EXHIBIT 10.1
PURCHASE AGREEMENT
PURCHASE AGREEMENT (this "Agreement"), dated as of January __,
2002, by and between Level 8 Systems, Inc., a Delaware corporation having an
office at 0000 Xxxxxxx Xxxxxxx, Xxxx, Xxxxx Xxxxxxxx 00000 ("Company") and MLBC,
Inc. corporation having an office at 000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000
("Purchaser").
W I T N E S S E T H :
WHEREAS, Company has agreed to issue and sell to Purchaser,
and Purchaser has agreed to purchase from Company, upon the terms and conditions
hereinafter provided 250,000 shares of Company's common stock, $0.001 par value
per share (the "Common Stock");
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, it is agreed as follows:
I. DEFINITIONS
"Affiliate" shall mean, with respect to any Person, (i) each
Person that, directly or indirectly, owns or controls, whether beneficially, or
as a trustee, guardian or other fiduciary, 5% or more of the Stock having
ordinary voting power in the election of directors of such Person, (ii) each
Person that controls, is controlled by or is under common control with such
Person or any Affiliate of such Person, (iii) each of such Person's officers,
directors, joint venturers and partners, (iv) any trust or beneficiary of a
trust of which such Person is the sole trustee or (v) any lineal descendants,
ancestors, spouse or former spouses (as part of a marital dissolution) of such
Person (or any trust for the benefit of such Person). For the purpose of this
definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise. An "Affiliate" for purposes of Purchaser shall include Xxxxxxx Xxxxx
& Co. Foundation, Inc.
"Amended and Restated PCA Shell License Agreement" shall mean
that License Agreement between Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated, a Delaware corporation ("Xxxxxxx Xxxxx"), and Company,
substantially in the form attached hereto as Exhibit A, whereby Xxxxxxx Xxxxx
shall xxxxx a license to Company under Xxxxxxx Xxxxx'x copyrights and patents to
incorporate the so-called PCA Shell user interface/infrastructure technology
into Company's products.
"Amended and Restated Registration Rights Agreement" shall
mean the Registration Rights Agreement by and between Company and Purchaser,
substantially in the form attached hereto as Exhibit B, as such agreement may be
amended, supplemented or otherwise modified from time to time in accordance with
the terms thereof.
"Balance Sheet" shall have the meaning set forth in Section
4.6(a) hereof.
"Business Day" shall mean any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
"Capital Expenditures" shall mean all payments for any fixed
assets or improvements or for replacements, substitutions or additions thereto,
that have a useful life of more than one year and which are required to be
capitalized under GAAP.
"Capital Lease" shall mean, with respect to any Person, any
lease of any property (whether real, personal or mixed) by such Person as lessee
that, in accordance with GAAP, either would be required to be classified and
accounted for as a capital lease on a balance sheet of such Person or otherwise
be disclosed as a capital lease in a note to such balance sheet, other than, in
the case of Company or a Subsidiary of Company, any such lease under which
Company or such Subsidiary is the lessor.
"Capital Lease Obligation" shall mean, with respect to any
Capital Lease, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in respect
of such Capital Lease or otherwise be disclosed in a note to such balance sheet.
"Charges" shall mean all federal, state, county, city,
municipal, local, foreign or other governmental (including, without limitation,
PBGC) taxes at the time due and payable, levies, assessments, charges, liens,
claims or encumbrances upon or relating to (i) Company's or any of its
Subsidiaries' employees, payroll, income or gross receipts, (ii) Company's or
any of its Subsidiaries' ownership or use of any of its assets, or (iii) any
other aspect of Company's or any of the Subsidiaries' business.
"Cicero Trademark License Agreement" shall mean that certain
License Agreement by and between Company and Xxxxxxx Xxxxx, substantially in the
form attached hereto as Exhibit C, as such agreement may be amended,
supplemented or otherwise modified from time to time.
"Closing" shall have the meaning set forth in Section 2.3
hereof.
"Closing Date" shall have the meaning set forth in Section 2.3
hereof.
"COBRA" shall have the meaning set forth in Section 4.18(m)
hereof.
"Common Stock" shall have the meaning set forth in the
recitals hereto.
"EBITDA" shall mean the consolidated operating income (before
extraordinary items, interest, taxes, depreciation and amortization) of such
Person and its consolidated Subsidiaries determined in accordance with GAAP.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974 (or any successor legislation thereto), as amended from time to time and
any regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to Company, any
trade or business (whether or not incorporated) under common control with
Company and which, together with Company, are treated as a single employer
within the meaning of Sections 414(b), (c), (m) or (o) of the IRC, excluding
Purchaser and each other person which would not be an ERISA Affiliate if
Purchaser did not own any issued and outstanding shares of Stock of Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and all rules and regulations promulgated thereunder.
"Financials" shall mean the financial statements (including
the notes thereto) referred to in Section 4.6(a) hereof.
"Fiscal Year" shall mean the twelve month period ending
December 31.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guaranteed Indebtedness" shall mean, as to any Person, any
obligation of such Person guaranteeing any Indebtedness, lease, dividend, or
other obligation ("primary obligations") of any other Person (the "primary
obligor") in any manner including, without limitation, any obligation or
arrangement of such Person (a) to purchase or repurchase any such primary
obligation, (b) to advance or supply funds (i) for the purchase or payment of
any such primary obligation or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet condition of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (d) to indemnify the owner of such
primary obligation against loss in respect thereof.
"Indebtedness" of any Person shall mean (i) all indebtedness
of such Person for borrowed money or for the deferred purchase price of property
or services (including, without limitation, reimbursement and all other
obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured, but not including obligations to trade
creditors incurred in the ordinary course of business), (ii) all obligations
evidenced by notes, bonds, debentures or similar instruments, (iii) all
indebtedness created or arising under any conditional sale or other title
retention agreements with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (iv)
all Capital Lease Obligations, (v) all Guaranteed Indebtedness, (vi) all
Indebtedness referred to in clause (i), (ii), (iii), (iv) or (v) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including, without limitation, accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness and (vii) all liabilities under Title IV of ERISA.
"IRC" shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereto.
"IRS" shall mean the Internal Revenue Service, or any
successor thereto.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest as to assets owned by the relevant Person under the Uniform
Commercial Code or comparable law of any jurisdiction).
"Master License Agreement" shall mean that certain Master
License Agreement, dated October 24, 1996, between Xxxxxxx Xxxxx, and Seer
Technologies, Inc., a Delaware corporation and predecessor-in-interest to
Company.
"Material Adverse Effect" shall mean material adverse effect
on the business, assets, operations, prospects (insofar as can reasonably be
forseen) or financial or other condition of Company and its Subsidiaries, if
any, taken as a whole.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA, and to which Company, any of its
Subsidiaries or any ERISA Affiliate is making, is obligated to make, has made or
been obligated to make, contributions on behalf of participants who are or were
employed by any of them.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any successor thereto.
"Pension Plan" shall have the meaning set forth in Section
4.18(a) hereof.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
entity or government (whether
federal, state, county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, agency, body or department thereof).
"Plan" shall have the meaning set forth in Section 4.18(a)
hereof.
"Royalty Termination Agreement" shall mean the Termination of
License, Development and Royalty Agreement by and between Xxxxxxx Xxxxx and
StarQuest Software, Inc., substantially in the form attached hereto as Exhibit
D, as such agreement may be amended, supplemented or otherwise modified from
time to time.
"Rule 144" shall have the meaning set forth in Section 3.7.
"SEC" shall mean the U.S. Securities and Exchange Commission,
or any successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and all rules and regulations promulgated thereunder.
"Stock" shall mean all shares, options, warrants, general or
limited partnership interests, limited liability company membership interest,
participations or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or equivalent entity whether
voting or nonvoting, including, without limitation, common stock, preferred
stock, or any other "equity security" (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the SEC under the Exchange
Act).
"Stockholders Agreement" shall mean that certain Stockholders
Agreement dated hereof, by and among Company, Purchaser and those stockholders
of Company set forth on Annex I thereto, as such agreement may be amended,
supplemented or otherwise modified from time to time.
