EXECUTION COPY
NOTE AND WARRANT PURCHASE AGREEMENT
THIS AGREEMENT, dated as of December 31, 2003, is entered into by and
among ComVest Investment Partners II LLC, a Delaware limited liability company
with its principal offices located at 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000
("ComVest"), DCC VENTURES, LLC, a Nevada limited liability company with its
principal offices located at 0000 Xxxxxx Xxxxxx Xxxxxxx, Xxxxx Xxxxx, Xxx Xxxxx,
XX 00000 ("DCC" and together with ComVest, the "Lenders"), COMMERCE ONE, INC., a
Delaware corporation with its principal offices located at Xxx Xxxxxx Xxxxxx,
Xxxxxxx Xxxxx, Xxxxx 0000, Xxx Xxxxxxxxx, XX 00000 (the "Company") and COMMERCE
ONE OPERATIONS, INC., a Delaware corporation and wholly-owned subsidiary of the
Company (the "Guarantor").
WHEREAS, the Company and the Lenders have agreed that the Company will
issue and sell to the Lenders (a) Senior Secured Non-Convertible Notes in the
form attached hereto as Exhibit A (each, a "Note" and together, the "Notes") in
the aggregate principal amount of Five Million Dollars ($5,000,000) and (b)
Warrants in the form attached hereto as Exhibit B (each a "Warrant" and
together, the "Warrants") to purchase a number of shares (the "Warrant Shares")
of common stock, par value $.0001 per share of the Company (the "Common Stock")
in exchange for an aggregate purchase price of One Hundred Dollars ($100). The
aggregate purchase price for the Notes and the Warrants shall be Five Million
One Hundred Dollars ($5,000,100) (the "Aggregate Purchase Price");
WHEREAS, in order to induce the Lenders to purchase the Notes and
Warrants, (i) the Guarantor has agreed to guaranty the repayment of the Notes
and all other obligations of the Company under this Agreement and the other
Closing Documents pursuant to the terms of the Guaranty attached hereto as
Exhibit C (the "Guaranty") and (ii) the Company and the Guarantor have agreed to
grant to the Lenders a first priority perfected security interest in certain
assets of the Company and the Guarantor as security for all of the Company's and
the Guarantor's respective obligations under the Notes, the Guaranty, the Pledge
Agreement, this Agreement and the other Closing Documents pursuant to the terms
of the Security Agreement attached hereto as Exhibit D (the "Security
Agreement");
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto hereby agree as follows:
SECTION 1. Authorization and Sale of the Notes and the Warrants.
(a) Authorization. Prior to the Closing (as defined below), the
Company shall have authorized the sale and issuance of the Notes and the
Warrants.
(b) Sale of Notes and Warrants. Subject to the terms and conditions of
this Agreement, at the Closing, the Company shall sell and issue to ComVest (i)
a Note in the principal amount of Four Million Dollars ($4,000,000) (the
"ComVest Note") and (ii) a Warrant to purchase up to a number of shares of
Common Stock, as set forth in the ComVest Warrant, in
exchange for a purchase price equal to Eighty Dollars ($80) (the "ComVest
Warrant"). Subject to the terms and conditions of this Agreement, at the
Closing, the Company shall sell and issue to DCC (i) a Note in the principal
amount of One Million Dollars ($1,000,000) (the "DCC Note") and (ii) a Warrant
to purchase up to a number of shares of Common Stock, as set forth in the DCC
Warrant, in exchange for a purchase price equal to Twenty Dollars ($20) (the
"DCC Warrant"). Subject to the terms and conditions of this Agreement, ComVest
shall purchase and acquire from the Company the ComVest Note and the ComVest
Warrants, free and clear of all liens and encumbrances and DCC shall purchase
and acquire from the Company the DCC Note and the DCC Warrant, free and clear of
all liens and encumbrances.
SECTION 2. Description of the Notes, Guaranty and Security Agreement.
The following summary of the Notes, the Guaranty and Security Agreement
is provided for illustrative purposes only. To the extent there are any
inconsistencies between the summary below and the Notes, the Guaranty and/or
Security Agreement, such agreements shall control.
(a) Maturity. The Company shall pay each of ComVest and DCC the
outstanding principal amount of the ComVest Note and the DCC Note, as
applicable, together with all accrued and unpaid interest thereon, on the
earliest to occur (the "Maturity Date") of (i) fifteen (15) months following the
Closing Date, (ii) a merger or combination of the Company or the sale, transfer
or other disposition of all or substantially all of the assets of the Company
(other than the SRM Sale) (as defined in the Notes), (iii) the acquisition by a
single entity, person or a "group" within the meaning of Rule 13d-1 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), of more than
Fifty Percent (50%) of the voting power or capital stock of the Company (on a
fully-diluted basis) or (iv) one (1) business day before the date on which the
Company pays all or substantially all amounts outstanding under the promissory
note due February 22, 2005, payable to PeopleSoft and entered into in connection
with the settlement of certain real estate obligations of the Company.
(b) Interest. The Notes shall bear interest at a rate per annum as
follows:
Months 1-3 of the Note 6% per annum
Months 4-6 of the Note 7% per annum
Months 7-9 of the Note 8% per annum
Months 10-12 of the Note 9% per annum
Months 13-15 of the Note 10% per annum
Interest shall be payable quarterly in cash. If any Event of Default (as defined
in the Notes) has occurred and is continuing, the Notes shall bear interest of
12% per annum until such time as such Event of Default has been cured.
