -------
Affiliate 10.1
Ancillary Agreements 3.1
Balance Sheet 3.9
Balance Sheet Date 3.9
CERCLA 3.22(a)
Certificate of Amendment 1.1
Closing 2
Closing Date 2
Code 3.11
Co-Sale Agreement 6.4(c)
Common Stock 1.3
Company Introduction
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25
Company Material Adverse Effect 3.1
Confidential Information 10.2
Environmental Law 3.22(a)
ERISA 3.19
Exchange Act 9.4
Financial Statements 3.9
GAAP 3.9
Governmental Entity 3.6
Intellectual Property 3.13(a)
Investor Rights Agreement 6.4(b)
Major Purchaser 8.2(d)
Materials of Environmental Concern 3.22(b)
Memorandum 3.2
Permits 3.21
Plan 3.25
Purchase Price 1.2
Purchaser Introduction
Restricted Shares 9.1
Rule 144A Information 9.4
Securities Act 3.4
Security Interest 3.6
Series A Preferred 1.1
Shares 1.2
Stockholders' Voting Agreement 6.4(a)
Telos 1.3
(b) Special Provisions Relating to Tudor. For
purposes of determining whether, for any provision hereof, the number of shares
of capital stock held by a Tudor Entity is sufficient to meet a required
threshold, such Tudor Entity shall be deemed to hold the number of shares of
capital stock issued or issuable upon conversion, exercise or exchange, directly
or indirectly, of any derivative securities held by such Tudor Entity and any of
its Affiliates and other Tudor Entities.
"Tudor Entity" or "Tudor Entities" means
each of the following: Tudor Private Equity Fund, L.P., Tudor Arbitrage
Partners, L.P., Tudor BVI Futures, Ltd., Raptor Global Fund, L.P., Raptor Global
Fund Ltd., Raptor Global Portfolio, Ltd., ALTAR Rock Fund, L.P. or any funds or
other investment vehicles or entities of which any of the foregoing entities are
Affiliates, or any Affiliate or Affiliated Group of Tudor Investment Corporation
and/or Tudor Global Trading, Inc.
"Affiliate", for the purposes of this
Section 11(b), shall have the same meaning as in Section 10.1 and shall also
include any entities for which a Tudor Entity or any of its Affiliates (as
defined in Section 10.1 above) serve as general partner and/or investment
advisor or in a similar capacity, and all mutual funds or other pooled
investment vehicles or entities under the control or management of such Tudor
Entity or the general partner or investment adviser thereof or any person in a
similar capacity, or any Affiliate (as defined in Section 10.1 above) of any of
them, or any Affiliates of any of the foregoing.
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26
"Affiliated Group" has the meaning given to
it in Section 1504 of the Internal Revenue Code of 1986, as amended, and in
addition includes any analogous combined, consolidated, or unitary group, as
defined under any applicable state, local, or foregoing income tax law.
COUNTERPART SIGNATURE PAGE TO SERIES A
CONVERTIBLE STOCK PURCHASE AGREEMENT
Executed as of the date first written above.
COMPANY:
Enterworks, Inc.
By:
PURCHASERS:
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27
EXHIBIT A
List of Purchasers
Name and Address No. of Shares of Aggregate
of Purchaser Series A Preferred Purchase Price
------------ ------------------ --------------
28
Exhibit E
Opinions of Counsel
[SUBJECT TO CUSTOMARY ASSUMPTIONS, QUALIFICATIONS AND EXCLUSIONS]
Xxx Xxxxxx, Esq. (General Counsel) to Enterworks
(a) The authorized capital stock of the Company
(immediately prior to the Closing) is as set forth in Section 3.2 of the
Agreement. All of the issued and outstanding shares of Common Stock have been
duly authorized and validly issued and are fully paid and nonassessable. To the
best of such counsel's knowledge, except as set forth in Exhibit C to the
Agreement or provided in the Agreement, (i) no subscription, warrant, option,
convertible security or other right (contingent or otherwise) to purchase or
acquire any shares of capital stock of the Company is authorized or outstanding,
(ii) the Company has no obligation (contingent or otherwise) to issue any
subscription, warrant, option, convertible security or other such right or to
issue or distribute to holders of any shares of its capital stock any evidences
of indebtedness or assets of the Company, and (iii) the Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any shares of its capital stock or any interest therein or to pay any dividend
or make any other distribution in respect thereof. No registration was required
under the Securities Act or under applicable state securities laws in connection
with the issuance and sale of the outstanding shares of capital stock of the
Company.
(b) The execution and delivery of the Agreement and
the Ancillary Agreements and the offer, issue and sale of the Shares thereunder
will not conflict with, or result in any breach of any of the terms, conditions,
or provisions of, or constitute a default under, the Certificate of
Incorporation or By-Laws of the Company, or any indenture, lease, agreement, or
other instrument known to such counsel to which the Company is a party or by
which it or any of its properties are bound, or any decree, judgment or order
specifically naming the Company and known to such counsel.
(c) Except as obtained and in effect at the Closing,
no consent, approval, order or authorization of, or registration, qualification,
designation, declaration, or filing with, any governmental authority (other than
filings required to be made after the Closing under applicable federal and state
securities laws, which filings shall be specified in such opinion) is required
on the part of the Company in connection with the execution and delivery of the
Agreement, or the offer, issue, sale and delivery of the Shares, or the other
transactions to be consummated at the Closing pursuant to the Agreement and the
Ancillary Agreements.
(d) To the best of such counsel's knowledge, except
as set forth in Exhibit C to the Agreement, there is no action, suit or
proceeding, or governmental inquiry or investigation, pending or threatened
against the Company which is likely to have a Company Material Adverse Effect.
Xxxx and Xxxx LLP (Special Counsel)
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has full corporate power and authority to conduct its business
as presently conducted, to enter into and perform the
29
Agreement and the Ancillary Agreements and to carry out the transactions
contemplated by the Agreement and the Ancillary Agreements.
(b) The Shares, and the shares of Common Stock
issuable upon conversion of the Shares, have been duly authorized and reserved
for issuance by all necessary corporate and stockholder action on the part of
the Company; and the Shares, when issued, sold and delivered against payment
therefor in accordance with the provisions of the Agreement, and the shares of
Common Stock issuable upon conversion of the Shares, when issued upon such
conversion, will be duly and validly issued, fully paid and non-assessable.
(c) The execution, delivery and performance by the
Company of the Agreement and the Ancillary Agreements have been duly authorized
by all necessary corporate action and the Agreement and the Ancillary Agreements
have been duly executed and delivered by the Company. The Agreement and the
Ancillary Agreements constitute the valid and binding obligations of the
Company, enforceable in accordance with their respective terms.
Xxxxxxx Xxxxxxxx, Esq. (General Counsel to Telos)
[Opinion similar to the foregoing, as they apply to Telos]