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of more than fifty (50%) percent of the
outstanding Stock having ordinary voting power to elect a majority of the board
of directors of such corporation (irrespective of whether, at the time, Stock of
any other class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time, directly or
indirectly, owned legally or beneficially by such Person and/or one or more
Subsidiaries of such Person, and (b) any partnership or other entity in which
such Person and/or one or more Subsidiaries of such Person shall have an
interest (whether in the form of voting or participation in profits or capital
contribution) of more than fifty (50%) percent.
"Transaction Documents" shall mean this Agreement, the Amended and
Restated Registration Rights Agreement, the Amended and Restated PCA Shell
License Agreement, the Cicero Trademark License Agreement, the Royalty
Termination
Agreement and any other certificates or additional documents to be delivered in
connection with the transactions contemplated hereunder.
"Welfare Plan" shall mean any welfare plan, as defined in Section 3(1)
of ERISA, which is maintained or contributed to by Company, any of its
Subsidiaries or any ERISA Affiliate.
References to this "Agreement" shall mean this Purchase Agreement,
including all amendments, modifications and supplements and any exhibits or
schedules to any of the foregoing, and shall refer to the Agreement as the same
may be in effect at the time such reference becomes operative.
Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given such term
in accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
consistently applied. That certain terms or computations are explicitly modified
by the phrase "in accordance with GAAP" shall in no way be construed to limit
the foregoing. The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole, including the Exhibits and
Schedules hereto, as the same may from time to time be amended, modified or
supplemented, and not to any particular section, subsection or clause contained
in this Agreement. Wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, the feminine and the neuter.
II. THE PURCHASE OF COMMON STOCK
2.1. Authorization of Issue. Prior to the Closing, Company shall have
duly authorized the issuance and sale to Purchaser of the number of shares of
Common Stock set forth in Section 2.2 below.
2.2. Purchase of Common Stock. Subject to the terms and conditions set
forth in this Agreement, Purchaser agrees to subscribe for and purchase from
Company, and Company agrees to issue and sell to Purchaser, on the Closing Date
an aggregate of 250,000 shares of Common Stock. The consideration for the
aggregate number of shares of Common Stock subscribed for by Purchaser shall
consist of Xxxxxxx Xxxxx'x grant of a license to Company, with certain rights to
sublicense thereunder, pursuant to the Amended and Restated PCA Shell License
Agreement.
2.3. Closing. (a) The closing of the purchase and sale of the Common
Stock (the "Closing") shall take place within five (5) Business Days after the
satisfaction or waiver of the conditions set forth in Article VI hereof or such
date and time as shall be mutually agreed to by the parties hereto (the "Closing
Date") at the offices of Weil, Gotshal & Xxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx, or such other place as shall be mutually agreed to by the parties
hereto.
(b) Subject to the satisfaction (or waiver) of the conditions
set forth in Article VI hereof, on the Closing Date, Company will deliver to
Purchaser certificate(s) representing the Common Stock to be purchased by
Purchaser, registered in such names and in such denominations as Purchaser
requests, provided, however, that any Person designated by Purchaser to receive
such Common Stock shall be an Affiliate of Purchaser, against delivery by
Xxxxxxx Xxxxx of the Amended and Restated PCA Shell License Agreement, duly
executed by Xxxxxxx Xxxxx.
III. PURCHASER'S REPRESENTATIONS
Purchaser makes the following representations and warranties
to Company, each and all of which shall survive the execution and delivery of
this Agreement and the Closing hereunder:
3.1. Investment Intention. Purchaser is purchasing the Common Stock for
its own account, for investment purposes and not with a view to the distribution
thereof. Purchaser will not, directly or indirectly, offer, transfer, sell,
assign, pledge, hypothecate or otherwise dispose of any of the Common Stock (or
solicit any offers to buy, purchase, or otherwise acquire any of the Common
Stock), except in compliance with the Securities Act.
3.2. Accredited Investor. Purchaser is an "accredited investor" (as that
term is defined in Rule 501 of Regulation D under the Securities Act) and by
reason of its business and financial experience, it has such knowledge,
sophistication and experience in business and financial matters as to be capable
of evaluating the merits and risks of the prospective investment, is able to
bear the economic risk of such investment and is able to afford a complete loss
of such investment.
3.3. Corporate Existence. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation.
3.4. Corporate Power; Authorization; Enforceable Obligations. The
execution, delivery and performance by Purchaser of this Agreement and the other
Transaction Documents to be executed by it: (i) are within Purchaser's corporate
power; (ii) have been duly authorized by all necessary corporate action; (iii)
are not in contravention of any provision of Purchaser's certificate of
incorporation or by-laws; and (iv) will not violate any law or regulation, or
any order or decree of any court or governmental instrumentality binding on
Purchaser. This Agreement and the other Transaction Documents to which Purchaser
is a party have each been duly executed and delivered by Purchaser and
constitute the legal, valid and binding obligations of Purchaser, enforceable
against it in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally, and subject, as
to enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
3.5. Reliance on Exemptions. Purchaser understands that the shares of
Common Stock are being offered and sold to it in reliance on specific exemptions
from the registration requirements of Securities Act and applicable state
securities laws and that Company is relying in part upon the truth and accuracy
of the representations and warranties of Purchaser set forth in this Article III
in order to determine the availability of such exemptions and the eligibility of
Purchaser to acquire the Common Stock.
3.6. Information. Purchaser and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of Company and materials relating to the offer and sale of the securities which
have been requested by Purchaser. Purchaser and its advisors, if any, have been
afforded the opportunity to ask questions of Company. Neither such inquiries nor
any other due diligence investigations conducted by Purchaser or its advisors,
if any, or its representatives shall modify, amend or affect in any way
Purchaser's right to rely on Company's representations and warranties contained
in this Agreement.
3.7. Transfer or Resale. Purchaser acknowledges that except as provided
in this Agreement or the Amended and Restated Registration Rights Agreement: (i)
the Common Stock has not been registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (A) subsequently registered thereunder, (B) Purchaser shall have
delivered to Company an opinion (which shall be satisfied by delivery of an
opinion from in-house counsel) in form reasonably satisfactory to Company, to
the effect that the Common Stock can be sold, assigned or transferred pursuant
to an available exemption under the Securities Act or (C) Purchaser provides
Company with reasonable assurances that such Common Stock can be sold, assigned
or transferred pursuant to Rule 144 promulgated under the Securities Act (or any
successor thereto)("Rule 144"); (ii) any sale of the Common Stock made in
reliance on Rule 144 may be made only in accordance with the provisions of Rule
144; and (iii) neither Company nor any other Person is under any obligation to
register the Common Stock under the Securities Act or any state securities laws
or to comply with the terms and conditions of any exemption thereunder.
Notwithstanding the foregoing, the Common Stock may be (i) pledged in connection
with a bona fide margin account or other loan secured by the Common Stock and
(ii) transferred, in whole or in part, to any Affiliate of Purchaser.
3.8. Legends. Purchaser understands that the certificates or other
instruments representing the Common Stock and, until such time as the sale of
such Common Stock has been registered under the Securities Act or may be sold
pursuant to an available exemption under the Securities Act, the stock
certificates representing such Common Stock, except as set forth below, shall
bear a restrictive legend in the following form (and a stop-transfer order may
be placed against transfer of such stock certificates):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"1933 ACT"), OR APPLICABLE STATE
SECURITIES LAWS. SUCH SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR SUCH SECURITIES UNDER THE 1933 ACT, OR APPLICABLE STATE
SECURITIES LAWS, AN OPINION OF COUNSEL, REASONABLY SATISFACTORY
TO THE ISSUER, THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933
ACT, OR APPLICABLE STATE SECURITIES LAW OR UNLESS SOLD PURSUANT
TO RULE 144 UNDER THE 1933 ACT. NOTWITHSTANDING THE FOREGOING,
SUCH SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES."