(c) Conversion. The Notes shall not be convertible except in the event
the Company fails to pay such Note in accordance with its terms, whether on the
Maturity Date or upon an Event of Default. In such event, the holder of such
Note shall be entitled to convert (the "Conversion") such Note into shares of
Common Stock (the "Conversion Shares") equal to the number of obtained by
dividing the then-outstanding principal amount of this Note, together with all
accrued but unpaid Interest thereon, by the conversion price (the "Conversion
Price"), which
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shall be equal to Ninety-Percent (90%) of the average closing bid price for the
five (5) Trading Days (as defined in the Notes) immediately following the later
of (i) the date of such default and (ii) the date of issuance of any press
release announcing such default; provided, however, that such conversion shall
be limited to the extent that the number of Warrant Shares plus the number of
Conversion Shares issued or issuable to ComVest and DCC shall not exceed an
aggregate of 6,653,840 shares of Common Stock (which shall be equal to Nineteen
and Nine-Tenths Percent (19.9%) of the outstanding shares of Common Stock, as
calculated immediately prior to the Closing (the "Maximum Conversion Amount").
Any principal and Interest that remains after the Conversion of up to the
Maximum Conversion Amount shall remain outstanding on the books of the Company.
All Conversion Shares shall be issued as further security for performance of the
Company's and Guarantor's obligations under the Notes, this Agreement and the
other Closing Documents.
(d) Prepayment. The Notes may be prepaid, in whole or in part, at any
time without penalty or premium, upon ten (10) days' prior written notice to
each of ComVest and DCC. The Notes shall be prepaid from certain proceeds
received by the Company from the sale of the SRM Business (as defined in the
Notes), the SRM Assets or the Perfect Commerce Note (as defined in the Notes)
and from payments received by the Company (from the Guarantor) under the Perfect
Commerce Note, all as more fully set forth in the Notes. In the event of
prepayment of the Notes, all such prepayments shall be made ratably between the
Notes.
(e) Guaranty. The Guarantor shall guaranty the repayment of the
Company's obligations under the Notes and under the Purchase Agreement and the
other Closing Documents pursuant to the terms of the Guaranty.
(f) Security and Ranking. The Notes and all other obligations of the
Company and the Guarantor under this Agreement and the other Closing Documents
shall be secured by certain collateral of the Guarantor and the Company, as
described in the Security Agreement and the Pledge Agreement, dated as of even
date herewith, by and among the Lenders and the Guarantor, in the form attached
hereto as Exhibit E (the "Pledge Agreement"). As an inducement to the Lenders to
purchase the Notes and execute and enter into this Agreement, and to secure
prompt payment of the Notes and the discharge in full of the Company's and the
Guarantor's obligations under this Agreement and under the Notes, this Agreement
and the other Closing Documents, the Guarantor and the Company shall grant to
the Lenders a first priority perfected lien and security interest in the
collateral described in the Security Agreement and the Guarantor shall grant to
the Lender a first priority perfected lien and security interest in the
collateral descibed in the Pledge Agreement, which security interests shall rank
senior in lien priority to any other existing or future indebtedness, security
interests and liens (other than the Permitted Liens and, subject to Section
7(a)(viii) hereof, the CambridgePark Indebtedness) of the Company and the
Guarantor. For purposes hereof "Permitted Liens" shall have the meaning set
forth in the Security Agreement; and "CambridgePark Indebtedness" shall mean the
payments due by the Company to CambridgePark Investors Limited Partnership
("CambridgePark") in the aggregate amount of Seven Hundred and Fifty Thousand
Dollars ($750,000), the repayment of which is secured by security interest in
certain accounts receivable of the Company, in accordance with the Settlement
Agreement, dated as of June 6, 2003, by and between the Company and
CambridgePark (the "CambridgePark Settlement Agreement").
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SECTION 3. Warrants.
The following summary of the Warrants is provided for illustrative
purposes only. To the extent there are any inconsistencies between the summary
below and the Warrants, the Warrants shall control.
(a) As further security for the Company's and the Guarantor's
performance under the Notes, this Agreement and the other Closing Documents, the
Warrants shall entitle the Lenders to purchase an aggregate of 2,568,494 shares
of Common Stock. The exercise price of the Warrants is $.0001 per share (the
"Per Share Warrant Exercise Price"). The Warrants shall have a term of one (1)
year and shall be exercisable immediately. The Company shall have the right to
repurchase up to an aggregate of Twenty Percent (20%) of the Warrants or the
Warrant Shares, as the case may be, at a per share purchase price equal to the
Per Share Warrant Exercise Price in the event that the Company (i) repays the
principal amount of the Notes in full, together with all accrued but unpaid
interest thereon, within four (4) months following the Closing and (ii) the
Warrant Shares are registered under the Securities Act of 1933, as amended (the
"Securities Act") in accordance with the terms of the Registration Rights
Agreement, dated as of even date herewith, by and among the Company and the
Lenders and in the form attached hereto as Exhibit D (the "Registration Rights
Agreement").
SECTION 4. Closing of Sale of the Notes and Warrants.
(a) The consummation of the sale of the Notes and Warrants (the
"Closing") shall take place at the offices of Xxxxxx Sonsisni Xxxxxxxx & Xxxxxx,
P.C., counsel to the Company and Guarantor, located at 000 Xxxx Xxxx Xxxx, Xxxx
Xxxx, XX 00000, on or by December 31, 2003, or at such time as shall be mutually
agreed upon by the parties hereto (the "Closing Date").
(b) At the Closing, the Lenders shall deliver to the Company an
aggregate of Five Million Dollars ($5,000,100) by certified check or wire
transfer (the "Purchase Price"). The Purchase Price shall be borne ratably by
the Lenders.
SECTION 5. Representations and Warranties of the Company to the Lenders.
Other than as set forth in the most recent 10-Q and 10-K filings made
by the Company with the Securities and Exchange Commission in 2003, or as set
forth on the Disclosure Schedule hereto, each of the Company and the Guarantor,
or as otherwise indicated below, hereby represents and warrants to the Lender as
follows:
(a) Organization. The Company or the Guarantor, as the case may be, is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Company or the Guarantor, as the case may be,
has all requisite corporate power and authority to own and lease its property,
to carry on its business as presently conducted and as proposed to be conducted,
and to carry out the transactions contemplated by this Agreement and the other
Closing Documents, and is duly licensed of qualified to do business as a foreign
corporation in each jurisdiction in which the conduct of its business or
ownership or leasing of its properties requires it to be so licensed or
qualified, except where failure to be so licensed or
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qualified would not, in the aggregate, have a material adverse effect on the
business, results of operations, or condition (financial or otherwise) of the
Company or the Guarantor, as the case may be (a "Material Adverse Effect"). The
Company or the Guarantor, as the case may be, has furnished or expressly made
available to counsel to the Lender true and complete copies of its Certificate
of Incorporation, as amended, and Bylaws, each as amended to date and currently
in effect.
(b) Capitalization. The authorized capital stock (the "Capital Stock")
of the Company (immediately prior to the Closing) is as set forth in Section
5(b) of the Disclosure Schedule attached hereto. All of the issued and
outstanding shares of Capital Stock have been duly authorized and validly issued
and are fully paid and nonassessable. Except as set forth in (ii) above or under
Section 5(b) on the Disclosure Schedule attached hereto, (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 does not have an 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 does not have an 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. 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.
(c) Indebtedness. The Company or the Guarantor, as the case may be,
(i) does not have any outstanding Indebtedness (as defined below) (other than
the Permitted Indebtedness (as defined below), none of which is or shall become
senior to or pari passu with the Notes (other than Indebtedness secured by
Permitted Liens and, subject to Section 7(a)(viii) hereof, the CambridgePark
Indebtedness)), (ii) is not a party to any contract, agreement or instrument,
the violation of which, or default under which, by any party thereto would
reasonably be expected to result in a Material Adverse Effect, (iii) is not in
violation of any term of or in default under any contract, agreement or
instrument relating to any Indebtedness, except where such violations and
defaults would not reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect, and (iv) is not a party to any
contract, agreement or instrument relating to any Indebtedness, the performance
of which, in the judgment of the Company's officers, has or is expected to have
a Material Adverse Effect.
For purposes of this Agreement: "Indebtedness" means, without duplication (A)
all indebtedness for borrowed money, (B) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
payables entered into in the ordinary course of business), (C) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced and incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale or such property), (F) all
monetary obligations under any leasing
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or similar arrangement which, in connection with generally accepted accounting
principles, consistently applied for the periods covered thereby, is classified
or should be classified as a capital lease, (G) all indebtedness referred to in
clauses (A) through (F) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any mortgage, lien, pledge, security interest or other encumbrance upon or in
any property or assets of the Company or the Guarantor (including the SRM Assets
and the Perfect Commerce Note (as defined in the Notes)) and (H) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; "Contingent Obligations" means any
direct or indirect liability, contingent or otherwise, of that Person with
respect to any indebtedness, lease, dividend or other obligation of another
Person;"Person" means an individual, limited liability company, partnership,
joint venture, corporation, trust, unincorporated organization and government or
any department or agency thereof; and "Permitted Indebtedness" means (a) the
Company's and Guarantor's indebtedness under this Agreement, the Notes or any of
the other Closing Documents, (b) Indebtedness existing in the date hereof, as
set forth on the Disclosure Schedule attached hereto, (c) Indebtedness in an
amount not to exceed One Million Dollars ($1,000,000) incurred by the Company or
Guarantor, which shall be subordinated in right of payment and lien priority to
indebtedness owed to the Lenders hereunder and which is reflected in a written
agreement in a manner and form reasonably acceptable to the Lenders, (d)
Indebtedness secured by Permitted Liens, (e) subject to Section 7(b)(v) hereof,
Indebtedness of the Company or the Guarantor to any subsidiary of the Company or
the Guarantor (in each case, a "Subsidiary") and Contingent Obligations of any
Subsidiary with respect to obligations of the Company or the Guarantor (provided
that the primary obligations are not prohibited hereby), and Indebtedness of any
Subsidiary of the Company or Guarantor and any Contingent Obligations of any
Subsidiary with respect to obligations of any other subsidiary (provided that
the primary obligations are not prohibited hereby), (f) Indebtedness with
respect to surety, appeal, indemnity, performance or other similar bonds
incurred in the ordinary course of business, (g) indebtedness consisting of
Contingent Obligations with respect to letters of credit issued for the benefit
of the Company or the Guarantor; provided, that the aggregate amount of any such
indebtedness that may be cash collateralized by the Company or the Guarantor
shall not exceed Three Million Two Hundred Fifty Thousand Dollars ($3,250,000),
(h) Indebtedness existing as of the date hereof that is unsecured in an
aggregate amount not to exceed Two Hundred Thousand Dollars ($200,000), and (i)
extensions, refinancings, modifications, amendments and restatements of any
items of Permitted Indebtedness (a) through (h) above, provided that the
principal amount thereof is not increased and the terms thereof are not
modified to impose more burdensome terms upon the Company, the Guarantor or any
Subsidiary, as the case may be.