The legend set forth above shall be removed and Company shall
issue a certificate without such legend to the holder of the Common Stock if (i)
such Common Stock is registered for sale under the Securities Act, (ii) such
holder provides Company with an opinion of counsel (which shall be satisfied by
delivery of an opinion from in-house counsel), in a form reasonably satisfactory
to Company, to the effect that a public sale, assignment or transfer of the
Common Stock may be made without registration under the Securities Act or (iii)
such holder provides Company with reasonable assurances that the Common Stock
can be sold pursuant to Rule 144.
IV. COMPANY'S REPRESENTATIONS AND WARRANTIES
Company makes the following representations and warranties to
Purchaser, each and all of which shall survive the execution and delivery of
this Agreement and the Closing hereunder:
4.1. Authorized and Outstanding Shares of Capital Stock. After giving
effect to the Closing, the authorized capital stock of Company as of November
30, 2001 consists of 40,000,000 shares of Common Stock, $0.001 par value per
share, of which 16,174,825 shares are issued and outstanding, and 10,000,000
shares of Preferred Stock, $0.001 par value per share, of which 11,570 shares of
Series A1 Convertible Redeemable Preferred Stock are issued and outstanding and
30,000 shares of Series B1 Convertible Redeemable Preferred Stock are issued and
outstanding. All of such issued and outstanding shares are validly issued, fully
paid and non-assessable. Except as set forth on Schedule 4.1, (i) there is no
existing option, warrant, call, commitment or other agreement to which Company
is a party requiring, and there are no convertible securities of Company
outstanding which upon conversion would require, the issuance of any additional
shares of Stock of Company or other securities convertible into shares of
equity securities of Company, other than the Common Stock, and (ii) there are no
agreements to which Company is a party or, to the knowledge of Company, to which
any stockholder or warrant holder of Company is a party, with respect to the
voting or transfer of the Stock of Company or with respect to any other aspect
of Company's affairs, other than the Stockholders Agreement. Except as set forth
on Schedule 4.1, there are no stockholders' preemptive rights or rights of first
refusal or other similar rights with respect to the issuance of Stock by
Company, other than pursuant to the Transaction Documents. True and correct
copies of the certificate of incorporation and by-laws of Company on effect on
the date hereof have been delivered to Purchaser.
4.2. Authorization and Issuance of Common Stock. The issuance of the
Common Stock has been duly authorized by all necessary corporate action on the
part of Company and, upon delivery to Purchaser of certificate(s) therefor
against payment in accordance with the terms hereof, the Common Stock (i) will
have been validly issued and fully paid and non-assessable, (ii) will be free
and clear of all pledges, liens, encumbrances and preemptive rights and (iii)
assuming that the representations of Purchaser in Article III are true and
correct, will have been issued in compliance with all applicable federal and
state securities laws, as presently in effect.
4.3. Corporate Existence; Compliance with Law. Company and each of its
Subsidiaries, if any, (i) is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware in the case of Company
and as set forth on Schedule 4.4 in the case of its Subsidiaries; (ii) is duly
qualified as a foreign corporation and in good standing under the laws of each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification (except for jurisdictions in which such
failure to so qualify or to be in good standing would not have a Material
Adverse Effect); (iii) has the requisite corporate power and authority and the
legal right to own, pledge, mortgage or otherwise encumber and operate its
properties, to lease the property it operates under lease, and to conduct its
business as now being conducted; (iv) has, or has applied for, all material
licenses, permits, consents or approvals from or by, and has made all material
filings with, and has given all material notices to, all Governmental
Authorities having jurisdiction, to the extent required for such ownership,
operation and conduct; (v) is in compliance with its certificate or articles of
incorporation and by-laws; and (vi) is in compliance with all applicable
provisions of law, except for such non-compliance which would not have a
Material Adverse Effect.
4.4. Subsidiaries. There currently exist no Subsidiaries of Company
other than as set forth on Schedule 4.4 hereto, which sets forth such
Subsidiaries, together with their respective jurisdictions of organization, and
the authorized and outstanding capital Stock of each such Subsidiary, by class
and number and percentage of each class owned by Company or a Subsidiary of
Company or any other Person. There are no options, warrants, rights to purchase
or similar rights covering capital Stock for any such Subsidiary.
4.5. Corporate Power; Authorization; Enforceable Obligations. The
execution, delivery and performance by Company of this Agreement, the other
Transaction Documents to which it is a party and all instruments and documents
to be delivered by Company, the issuance and sale of the Common Stock and the
consummation of the other transactions contemplated by any of the foregoing: (i)
are within Company's corporate power and authority; (ii) have been duly
authorized by all necessary or proper corporate action; (iii) are not in
contravention of any provision of Company's certificate of incorporation or
by-laws; (iv) will not violate any law or regulation, or any order or decree of
any court or governmental instrumentality; (v) will not conflict with or result
in the breach or termination of, constitute a default under or accelerate any
performance required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which Company or any of its Subsidiaries is a
party or by which Company, any of its Subsidiaries or any of their property is
bound; (vi) will not result in the creation or imposition of any Lien upon any
of the property of Company or any of its Subsidiaries; and (vii) do not require
the consent or approval of, or any filing with, any Governmental Authority or
any other Person (except (A) for those filings required by the Amended and
Restated Registration Rights Agreement, (B) the Form D (referred to in Section
5.1(j) below), and (C) to the extent previously obtained or made). At or prior
to the Closing Date, each of this Agreement and the other Transaction Documents
shall have been duly executed and delivered by Company and each shall then
constitute a legal, valid and binding obligation of Company, enforceable against
it in accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
4.6. Financial Statements. (a) The audited consolidated balance sheet of
Company as at December 31, 2000, and the related consolidated statements of
income and cash flows for the year then ended, with the opinion thereon of
Deloitte & Touche ("D&T"), and the unaudited consolidated balance sheet of
Company as at November 30, 2001 (the "Balance Sheet") and the related unaudited
consolidated statements of income and cash flows for the three months then
ended, copies of which have previously been delivered to Purchaser, have been,
except as noted therein, prepared in conformity with GAAP consistently applied
throughout the periods involved and present fairly in all material respects the
consolidated financial position of Company as at the dates thereof, and the
consolidated results of its operations and cash flows for the periods then
ended, subject, in the case of the interim financial statements, to normal
year-end audit adjustments.
(b) Except as set forth on Schedule 4.6, neither Company nor any of its
Subsidiaries has any material obligations, contingent or otherwise, including,
without limitation, liabilities for Charges, long-term leases or unusual forward
or long-term commitments which are not reflected in the Financials, other than
those incurred since December 31, 2000, in the ordinary course of business.
(c) Except as set forth on Schedule 4.6, no dividends or other
distributions have been declared, paid or made upon any shares of capital Stock
of
Company, nor have any shares of capital Stock of Company been redeemed, retired,
purchased or otherwise acquired for value by Company since December 31, 2000.
4.7. S-3 Eligibility. As of the Closing Date, the Company is eligible to
file a form S-3 registration statement with respect to a sale of stock by any
stockholder.
4.8. SEC Filings. (a) Company has filed all required reports, schedules,
forms, statements and other documents with the Securities and Exchange
Commission (the "SEC") since December 31, 1998 (the "Company SEC Documents").
(b) As of its filing date, except as expressly set forth on Schedule 4.8,
each Company SEC Document filed pursuant to the Exchange Act (i) did not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except to the extent
that such statements have been modified or superseded by a later filed Company
SEC Document, (ii) complied in all material respects with the Exchange Act and
(iii) was filed with the SEC in a timely manner.
(c) Each Company SEC Document that is a registration statement, as amended
or supplemented, if applicable, filed pursuant to the Securities Act as of the
date such registration statement or amendment became effective (i) did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, except to the extent that such statements have been modified or
superseded by a later filed Company SEC Document and (ii) complied in all
material respects with the Securities Act.