(d) Subsidiaries. Etc. Except as set forth under Section 5(d) on the
Disclosure Schedule attached hereto, neither the Company nor the Guarantor has
any subsidiaries and neither the Company nor the Guarantor owns or control,
directly or indirectly, any shares of capital stock of any other corporation or
any interest in any association, trust, partnership, joint venture or other
non-corporate business enterprise.
(e) Issuance of Notes and Warrants. The issuance, sale and delivery of
the Notes and the Warrants in accordance with this Agreement 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 Warrant Shares and Conversion Shares have been
duly reserved for issuance. The Warrant
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Shares and Conversion Shares, when issued, sold and delivered against payment
therefor in accordance with the provisions of the Warrants and Notes,
respectively, will be duly and validly issued, fully paid and non-assessable and
free and clear of all liens or other encumbrances with respect to the issuance
thereof.
(f) Authority for Agreement. The execution, delivery and performance
by each of the Company and the Guarantor, as applicable, of this Agreement, the
Notes, the Warrants, the Security Agreement, the Pledge Agreement, the
Registration Rights Agreement, any other documents executed and delivered in
connection with this transaction (together, the "Closing Documents") and the
consummation by the Company and the Guarantor, as applicable, of the
transactions contemplated hereby and thereby, have been duly authorized by all
requisite action on the part of the Company or the Guarantor, as the case may
be. This Agreement and the other Closing Documents, when executed, will have
been, duly executed and delivered by the Company and the Guarantor, to the
extent applicable, and constitute valid and binding obligations of the Company
and the Guarantor, to the extent applicable, enforceable in accordance with
their terms. The execution, delivery and performance of this Agreement and the
other Closing Documents and the compliance with their provisions by the Company
and the Guarantor will not:
(i) violate any provision of law, statute, ordinance, rule or
regulation or any ruling, writ, injunction, order, judgment or decree
of any court, administrative agency or other governmental body where
such violation would have a Material Adverse Effect;
(ii) conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute (with due notice or lapse
of time, or both) a default (or give rise to any right of termination,
cancellation or acceleration) under (A) any agreement, document,
instrument, contract, understanding, arrangement, note, indenture,
mortgage or lease to which the Company or the Guarantor, as
applicable, is a party or under which the Company or the Guarantor, as
applicable, or any of its assets is bound or affected where such
default would have a Material Adverse Effect, (B) the Certificate of
Incorporation, as amended, of the Company or the Guarantor, as
applicable, or (C) the By-Laws of the Company or the Guarantor, as
applicable; or
(iii) result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the
Company or the Guarantor, other than as expressly contemplated by this
Agreement.
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(g) Consents and Approvals. No authorization, consent, approval or
other order of, or declaration to or filing with, any governmental agency or
body (other than filings required to be made under applicable federal and state
securities laws) is required for the valid authorization, execution, delivery
and performance by the Company or the Guarantor, as the case may be, of this
Agreement, the other Closing Documents or the issuance and sale of the Notes and
the Warrants. The Company or the Guarantor, as the case may be, has obtained all
other consents that are necessary to permit the consummation of the transactions
contemplated hereby. Based on the representations of each Lender set forth in
Section 6 of this Agreement and the conduct of the Company or the Guarantor, as
the case may be, the offer, sale and issuance of the Notes and the Warrants will
be in compliance with applicable federal and state securities laws.
(h) Financial Statements. The Company has provided or made available
to the Lenders an audited consolidated balance sheet of the Company and the
Guarantor or the fiscal year ending December 31, 2002 (the "2002 Balance Sheet")
and an unaudited consolidated balance sheet of the Company and the Guarantor as
at November 30, 2003 (the "2003 Balance Sheet"). The Company has also provided
or made available to the Lenders an audited consolidated statement of income of
the Company and the Guarantor for the fiscal year ended December 31, 2002 (the
"2002 Income Statement") and unaudited consolidated statements of income for the
eleven (11)-month period ending November 30, 2003 (the "2003 Income Statement"
and together with the 2002 Income Statement, the "Income Statements"). Such
financial statements have been (or will be) prepared in conformity with
generally accepted accounting principles ("GAAP"), consistently applied, during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of the unaudited interim
statements, to the extent they may exclude fottnotes or may ne condensed or
summary statements), are true and correct and show all material liabilities,
absolute or contingent, of the Company required to be recorded thereon and
present fairly the financial position and results of operations of the Company
as of the dates and for the periods indicated (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as set forth under
Section 5(h) on the Disclosure Schedule, there has been no material adverse
change in the condition (financial or otherwise) of the Company since November
30, 2003.
(i) Use of Proceeds. Each of the Company and the Guarantor are
receiving actual, direct and indirect benefit as a result of the transactions
contemplated by this Agreement and the other Closing Documents, including,
without limitation, that each of the Company and the Guarantor shall use the
proceeds of the sale of the Notes and Warrants for its working capital and to
repay that portion of the CambridgePark Indebtedness equal to Three Hundred
Seventy-Five Thousand Dollars ($375,000) on or before January 10, 2004 (the
"CambridgePark Indebtedness Repayment").
(j) Transactions with Affiliates. Except as set forth under Section
5(b) or 5(j) on the Disclosure Schedule attached hereto, the Company or the
Guarantor, as the case may be, has no agreements or transactions with any
officers, directors, stockholders or other affiliates of the Company or the
Guarantor, as the case may be, with respect to the payment of any fees or other
amounts (other than salaries, director fees and reimbursements in the ordinary
course of business) or the issuance of any equity securities.
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(k) Preemptive Rights, Dilutive Rights; Right of First Refusal. Except
as set forth under Section 5(k) of the Disclosure Schedule attached hereto, no
person, firm or other business entity owns any securities or is a party to any
agreement, contract or understanding, written or oral, entitling such party to
any preemptive rights in connection with this transaction. Except as set forth
under Section 5(k) of the Disclosure Schedule attached hereto, the transactions
contemplated herein will not cause any holder of securities of the Company or
the Guarantor to be entitled to any anti-dilution adjustments to such
securities. Except as set forth under Section 5(k) of the Disclosure Schedule
attached hereto, no person, firm or other business entity is a party to any
agreement, contract or understanding, written or oral entitling such party to a
right of first refusal with respect to offerings by the Company and no party
shall have a right of first refusal with respect to the sale and issuance of the
Notes and Warrants.
(l) Absence of Changes. Since September 31, 2003, and except as set
forth under Section 5(l) of the Disclosure Schedule attached hereto, neither the
Company nor the Guarantor has incurred any liabilities or obligations, direct or
contingent, not in the ordinary course of business, or entered into any
transaction not in the ordinary course of business, which is material to the
business of the Company or the Guarantor, as the case may be, and there has not
been any change in the capital stock of, or any incurrence of long-term debt by,
the Company or the Guarantor, as the case may be, or any issuance of options,
warrants or other rights to purchase the capital stock of the Company or the
Guarantor, as the case may be, nor is the Company or the Guarantor, as the case
may be, aware of any prospective adverse change in the condition (financial or
otherwise), net worth, results of operations, business, key personnel or
properties which would be material to the business or financial condition of the
Company or the Guarantor, as the case may be, and neither the Company nor the
Guarantor has become a party to, and neither the business nor the property of
the Company or the Guarantor, as the case may be, has become the subject of, any
material litigation whether or not in the ordinary course of business.
(m) Title. Except as set forth under Section 5(m) of the Disclosure
Schedule attached hereto, the Company or the Guarantor, as the case may be, has
good and marketable title to all properties and assets owned by it (expressly
including the SRM Assets and the Perfect Commerce Note (as defined in the
Note)), free and clear of all liens, charges, encumbrances or restrictions; all
of the material leases and subleases under which the Company or the Guarantor,
as the case may be, is the lessor or sublessor of properties or assets or under
which the Company or the Guarantor, as the case may be, holds properties or
assets as lessee or sublessee are in full force and effect, and neither the
Company nor the Guartantor is in default in any material respect with respect to
any of the terms or provisions of any of such leases or subleases, and no
material claim has been asserted by anyone adverse to rights of the Company or
the Guarantor, as the case may be, as lessor, sublessor, lessee or sublessee
under any of the leases or subleases mentioned above, or affecting or
questioning the right of the Company or the Guarantor, as the case may be, to
continued possession of the leased or subleased premises or assets under any
such lease or sublease. The Company orthe Guarantor, as the case may be, owns or
leases all such properties as are necessary to its operations.
(n) Proprietary Rights. Except as set forth under Section 5(n) of the
Disclosure Schedule attached hereto, each of the Company and the Guarantor owns
or possesses exclusive and enforceable rights to use all patents, patent
applications, trademarks, service
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marks, copyrights, trade secrets, processes, formulations, technology or
know-how used in the conduct of its business (the "Proprietary Rights"). Neither
the Company nor the Guarantor has received any notice of any claims, nor does it
have any knowledge of any threatened claims, and neither knows of any facts
which would form the basis of any claim, asserted by any person to the effect
that the sale or use of any product or process now used or offered by the
Company or the Guarantor, as the case may be, or proposed to be used or offered
by the Company or the Guarantor, as the case may be, infringes on any patents or
infringes upon the use of any such Proprietary Rights of another person and, to
the best of the knowledge of the Company or the Guarantor, as the case may be,
no others have infringed the their respective Proprietary Rights.
(o) Litigation. Except as set forth under Section 5(o) of the
Disclosure Schedule attached hereto, there is no material action, suit,
investigation, customer complaint, claim or proceeding at law or in equity by or
before any arbitrator, governmental instrumentality or other agency now pending
or, to the knowledge of the Company or the Guarantor, as the case may be,
threatened against the Company or the Guarantor, as the case may be (or basis
therefor known to the Company or the Guarantor, as the case may be), the adverse
outcome of which would have a Material Adverse Effect. Neither the Company nor
the Guarantor is subject to any judgment, order, writ, injunction or decree of
any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign which have a
Material Adverse Effect.
(p) Taxes. Each of the Company and the Guarantor has filed all
Federal, state, local and foreign tax returns which are required to be filed by
it or otherwise met its disclosure obligations to the relevant agencies and all
such returns are true and correct in all material respects. Each of the Company
and the Guarantor has paid or adequately provided for all tax liabilities of the
Company or the Guarantor, as the case may be, as reflected on such returns or
pursuant to any assessments received by it or which it is obligated to withhold
from amounts owing to any employee, creditor or third party. Each of the Company
and the Guarantor has properly accrued all taxes required to be accrued by GAAP
consistently applied. The tax returns of the Company or the Guarantor, as the
case may be, have never been audited by any state, local or Federal authorities,
except in the ordinary course of business and only in a manner that would not
otherwise cause a Material Adverse Effect on the Company or the Guarantor, as
the case may be. Neither the Company nor the Guarantor has waived any statute of
limitations with respect to taxes or agreed to any extension of time with
respect to any tax assessment or deficiency, other than than which would not
otherwise cause a Material Adverse Effect on the Company or the Guarantor, as
the case may be..