4.9. Absence of Certain Changes. Except as disclosed in Company SEC
Documents filed prior to the date of this Agreement or as disclosed on Schedule
4.9, since December 31, 2000, Company and its Subsidiaries have conducted their
business in the ordinary course consistent with past practice and there has not
been:
(a) any event, occurrence, development change or circumstance which has
had, or would reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Company;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Company, or any
repurchase, redemption or other acquisition by Company or any of its
Subsidiaries of any amount of outstanding shares of capital stock or other
equity securities of, or other ownership interests in, Company or any of its
Subsidiaries;
(c) any amendment of any term of any outstanding security of Company or any
of its Subsidiaries that would materially increase the obligations of Company or
such Subsidiary under such security;
(d) (x) any incurrence or assumption by Company or any of its Subsidiaries
of any indebtedness for borrowed money other than under existing credit
facilities (or any renewals, replacements or extensions that do not increase the
aggregate commitments thereunder) (A) in the ordinary course of business
consistent with past practice (it being understood that any indebtedness
incurred prior to the date hereof in respect of Capital Expenditures shall be
considered to have been in the ordinary course of business consistent with past
practice) or (B) in connection with any acquisition or capital expenditure or
(y) any guarantee, endorsement or other incurrence or assumption of liability
(whether directly, contingently or otherwise) by Company or any of its
Subsidiaries for the obligations of any other person (other than any wholly
owned Subsidiary of Company), other than in the ordinary course of business
consistent with past practice;
(e) any creation or assumption by Company or any of its Subsidiaries of any
consensual Lien on any material asset of Company or any of its Subsidiaries
other than in the ordinary course of business consistent with past practice;
(f) any making of any loan, advance or capital contribution to or
investment in any person by Company or any of its Subsidiaries other than (i)
loans, advances or capital contributions to or investments in wholly-owned
Subsidiaries of Company or (ii) loans or advances to employees of Company or any
of its Subsidiaries made in the ordinary course of business consistent with past
practice;
(g) any material change in any method of accounting or accounting
principles or practice by Company or any of its Subsidiaries, except for any
such change required by reason of a change in GAAP; or
(h) any (i) grant of any severance or termination pay to any director,
officer or employee of Company or any of its Subsidiaries, (ii) entering into of
any employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or employee
of Company or any of its Subsidiaries, (iii) increase in benefits payable under
any existing severance or termination pay policies or employment agreements or
(iv) increase in compensation, bonus or other benefits payable to directors,
officers or employees of Company or any of its Subsidiaries other than, in the
case of clause (iv) only, increases prior to the date hereof in compensation,
bonus or other benefits payable to employees of Company or any of its
Subsidiaries in the ordinary course of business consistent with past practice or
merit increases in salaries of employees at regularly scheduled times in
customary amounts consistent with past practices.
4.10. No Undisclosed Material Liabilities. There have been no liabilities
or obligations (whether pursuant to contracts or otherwise) of any kind
whatsoever incurred by Company or any of its Subsidiaries since December 31,
2000, whether accrued, contingent, absolute, determined, determinable or
otherwise, other than:
(a) liabilities or obligations disclosed or provided for in Company's
Financials or in Company SEC Documents filed prior to the date hereof;
(b) liabilities or obligations which, individually and in the aggregate,
have not had and would not have a Material Adverse Effect on Company; or
(c) liabilities or obligations under this Agreement.
4.11. Environmental Matters. Except as set forth on Schedule 4.11, Company
and its Subsidiaries (i) are in compliance in all material respects with any and
all applicable foreign, federal, state and local laws and regulations relating
to the protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental Laws"),
(ii) have received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses as
now conducted, except where the failure to receive such permits, licenses or
approvals would not, individually or in the aggregate, have a Material Adverse
Effect and (iii) are in compliance with all terms and conditions of any such
permit, license or approval, except where the failure to be in compliance would
not, individually or in the aggregate, have a Material Adverse Effect.
4.12. Employee Relations. Neither Company nor any of its Subsidiaries is
involved in any union labor dispute nor, to the knowledge of Company or any of
its Subsidiaries, is any such dispute threatened. Except as disclosed in
Schedule 4.12, none of Company's or its Subsidiaries' employees is a member of a
union, neither Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and Company and its Subsidiaries believe that their
relations with their employees are good. Except as disclosed in Schedule 4.12,
no executive officer (as defined in Rule 501(f) of the Securities Act) has
notified Company's Board of Directors that such officer intends to leave Company
or otherwise terminate such officer's employment with Company and Company does
not have any plans or otherwise expect to terminate any such officer during the
six months following the date of this Agreement.
4.13 Taxes. Except as set forth on Schedule 4.13, all federal, state, local
and foreign tax returns, reports and statements required to be filed by Company
and its Subsidiaries have been timely filed with the appropriate Governmental
Authority and all such returns, reports and statements are true, correct and
complete in all material respects. All Charges and other impositions shown or
determined to be due for the periods covered by such returns, reports and
statements have been paid prior to the date on which any fine, penalty, interest
or late charge may be added thereto for nonpayment thereof, or any such fine,
penalty, interest, late charge or loss has been paid. Proper and accurate
amounts have been withheld by Company and its Subsidiaries from its
employees for all periods in compliance in all material respects with the tax,
social security and unemployment withholding provisions of applicable federal,
state, local and foreign law and such withholdings have been timely paid to the
respective governmental agencies. Neither Company nor any of its Subsidiaries
has executed or filed with the IRS or any other Governmental Authority any
agreement or other document extending, or having the effect of extending, the
period for assessment or collection of any Charges. No tax audits or other
administrative or judicial proceedings are pending or to the knowledge of
Company threatened with regard to any Charges for which Company or any
Subsidiary may be liable and, to the knowledge of Company, no assessment of
Charges is proposed against Company or any Subsidiary. Neither Company nor any
of its Subsidiaries has filed a consent pursuant to IRC Section 341(f) or agreed
to have IRC Section 341(f)(2) apply to an dispositions of subsection (f) assets
(as such term is defined in IRC Section 341(f)(4)). None of the property owned
by Company or any of its Subsidiaries is property which such company is required
to treat as being owned by any other Person pursuant to the provisions of
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended, and in
effect immediately prior to the enactment of the Tax Reform Act of 1986 or is
"tax-exempt use property" within the meaning of IRC Section 168(h). Neither
Company nor any of its Subsidiaries has agreed or has been requested to make any
adjustment under IRC Section 481(a) by reason of a change in accounting method
or otherwise. Neither Company nor any of its Subsidiaries has any obligation
under any written tax sharing agreement.
4.14. No Litigation. Except as disclosed on Schedule 4.14, no action, claim
or proceeding is now pending or, to the knowledge of Company or its
Subsidiaries, threatened against Company or any of its Subsidiaries, at law, in
equity or otherwise, before any court, board, commission, agency or
instrumentality of any federal, state, or local government or of any agency or
subdivision thereof, or before any arbitrator or panel of arbitrators.
4.15. Brokers. Except as set forth on Schedule 4.15, no broker or finder
acting on behalf of Company or any of its Subsidiaries brought about the
consummation of the transactions contemplated pursuant to this Agreement and
neither Company nor any of its Subsidiaries has any obligation to any Person in
respect of any finder's or brokerage fees (or any similar obligation) in
connection with the transactions contemplated by this Agreement. Company is
solely responsible for the payment of all such finder's or brokerage fees.
4.16. Employment Agreements. Except as set forth on Schedule 4.16, there
are no employment, consulting or management agreements covering management of
Company or any of its Subsidiaries.
4.17. Patents, Trademarks, Copyrights and Licenses. Company and each of its
Subsidiaries owns (or, with respect to the patents listed on Schedule 4.17(a),
possesses all necessary rights to such patents or valid licenses covering such
patents) all licenses, patent applications, copyrights, service marks,
trademarks and registrations and applications for registration thereof, and
trade names necessary to continue to conduct its
business as heretofore conducted by it and now being conducted by it,
each of which is listed, together with Patent and Trademark Office or Copyright
4.17. Office application or registration numbers, where applicable, on Schedule
4.17(b) hereto. To Company's knowledge, Company and each of its Subsidiaries
conducts its businesses without infringement or claim of infringement of any
license, patent, copyright, service xxxx, trademark, trade name, trade secret or
other intellectual property right of others, except as set forth on Schedule
4.17(c) hereto. To Company's knowledge, there is no infringement by others of
any license, patent, copyright, service xxxx, trademark, trade name, trade
secret or other intellectual property right of Company or any of its
Subsidiaries, except as set forth on Schedule 4.17(d) hereto.