(q) Registration Rights. Except with respect to holders of the
Warrants or as set forth under Section 5(q) of the Disclosure Schedule attached
hereto, no person has any right to cause the Company to effect the registration
under the Securities Act of any securities of the Company. The Company shall
grant registration rights under the Securities Act to the Lenders and/or their
respective transferees, as more fully described in the Registration Rights
Agreement.
(r) Public Filings. The Company is current in all public filings
required to be made by it with the Commission pursuant to the Exchange Act. Such
filings, together with any other public filings elected to be made by the
Company (together, the "Public
10
Filings") are complete and represent true and accurate depictions of the
Company's business and financial condition (to the extent required by the
applicable filing) as of the date of each filing. The Public Filings, as of the
date they were filed, do not contain any untrue statements of a material fact or
omit to state a material fact necessary in order to make the statements
contained therein not misleading.
(s) Disclosure. No representation or warranty of the Company or the
Guarantor, as the case may be, contained in this Agreement, the financial
statements, the Closing Documents, or any other document, certificate or written
statement furnished to the Lenders by or on behalf of the Company or the
Guarantor, as the case may be, for use in connection with the transactions
contemplated herein, when read together, contains any untrue statement of a
material fact or omitted, omits or will omit to state a material fact necessary
in order to make the statements contained herein or therein not misleading in
light of the circumstances in which the same were made. Except as set forth
under Section 5(s) of the Disclosure Schedule, there is no material fact known
to the Company or the Guarantor, as the case may be, that has had or will have a
Material Adverse Effect and that has not been disclosed herein or in such other
documents, certificates and statements furnished to the Lenders for use in
connection with the transactions contemplated hereby.
(t) Insurance. Each of the Company and the Guarantor maintains
insurance policies for public liability, property damage for its business and
properties, product liability, and business interruption, of types and in
amounts customariliy maintained by comparable businesses; and no notice of
cancellation has been received with respect to such policies and the each of the
Company and the Guarantor is in complete compliance with all conditions
contained in such policies, respectively.
(u) Employee Matters.Except as set forth under Section 5(u) of the
Disclosure Schedule attached hereto, (a) neither the Company, the Guarantor, nor
any of their respective employees is subject to any collective baragining
agreement, (b) no petition for certification or union election is pending with
respect to the employees of the Company or the Guarantor, as the case may be,
and no union or collective bargaining unit has sought such certification or
recognition with respect to the employees of the Company or the Guarantor, as
the case may be, and (c) there are no strikes, slowdowns, work stopages or
controversies pending or, to the best knowledge of the Company or the Guarantor,
as the case may be, after due inquiry, threatened between the Company or the
Guarantor, as the case may be, and their respective employees, other than
employee grievances arising in the normal course of business which could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. Excpet as set forth under Section 5(u) of the
Disclosure Schedule attached hereto, neither the Company nor the Guarantor is
subject to any employment contract.
(v) Brokers. No person or entity has or will have, as a result of the
transactions contemplated by this Agreement, any right, interest or claim
against or upon the Company, the Guarantor or the Lenders for any commission,
fee or other compensation as a finder or broker because of any act or omission
by the Company or the Guarantor or by any agent of the Company or the Guarantor.
11
(w) Solvency. As of the date of this Agreement, each of the Company
and the Guarantor are solvent in that the fair market value of their respective
assets exceeds their respective liabilities, and each of the Company and the
Guarantor are able to pay their debts as they become due in the ordinary course
of their respective businesses.
(x) Perfect Commerce Note. The Perfect Commerce Note is being repaid
in a timely manner and otherwise materially in accordance with its terms and
neither the Company nor the Guarantor has any knowledge of any existing or
threatened material default under the Perfect Commerce Note. In addition, to the
knowledge of the Company and the Guarantor, any and all financial information
with respect to the Perfect Commerce Note provided or made available by the
Company or the Guarantor to the Lenders in connection with the transactions
contemplated hereby is true and complete.
(y) Real Property. Neither the Company nor the Guarantor own any real
property.
SECTION 6. Representations and Warranties of the Lenders to the
Company and the Guarantor.
Each Lender represents and warrants to the Company and the Guarantor
as follows:
(a) Investment. Such Lender is purchasing a Note and Warrant for
investment for the account of such Lender and not for the account of any other
person, and not with a view toward resale or other distribution thereof. Such
Lender understands that such Note, such Warrant, the Warrant Shares and the
Conversion Shares have not been registered under the Securities Act and
applicable state securities laws and, therefore, cannot be resold unless they
are subsequently registered under the Securities Act and applicable state
securities laws or unless an exemption from such registration is available. Such
Lender further understands and agrees that, until so registered or transferred
pursuant to the provisions of Rule 144 under the Securities Act, such securities
shall bear a legend, prominently stamped or printed thereon, reading
substantially as follows:
"These securities have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), or applicable state securities
laws. These securities have been acquired for investment and not with a
view to their distribution or resale, and may not be sold, pledged, or
otherwise transferred without an effective registration statement for
such securities under the Securities Act and applicable state
securities laws, or an opinion of counsel satisfactory to the Company
to the effect that such registration is not required."