4.18. ERISA. (a) Schedule 4.18 sets forth: (i) all "employee benefit
plans", as defined in Section 3(3) of ERISA, and any other employee benefit
arrangements or payroll practices, including, without limitation, severance pay,
sick leave, vacation pay, salary continuation for disability, consulting or
other compensation agreements, retirement, deferred compensation, bonus, stock
purchase, hospitalization, medical insurance, life insurance and scholarship
programs (the "Plans") maintained by Company and any of its Subsidiaries or to
which Company or and of its Subsidiaries contributed or is obligated to
contribute thereunder, and (ii) all "employee pension plans", as defined in
Section 3(2) of ERISA (the "Pension Plans"), maintained by Company, any of its
Subsidiaries or any of its ERISA Affiliates to which Company, any of its
Subsidiaries or any of its ERISA Affiliates contributed or is obligated to
contribute thereunder.
(b) Purchaser will not have (i) any obligation to make any contribution to
any Multiemployer Plan or (ii) any withdrawal liability from any such
Multiemployer Plan under Section 4201 of ERISA which it would not have had if it
had not purchased the Common Stock from Company at the Closing in accordance
with the terms of this Agreement.
(c) The Pension Plans intended to be qualified under Section 401 of the IRC
are so qualified and the trusts maintained pursuant thereto are exempt from
federal income taxation under Section 501 of the IRC, and nothing has occurred
with respect to the operation of the Pension Plans which could cause the loss of
such qualification or exemption or the imposition of any liability, penalty, or
tax under ERISA or the IRC.
(d) All contributions required by law or pursuant to the terms of the Plans
(without regard to any waivers granted under Section 412 of the IRC) to any
funds or trusts established thereunder or in connection therewith have been made
by the due date thereof (including any valid extension) and no accumulated
funding deficiencies exist in any of the Pension Plans.
(e) There is no "amount of unfunded benefit liabilities" as defined in
Section 4001(a)(18) of ERISA in any of the respective Pension Plans. Each of the
respective Pension Plans are fully funded in accordance with the actuarial
assumptions
used by the PBGC to determine the level of funding required in the event of
the termination of the Pension Plan and all benefit liabilities do not exceed
the assets of such Pension Plans.
(f) There has been no "reportable event" as that term is defined in
Section 4043 of ERISA and the regulations thereunder with respect to the Pension
Plans which would require the giving of notice, or any event requiring
disclosure under Sections 4041(c)(3)(C), 4063(a) or 4068(f) of ERISA.
(g) There is no material violation of ERISA with respect to the filing
of applicable reports, documents, and notices regarding the Plans with the
Secretary of Labor and the Secretary of the Treasury or the furnishing of such
documents to the participants or beneficiaries of the Plans.
(h) True, correct and complete copies of the following documents, with
respect to each of the Plans, have been made available or delivered to Purchaser
by Company: (A) any plans and related trust documents, and amendments thereto,
(B) the most recent Forms 5500 (including any schedules thereto) and the most
recent actuarial valuation report, if any, (C) the last IRS determination
letter, (D) summary plan descriptions and (E) written communications to
employees relating to the Plans.
(i) There are no pending actions, claims or lawsuits which have been
asserted or instituted or, to the knowledge of Company, asserted against the
Plans, the assets of any of the trusts under such Plans or the Plan sponsor or
the Plan administrator, or against any fiduciary of the Plans with respect to
the operation of such Plans (other than routine benefit claims), nor does
Company or any of its Subsidiaries have knowledge of facts which could form the
basis for any such claim or lawsuit.
(j) All amendments and actions required to bring the Plans into
conformity in all material respects with all of the applicable provisions of
ERISA and other applicable laws have been made or taken except to the extent
that such amendments or actions are not required by law to be made or taken
until a date after the Closing Date.
(k) The Plans have been maintained, in all material respects, in
accordance with their terms and with all provisions of ERISA (including rules
and regulations thereunder) and other applicable Federal and state law, and
neither Company nor any of its Subsidiaries or to the knowledge of Company, any
other "party in interest" or "disqualified person" with respect to the Plans has
engaged in a "prohibited transaction" within the meaning of Section 4975 of the
IRC or Section 406 of ERISA.
(l) None of Company, any of its Subsidiaries or any ERISA Affiliate has
terminated any Pension Plan, or incurred any outstanding liability under Section
4062 of ERISA to the PBGC, or to a trustee appointed under Section 4042 of
ERISA.
(m) None of Company, any of its Subsidiaries or any ERISA Affiliate
maintains retired life and retired health insurance plans which are Welfare
Plans and
which provide for continuing benefits or coverage for any participant or any
beneficiary of a participant except as may be required under the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") and at the
expense of the participant or the participant's beneficiary. Company, all of its
Subsidiaries and all ERISA Affiliates which maintains a Welfare Plan has
complied with the notice and continuation requirements of COBRA and the
regulations thereunder.
(n) None of Company, any of its Subsidiaries or any ERISA Affiliate has
contributed or been obligated to contribute to a Multiemployer Plan as of the
Closing.
(o) None of Company, any of its Subsidiaries or any ERISA Affiliate has
withdrawn in a complete or partial withdrawal from any Multiemployer Plan prior
to the Closing Date, nor has any of them incurred any liability due to the
termination or reorganization of a Multiemployer Plan.
(p) None of Company, any of its Subsidiaries, any ERISA Affiliate or
any organization to which Company is a successor or parent corporation, within
the meaning of Section 4069(b) of ERISA, has engaged in any transaction, within
the meaning of Section 4069 of ERISA.
4.19. Minute Books. The minute books of Company, as previously made
available to Purchaser, accurately reflect all formal corporate action of the
stockholders and Board of Directors of Company.
4.20. Private Offering. Company and all Persons acting on its behalf
have not made, directly or indirectly, and will not make, offers or sales of any
securities or solicited any offers to buy any security under circumstances that
would require registration of the Common Stock or the issuance of such
securities under the Securities Act. Subject to the accuracy and completeness of
the representations and warranties of Purchaser contained in Section 3.1, the
offer, sale and issuance by Company to Purchaser of the Common Stock are exempt
from the registration requirements of the Securities Act.
4.21. Listing Maintainance Requirements Compliance. The principal
market on which the Common Stock is currently traded is the NASDAQ National
Market System ("NASDAQ"). Except as disclosed on Schedule 4.21, Company has not
since December 31, 2000 received notice (written or oral) from NASDAQ (or any
stock exchange, market or trading facility on which the Common Stock is or has
been listed (or on which it has been quoted)) to the effect that Company is not
in compliance with the listing or maintenance requirements of such market or
exchange. After giving effect to the transactions contemplated by this Agreement
and the Transaction Documents, Company is and will be in compliance with all
such maintenance requirements.
4.22 Internal Accounting Controls. Company and its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or
specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with United States
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any difference.
4.23. Transactions with Affiliates. Except as set forth on Schedule 4.23
or the SEC Documents and other than the grant or exercise of stock options
disclosed on Schedule 4.1, none of the executive officers or directors of
Company is presently a party to any transaction with Company or any of its
Subsidiaries (other than for services as executive officers and directors)
involving an amount in excess of $60,000, including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of Company, any corporation, partnership, trust or entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.
4.24. Master License Agreement. With respect to the Master License
Agreement, (i) such agreement is legal, valid, binding, enforceable and in full
force and effect as of the date hereof, (ii) neither Company nor any of its
Subsidiaries is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default by, or permit
termination, modification, or acceleration, under such agreement; and (iii)
Company has not repudiated any provision of such agreement.