Such legend shall be removed when such securities may be sold pursuant to Rule
144(k).
(b) Authority. Such Lender has full legal capacity, power and
authority to execute and deliver this Agreement and the other Closing Documents
and to perform its obligations hereunder and thereunder. Each of this Agreement,
the other Closing Documents and the Note issued to such Lender is a valid and
binding obligation of such Lender, enforceable in accordance with its terms,
except as limited by bankruptcy, insolvency or other laws of
12
general application relating to or affecting the enforcement of creditors'
rights generally and general principles of equity.
(c) Experience. Such Lender has carefully reviewed the representations
concerning the Company and the Guarantor contained in this Agreement and has
made inquiry concerning the Company and the Guarantor, its business, operations,
financial condition and its personnel. The officers of the Company have made
available to such Lender any and all written information which he, she or it has
requested and have answered to such Lender's satisfaction all inquiries made by
such Lender; and such Lender has such knowledge and experience in financial
business matters that such Lender is capable of evaluating the merits and risks
of the purchase of a Note and a Warrant. Such Lender has the capacity to protect
its own interests in connection with the purchase of a Note and a Warrant by
reason of such Lender's business or financial experience.
(d) Accredited Lender. Such Lender is an "Accredited Lender," as that
term is defined in Rule 501 of Regulation D promulgated under the Securities
Act.
(e) Risk. Such Lender acknowledges that the operations of the Company
and the Guarantor are subject to all of the risks inherent in the establishment
of a business-to-business commercial enterprise and the likelihood of the
success of the Company or the Guarantor, as the case may be, must be evaluated
in light of various factors, including working capital deficits, competition
with established and well financed entities, anticipated negative cash flow in
the period following completion of this placement, the need for further
refinements of the Company's or the Guarantor's, as the case may be, products
and the need for additional capital to fund the Company's or the Guarantor's, as
the case may be, activities. Suchh Lender is aware that there can be no
assurance that the Company or the Guarantor, as the case may be, will be able to
generate sufficient revenues to support its operations and/or achieve profitable
results. Such Lender further acknowledges each of the risks set forth in the
Management's Discussion and Analysis section of the Company's most recently
filed quarterly and annual reports on Forms 10-Q and 10-K, respectively, with
the Commission.
SECTION 7. Covenants of each of the Company and the Guarantor.
(a) Affirmative Covenants. Each of the Company and the Guarantor, or
as otherwise provided below, covenants that, so long as any portion of the Notes
is outstanding, it shall take the following actions:
(i) Provide to the Lenders all such information about the
Company or the Guarantor, as the case may be, that is made available
publicly.
(ii) If an Event of Default occurs, the Company shall, if so
requested by the Lenders, promptly provide the following information:
(A) Annual Financial Statements. Unless filed with the
Commission through XXXXX and are publicly available through the
XXXXX system, copies of the consolidated balance sheet of the
Company and its subsidiaries (including the Guarantor), as of the
end of the immediately preceding fiscal year and the related
consolidated statements of income, stockholders' equity
13
and cash flows for such fiscal year, prepared in accordance with
generally accepted accounting principles and certified by a firm of
independent public accountants of recognized national standing
selected by the Board;
(B) Monthly Financial Statements. Unless filed with the
Commission through XXXXX and are publicly available through the
XXXXX system, copies of the consolidated balance sheet of the
Company and its subsidiaries (including the Guarantor), and the
related consolidated statements of income, stockholders' equity and
cash flows, unaudited but prepared in accordance with generally
accepted accounting principles, such consolidated balance sheet,
consolidated statements of income, stockholders' equity and cash
flows to be as of the end of each month following the end of the
immediately preceding fiscal year, in each case with comparative
statements for the prior fiscal year; provided, however, that, to
the extent the information in this Section 7(a)(ii)(B) is requested
by the Lenders, the Lenders shall hold and treat all such
information confidential (substantially in accordance with the
terms of the confidentiality agreement executed and delivered by
the Board Observer under Section 8 hereof) ;
(C) Accountant's Letters. Copies of each accountant's
management letter and other written report submitted to the Company
or the Guarantor, as the case may be, by its independent public
accountants in connection with an annual or interim audit of the
books of the Company or any of its subsidiaries (including the
Guarantor);
(D) Notices. Copies of notices of all actions, suits,
claims, proceedings, investigations and inquiries that could
materially and adversely affect the Company or any of its
subsidiaries (including the Guarantor); and
(E) Other Information. Any other information regarding the
business, prospects, financial condition, operations, property or
affairs of the Company or the Guarantor as the Lenders may
reasonably may request;
(iii) Each of the Company and the Guarantor shall maintain and
cause each of its material corporate subsidiaries, if any, to maintain
their respective corporate existence (except as set forth in the
Disclosure Schedule attached hereto);
(iv) Each of the Company and the Guarantor shall obtain and
maintain and cause each of its subsidiaries, if any, to maintain as to
their respective properties and businesses, with financially sound and
reputable insurers, insurance against such casualties and
contingencies and of such types and in such amounts as is customary
for companies similarly situated;
(v) Each of the Company and the Guarantor shall permit and
cause each of their respective subsidiaries, if any, to permit the
Lenders and such persons as the Lenders may designate, at the Lender's
expense, to visit and inspect any of the properties of the Company or