4.25. Insurance. Company has in full force and effect policies of
insurance covering matters customary for its industry, including without
limitation, directors and officers liability insurance, all in amounts customary
for its industry.
4.26. Full Disclosure. No information contained in this Agreement, any
other Transaction Document, the Financials or any written statement furnished by
or on behalf of Company pursuant to the terms of this Agreement contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein or therein not misleading in light of
the circumstances under which made.
V. COVENANTS
5.1. Covenants of Company. Company covenants and agrees that from and
after the date hereof (except as otherwise provided herein):
(a) Books and Records. Company shall, and shall cause its Subsidiaries to,
keep adequate records and books of account with respect to their business
activities, in which proper entries, reflecting all of their financial
transactions, are made in accordance with GAAP.
(b) Financial and Business Information
(i) Company will deliver to Purchaser as soon as practicable after the
end of each of the first three quarterly fiscal periods in each fiscal year of
Company, but in any event within forty five (45) days thereafter, (A) an
unaudited consolidated balance sheet of Company and its Subsidiaries, if any, as
at the end of such quarter, and (B) unaudited consolidated statements of income
and cash flows of Company and its Subsidiaries, if any, for such quarter and (in
the case of the second and third quarters) for the portion of the fiscal year
ending with such quarter, setting forth in comparative form in each case the
projected consolidated figures for such period and the actual consolidated
figures for the comparable period of the prior fiscal year. Such statements
shall be (1) prepared in accordance with GAAP consistently applied, (2) in
reasonable detail and (3) certified by the principal financial or accounting
officer of Company.
(ii) Company will deliver to Purchaser as soon as practicable after the
end of each Fiscal Year of Company, but in any event within ninety (90) days
thereafter, (A) an audited consolidated balance sheet of Company and its
Subsidiaries, if any, as at the end of such year, and (B) audited consolidated
statements of income and cash flows of Company and its Subsidiaries, if any, for
such year; setting forth in each case in comparative form the figures for the
previous year. Such statements shall be (1) prepared in accordance with GAAP
consistently applied, (2) in reasonable detail and (3) certified by D&T or
Company's current auditors or such other firm of independent certified public
accountants of recognized national standing selected by Company and reasonably
acceptable to Purchaser.
(iii) In lieu of its obligations under Sections 5.1(b)(i) and (ii)
above and so long as Company has a class of equity securities registered
pursuant to Section 12 of the Exchange Act, Company will file on or before the
required date all regular or periodic reports (pursuant to the Exchange Act)
required to be filed with the SEC pursuant to the Exchange Act and will deliver
to Purchaser promptly upon their becoming available (unless such reports are
available through the SEC's XXXXX system) one copy of each report, notice or
proxy statement sent by Company to its stockholders generally, and of each
regular or periodic report (pursuant to the Exchange Act) and any registration
statement, prospectus or written communication (other than transmittal letters)
(pursuant to the Securities Act), filed by Company with (i) the SEC or (ii) any
securities exchange on which shares of Common Stock of Company are listed.
(c) Reporting. Company will, so long as the shares of Common Stock are
outstanding and are "restricted securities" within the meaning of Rule 144(a)(3)
under the Securities Act, file reports and other information with the Commission
under Section 13 or 15(d) of the Exchange Act.
(d) Access to Information. Company covenants that it will permit Purchaser
and Purchaser's Affiliates, for so long as they own any shares of Common Stock
that, in the aggregate, represent at least twenty (20%) percent of the aggregate
shares purchased under the Agreement and the Original Purchase Agreement, dated
as of July 31, 2000, (the "Minimum Threshold"), and any Person acting in a
representative capacity on behalf of Purchaser and who is designated in writing
by Purchaser, to reasonably request and be furnished with such data, books and
records as Purchaser requests; provided, however, Purchaser shall be limited to
one (1) such request in any ninety (90) day period. Purchaser shall, and shall
cause any Person designated by them pursuant to the first sentence of this
Section 5.1(d) to, keep confidential all information furnished to, or made
available to, them pursuant to this Section 5.1(d), nor shall any of them use,
or permit any such Person to use, any such information for any purpose other
than to evaluate their investment in the shares of Common Stock; except that
Purchaser and such other holders shall have no obligation to keep confidential
information which is or becomes generally available to the public other than as
a result of a disclosure by Purchaser or any such other holders or their
representatives.
(e) Transactions with Stockholders and Affiliates. Except as to any
agreements contemplated by this Agreement, for so long as Purchaser and any
Purchaser Affiliates own shares of Common Stock that, in the aggregate,
represent at least the Minimum Threshold, Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, make loans, advances or
payments to, or sell, transfer or lease any assets or property to, any Person
who beneficially owns in the aggregate 5% or more of the voting securities of
Company or any Affiliate or Associate (as such terms are defined in the rules
and regulations under the Exchange Act) of Company.
(f) Lost, Stolen, Destroyed or Mutilated Stock Certificates. Upon receipt
of evidence reasonably satisfactory to Company of the loss, theft, destruction
or mutilation of any certificate for shares of Common Stock and, in the case of
loss, theft or destruction, upon delivery of an indemnity reasonably
satisfactory to Company (which may be an undertaking by a Purchaser to so
indemnify Company), or, in the case of mutilation, upon surrender and
cancellation thereof, Company will issue a new certificate of like tenor for a
number of shares of Common Stock equal to the number of shares of such stock
represented by the certificate lost, stolen, destroyed or mutilated.
(g) Stop Transfer Instruction. Company may not make any notation on its
records or give instructions to any transfer agent of Company which enlarge the
restrictions on transfer set forth in Section 3.7.
(h) Furnishing of Information. As long as Purchaser owns the Common Stock,
Company will cause the Common Stock to continue at all times to be registered
under Section 12 of the Exchange Act or subject to Section 15(d) of the Exchange
Act, will timely file (or obtain extensions in respect thereof and file within
the applicable grace period) all reports required to be filed by Company after
the date hereof pursuant to Section 13, 14 or 15(d) of the Exchange Act and will
not take any action or file any document (whether or not permitted by the
Exchange Act or the rules thereunder) to terminate or suspend such reporting and
filing obligations. As long as any Purchaser owns the Common Stock, if Company
is not required to file reports pursuant to Section 13(a) or 15(d) of the
Exchange Act, it will prepare and furnish to Purchaser and make
publicly available in accordance with Rule 144(c) promulgated under the
Securities Act annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and substance
substantially similar to those that would otherwise be required to be included
in reports required by Section 13(a) or 15(d) of the Exchange Act. Company
further covenants that it will take such further action as the holders of a
majority of the Common Stock may reasonably request, all to the extent required
from time to time to enable such Person to sell the Common Stock without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act, including the legal
opinion referenced above in Section 3.7. Upon the request of any such Person,
Company shall deliver to such Person a written certification of a duly
authorized officer as to whether it has complied with such requirements.
(i) Integration. Company shall not sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in Section
2 of the Securities Act) that would be integrated with the offer or sale of the
Common Stock in a manner that would require the registration under the
Securities Act of the sale of the Common Stock to any Purchaser, or to issue
securities in such circumstances that is likely to result in such offering being
integrated with the sale of the Common Stock in such manner that stockholder
approval would be required pursuant to any stockholder approval provision
applicable to Company or its securities.
(j) Form D. Company agrees to file in a timely manner with the SEC a Form D
with respect to the Common Stock as required by Rule 506 of the rules
promulgated under the Securities Act and to provide a copy thereof to each
Purchaser promptly after such filing.
(k) Press Release; Filing of Form 8-K. Subject to the provisions of Section
9.9 hereof, Company shall issue a press release in form and substance acceptable
to Purchaser promptly following the Closing.
(l) Best Efforts. Company shall use its best efforts to satisfy each of the
conditions to be satisfied by it as provided in Sections 6.1 and 6.2 of this
Agreement.
(m) Insurance. Company shall and shall cause each Subsidiary of Company to
maintain insurance covering, without limitation, fire, theft, burglary, public
liability, property damage, product liability, workers' compensation, directors'
and officers' insurance and insurance on all property and assets material to the
operation of the business, all in amounts customary for the industry. Company
shall, and shall cause each of its Subsidiaries to, pay all insurance premiums
payable by them.
(n) Amendment to the Registration Statement. Company shall promptly, upon
the request of Purchaser, file a prospectus supplement pursuant to Rule 424
under the Securities Act to include MLBC, Inc., as a selling stockholder. In
addition, Company shall, in the event of a filing of any amendment to a
registration statement filed
by the Company with the SEC, include MLBC, Inc. as a selling stockholder
pursuant to such registration statement.
VI. CLOSING CONDITIONS
6.1. Conditions Precedent to Obligations of Purchaser. The obligations of
Purchaser to purchase the Common Stock pursuant to Section 2.2 hereof is subject
to the condition that Purchaser shall have received, on the Closing Date, the
following, each dated as of the Closing Date unless otherwise indicated, in form
and substance satisfactory to Purchaser:
(a) Favorable opinions of Powell, Goldstein, Xxxxxx & Xxxxxx LLP, counsel
to Company, substantially in the form attached hereto as Exhibit E, it being
understood that to the extent that such opinion of counsel to Company shall rely
upon any other opinion of counsel, each such other opinion shall be in form and
substance reasonably satisfactory to Purchaser and shall provide that Purchaser
may rely thereon.
(b) Resolutions of the board of directors of Company, certified by the
Secretary or Assistant Secretary of Company, as of the Closing Date, to be duly
adopted and in full force and effect on such date, authorizing (i) the
consummation of each of the transactions contemplated by this Agreement and (ii)
specific officers to execute and deliver this Agreement and each other
Transaction Document to which it is a party.
(c) Governmental certificates, dated the most recent practicable date prior
to the Closing Date, with telegram updates where available, showing that Company
is organized and in good standing in the jurisdiction of its organization and is
qualified as a foreign corporation and in good standing in all other
jurisdictions in which it is qualified to transact business.
(d) A copy of the organizational charter and all amendments thereto of
Company, certified as of a recent date by the Secretary of State of the State of
Delaware, and copies of Company's by-laws, certified by the Secretary or
Assistant Secretary of Company as true and correct as of the Closing Date.
(e) The Amended and Restated Registration Rights Agreement, the Amended and
Restated PCA Shell License Agreement, the Cicero Trademark License Agreement,
the Royalty Termination Agreement and such other Transaction Documents to be
delivered on or prior to the Closing Date, duly executed by the parties thereto.
(f) Certificates of the Secretary or an Assistant Secretary of Company,
dated the Closing Date, as to the incumbency and signatures of the officers of
Company executing this Agreement, the Common Stock, each other Transaction
Document to which it is a party and any other certificate or other document to
be delivered pursuant hereto or thereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary;
(g) Certificate of the President of Company, dated the Closing Date,
stating that all of the representations and warranties of Company contained
herein or in the other Transaction Documents are true and correct on and as of
the Closing Date as if made on such date and that no breach of any covenant
contained in Section V has occurred or would result from the Closing hereunder;
and
(h) The Common Stock shall have been at all times since the date of this
Agreement and on the Closing Date listed for trading on the NASDAQ.
6.2. Additional Conditions of Purchaser. The obligation of Purchaser to
purchase the Common Stock pursuant to Section 2.2 is subject to the additional
conditions precedent that:
(a) Except as disclosed pursuant to Section IV hereof, there shall not have
occurred any event or condition since December 31, 2000 which could have a
Material Adverse Effect.
(b) All of the representations and warranties of Company contained herein
or in the other Transaction Documents shall be true and correct on and as of the
Closing Date as if made on such date and no breach of any covenant contained
herein shall have occurred or would result from the Closing hereunder.
(c) Company shall have delivered to Purchaser a letter from Company's
transfer agent certifying the number of shares of Common Stock outstanding as of
a date within five (5) days of the Closing Date.
(d) Company shall have wired to Purchaser or its designee funds in an
amount equal to Purchaser's legal fees and expenses related to the transactions
contemplated hereby.
6.3. Conditions Precedent to Obligations of Company. The obligations of
Company to sell the Common Stock pursuant to Section 2.2 hereof is subject to
the condition that Company shall have received, on the Closing Date, the
following, each dated as of the Closing Date unless otherwise indicated, in form
and substance satisfactory to Company:
(a) The Amended and Restated Registration Rights Agreement, the Amended and
Restated PCA Shell License Agreement, the Cicero Trademark License Agreement,
the Royalty Termination Agreement and such other Transaction Documents to be
delivered on or prior to the Closing Date, duly executed by the parties thereto.
(b) Certificates of the Secretary or an Assistant Secretary of Purchaser,
dated as of the Closing Date, as to the incumbency and signatures of the
officers of Purchaser executing this Agreement and each other Transaction
Document to which it is a party and any other certificate or other document to
be delivered pursuant hereto or
thereto, together with evidence of the incumbency of such Secretary or Assistant
Secretary.
(c) Certificate of an Executive Vice President or Senior Vice President of
Purchaser, dated as of the Closing Date, stating that all of the representations
and warranties of Purchaser contained herein or in the other Transaction
Documents are true and correct on and as of the Closing Date as if made on such
date.
VII. INDEMNIFICATION
Company agrees to indemnify and hold harmless Purchaser and its Affiliates
and their respective officers, directors and employees 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 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 Company contained herein or in any certificate or
document delivered pursuant hereto or otherwise relating to or arising out of
the transactions contemplated hereby. Notwithstanding the foregoing, Company
shall not be required to indemnify any Purchaser under the terms of this Article
VII with respect to any claim or violation for which indemnification is
expressly excluded under the Amended and Restated Registration Rights Agreement.
VIII. EXPENSES
(a) Company shall pay all reasonable out-of-pocket expenses of Purchaser in
connection with any amendment, modification or waiver, or consent with respect
to, any of the Transaction Documents.
(b) Company shall pay all reasonable out-of-pocket expenses of Purchaser in
connection with any attempt to enforce any rights of Purchaser against Company,
any Subsidiary of Company or any other Person that may be obligated to Purchaser
by virtue of any of the Transaction Documents (including the reasonable fees and
expenses of all of its counsel and consultants retained in connection with the
Transaction Documents and the transactions contemplated thereby).
(c) Company shall pay the expenses of Purchaser not exceeding $25,000 in
connection with the preparation of the Transaction Documents and the
transactions contemplated thereby, including without limitation, all legal fees
and expenses of Weil, Gotshal & Xxxxxx LLP, counsel to Purchaser.
IX. MISCELLANEOUS
9.1. Notices. Whenever it is provided herein that any notice, demand,
request, consent, approval, declaration or other communication shall or may be
given to or served upon any of the parties by another, or whenever any of the
parties desires to
give or serve upon another any such communication with respect to this
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and either shall be delivered in person
with receipt acknowledged or by registered or certified mail, return receipt
requested, postage prepaid, or by telecopy and confirmed by telecopy answerback
addressed as follows:
If to Company:
Xxxxx 0 Systems, Inc.
0000 Xxxxxxx Xxxxxxx
Xxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxxxxx
Telecopy Number: (000) 000-0000
with a copy to:
Powell, Goldstein, Xxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx X.X., 00xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxx, Esq.
Telecopy Number: (000) 000-0000
If to Purchaser:
MLBC, Inc.
c/o Merrill Xxxxx Corporate Law Department
000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxxx Xxxxx
Telecopy Number: (000) 000-0000
with copies to:
Xxxx X. Xxxxxxx, Esq.
Xxxxxxx Xxxxx Corporate Law
000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy Number: (000) 000-0000
with copies to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxx, Esq.
X. Xxxx Angus, Esq.
Telecopy Number: (000) 000-0000
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, telecopied and confirmed by telecopy answerback, or
three (3) Business Days after the same shall have been deposited with the United
States mail.
9.2. Binding Effect; Benefits. Except as otherwise provided herein,
this Agreement shall be binding upon and inure to the benefit of the parties to
this Agreement and their respective successors and permitted assigns. Nothing in
this Agreement, express or implied, is intended or shall be construed to give
any person other than the parties to this Agreement or their respective
successors or assigns any legal or equitable right, remedy or claim under or in
respect of any agreement or any provision contained herein.
9.3. Complete Agreement; Amendment. This Agreement, together with the
other Transaction Documents, constitutes the complete agreement and
understanding of the parties with respect to the subject matter hereof and
thereof and supersedes any previous agreement or understanding between them
relating thereto. No amendment or waiver of any provision of this Agreement or
any other Transaction Document nor consent to any departure by Company
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Company and Purchaser, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action, of compliance with any
representations, warranties, covenants or agreements contained herein. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any preceding or succeeding breach
and no failure by either party to exercise any right or privilege hereunder
shall be deemed a waiver of such party's rights or privileges hereunder or shall
be deemed a waiver of such party's rights to exercise the same at any subsequent
time or times hereunder.
9.4. Successors and Assigns; Assignability. Neither this Agreement nor
any right, remedy, obligation or liability arising hereunder or by reason hereof
shall be assignable by Company without the prior written consent of Purchaser.
Any right,
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by Purchaser to (i) Xxxxxxx Xxxxx & Co. Foundation, Inc. or (ii) any
Affiliate of Purchaser without the prior written consent of Company, except the
obligation of Purchaser to purchase the Common Stock at Closing. All covenants
contained herein shall bind and inure to the benefit of the parties hereto and
their respective successors and assigns.
9.5. Remedies. Purchaser, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and hereby agrees
to waive the defense in any action for specific performance that a remedy at law
would be adequate. In any action or proceeding brought to enforce any provision
of this Agreement or where any provision hereof is validly asserted as a
defense, the successful party shall be entitled to recover reasonable attorneys'
fees in addition to any other available remedy.
9.6. Section and Other Headings. The section and other headings
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
9.7. Severability. In the event that any one or more of the provisions
contained in this Agreement shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision or provisions in every other respect and
the remaining provisions of this Agreement shall not be in any way impaired.
9.8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
9.9. Publicity. Neither Purchaser nor Company shall issue any press
release or make any public disclosure regarding the transactions contemplated
hereby unless such press release or public disclosure is approved by the other
party in advance. Notwithstanding the foregoing, each of the parties hereto may,
in documents required to be filed by it with the SEC or other regulatory bodies,
make such statements with respect to the transactions contemplated hereby as
each may be advised by counsel is legally necessary or advisable, and may make
such disclosure as it is advised by its counsel is required by law.
9.10. Governing Law; Waiver of Jury Trial. This Agreement shall be
governed by, construed and enforced in accordance with, the laws of the State of
New York without regard to the principles thereof relating to conflict of laws.
Each of the parties hereby submits to personal jurisdiction and waives any
objection as to venue in the federal or state courts located in the County of
New York, State of New York. Service of process on the parties in any action
arising out of or relating to this Agreement shall be effective if mailed to the
parties in accordance with Section 9.1 hereof. The
parties hereto waive all right to trial by jury in any action or
proceeding to enforce or defend any rights under this Agreement.
IN WITNESS WHEREOF, Company and Purchaser have executed this
Agreement as of the day and year first above written.
LEVEL 8 SYSTEMS, INC.
By:
----------------------------------
Name:
Title:
MLBC, INC.
By:
----------------------------------
Name:
Title:
------------------------------------------------------------------------------
PURCHASE AGREEMENT
dated as of January __, 2002
by and between
LEVEL 8 SYSTEMS, INC.,
and
MLBC, INC.
-------------------------------------------------------------------------------
TABLE OF CONTENTS
PURCHASE AGREEMENT
Page
I. DEFINITIONS.................................................... 1
II. THE PURCHASE OF COMMON STOCK .................................. 6
2.1. Authorization of Issue................................ 6
2.2. Purchase of Common Stock ............................. 6
2.3. Closing .............................................. 6
III. PURCHASER'S REPRESENTATIONS ................................... 7
3.1. Investment Intention ................................. 7
3.2. Accredited Investor .................................. 7
3.3. Corporate Existence .................................. 7
3.4. Corporate Power; Authorization; Enforceable
Obligations .......................................... 7
3.5. Reliance on Exemptions ............................... 8
3.6. Information .......................................... 8
3.7. Transfer or Resale.................................... 8
3.8. Legends .............................................. 8
IV. COMPANY'S REPRESENTATIONS AND WARRANTIES....................... 9
4.1. Authorized and Outstanding Shares of Capital Stock.... 9
4.2. Authorization and Issuance of Common Stocks .......... 10
4.3. Corporate Existence; Compliance with Law ............. 10
4.4. Subsidiaries ......................................... 10
4.5. Corporate Power; Authorization; Enforceable
Obligations .......................................... 10
4.6. Financial Statements ................................. 11
4.7. S-3 Eligibility ...................................... 12
4.8. SEC Filings .......................................... 12
4.9. Absence of Certain Changes ........................... 12
4.10. No Undisclosed Material Liabilities .................. 14
4.11. Environmental Matters ................................ 14
4.12. Employee Relations ................................... 14
4.13. Taxes ................................................ 14
4.14. No Litigation ........................................ 15
4.15. Brokers .............................................. 15
4.16. Employment Agreements................................. 15
4.17. Patents, Trademarks, Copyrights and Licenses ......... 15
TABLE OF CONTENTS
(continued)
Page
4.18. ERISA ................................................ 16
4.19. Minute Books ......................................... 18
4.20. Private Offering ..................................... 18
4.21. Listing Maintainance Requirements Compliance ......... 18
4.22. Internal Accounting Controls ......................... 18
4.23. Transactions with Affiliates ......................... 19
4.24. Master License Agreement ............................. 19
4.25. Insurance ............................................ 19
4.26. Full Disclosure ...................................... 19
V. COVENANTS ..................................................... 19
5.1. Covenants of Company ................................. 19
VI. CLOSING CONDITIONS ............................................ 23
6.1. Conditions Precedent to Obligations of Purchaser ..... 23
6.2. Additional Conditions of Purchaser ................... 24
6.3. Conditions Precedent to Obligations of Company ....... 24
VII. INDEMNIFICATION ............................................... 25
VIII. EXPENSES ...................................................... 25
IX. MISCELLANEOUS ................................................. 25
9.1. Notices .............................................. 25
9.2. Binding Effect; Benefits ............................. 27
9.3. Complete Agreement; Amendment ........................ 27
9.4. Successors and Assigns; Assignability ................ 27
9.5. Remedies ............................................. 28
9.6. Section and Other Headings ........................... 28
9.7. Severability ......................................... 28
9.8. Counterparts ......................................... 28
9.9. Publicity ............................................ 28
9.10. Governing Law; Waiver of Jury Trial .................. 28
ii
TABLE OF CONTENTS
PURCHASE AGREEMENT
Page
Schedules
Schedule 4.1 - Stock and Warrants
Schedule 4.4 - Subsidiaries
Schedule 4.6 - Financial Statements; Other Obligations
Schedule 4.8 - SEC Filings
Schedule 4.9 - Absence of Certain Changes
Schedule 4.11 - Environmental Matters
Schedule 4.12 - Employee Relations
Schedule 4.13 - Taxes
Schedule 4.14 - Litigation
Schedule 4.15 - Brokers
Schedule 4.16 - Employment Contracts
Schedule 4.17 - Patents, Trademarks, Etc.
Schedule 4.18 - ERISA
Schedule 4.21 - Listing Maintenance Requirements Compliance
Schedule 4.23 - Affiliate Transactions
Exhibits
Exhibit A Form of Amended and Restated PCA Shell License Agreement
Exhibit B Form of Amended and Restated Registration Rights Agreement
Exhibit C Form of Cicero Trademark Licensing Agreement
Exhibit D Form of Royalty Termination Agreement
Exhibit E Form of Opinion of Company Counsel