the Guarantor, as the case may be, and their respective subsidiaries,
14
examine their books and take copies and extracts therefrom, discuss
the affairs, finances and accounts of the Company or the Guarantor, as
the case may be, and their respective subsidiaries with their
officers, employees and public accountants (and each of the Company
and the Guarantor hereby authorizes said accountants to discuss with
such Lenders and such designees such affairs, finances and accounts),
and consult with and advise the management of the Company or the
Guarantor, as the case may be, and their respective subsidiaries as to
their affairs, finances and accounts, all at reasonable times and upon
reasonable notice during normal business hours and provided that the
Lenders or designee has executed a confidentiality agreement in
substance and form reasonably acceptable to the Company or the
Guarantor, as the case may be; provided, however, that in no event
(other than an Event of Default) shall the Company or the Guarantor be
required to provide the Lenders or their respective designees with any
information about the Company or the Guarantor that is not publicly
available;
(vi) Each of the Company and the Guarantor shall comply, and
cause each subsidiary to comply, with all applicable laws, rules,
regulations and orders, noncompliance with which could materially
adversely affect its business or condition, financial or otherwise;
(vii) Each of the Company and the Guarantor shall keep, and
cause each subsidiary, if any, to keep, adequate records and books of
account, in which complete entries will be made in accordance with
generally accepted accounting principles consistently applied,
reflecting all financial transactions of the Company or the Guarantor,
as the case may be, and such subsidiary, and in which, for each fiscal
year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with
its business shall be made;
(viii) By January 10, 2004, the Company shall make the
CambridgePark Indebtedness Repayment out of the proceeds of the Note
being purchased by the Lenders and, shall use its reasonable best
efforts to cause the security interest thereon to be released in
accordance with the terms of the CambridgePark Settlement Agreement;
(ix) Within no more than five (5) days following an Event of
Default (as defined in the Notes), the Company or the Guarantor, as
applicable, shall notify the Lenders of such Event of Default, the
circumstances causing such default and the proposed course of action
to be taken by the Company or the Guarantor, as the case may bem to
cure such default; and
(x) On or by January 10, 2004, the Company shall have obtained
the written waiver of SAP Aktiengesellschaft ("SAP AG"), pursuant to
which SAP AG has waived its pro rata right to participate in the sale
of the Notes and Warrants hereunder (and the issuance of the Warrant
Shares and any Conversion Shares thereunder) in accordance with
Section 11 of that certain Investor Rights Agreement, dated as of June
28, 2001, by and between the Company and SAP AG.
15
(b) Negative Covenants. Each of the Company and the Guarantor
covenants that, so long as any portion of the Note is outstanding, it shall not
take any of the following actions without the prior written consent of the
Lender:
(i) Make, or permit any material subsidiary, if any, to make,
any material change in the nature of its business (other than with
respect to the sale of the SRM Assets, the SRM Business or the Perfect
Commerce Note and a settlement with Covisint) as of the date hereof;
(ii) Create, incur, assume, become liable for, or permit to
exist any indebtedness for borrowed money (other than, the
indebtedness referred to in clauses (a), (b) and (c) of the definition
of Permitted Indebtedness);
(iii) Redeem or repurchase any shares of Capital Stock of the
Company or the Guarantor, except for (a) repurchases contemplated by
this Agreement,(b) with respect to the Company, repurchases
contemplated by that certain Securities Purchase Agreement, dated as
of July 10, 2003, by and between the Company and BayStar Capital II,
L.P. (the "BayStar Agreement") or (c) repurchases of stock from
employees, directors or consultants of the Company or Guarantor in
accordance with agreements existing as of the date hereof for the
repurchase of shares of Capital Stock in connection with any
termination of service to the Company or its subsidiaries;
(iv) Declare or pay any dividend on any class of Capital Stock
of the Company or the Guarantor (except, with respect to the Company,
(a) dividends payable to BayStar Capital II, L.P. pursuant to the
BayStar Agreement and (b) dividends payable solely in Capital Stock of
the Company or the Guarantor in connection with a stock split or
similar transaction of the Company or the Guarantor, as the case may
be;
(v) Enter into any transactions with affiliates of the Company
or the Guarantor, as the case may be (other than, (i) with respect to
the Company, agreements entered into between the Company and SAP AG in
the Company's ordinary course of business and, (ii) with respect to
the Company and the Guarantor, the provision by the Company or the
Guarantor to one or more of their respective subsidiaries of up to an
aggregate of Two Million Dollars ($2,000,000) in connection with the
payment of liabilities and obligations of such subsidiary, as
currently reflected on the 2003 Balance Sheet;
(vi) Merge or consolidate with any other entity (whether or not
the Company or the Guarantor, as the case may be, shall be the
surviving entity) or have a transaction in which any "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")),
becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of greater than fifty percent
(50%) of the shares of all classes of stock then outstanding of the
Company or the Guarantor, as the case may be, ordinarily entitled to
vote in the election of directors;
16
(vii) Sell all or substantially all of the assets of the
Company or the Guarantor, as the case may be (except for the
consummation of an SRM Sale (as defined in the Notes));
(viii) Except as contemplated by this Agreement, permit any
liens or encumbrances on any assets of the Company or the Guarantor,
as the case may be (other than the Permitted Liens and the security
interest granted by the Company to CambridgePark in connection with
the CambridgePark Indebtedness); provided, however, that such
restriction shall terminate immediately following an SRM Sale as a
result of which at least Four Million Dollars ($4,000,000) of the
principal amount of the Notes is repaid on a pro rata basis;
(x) Liquidate, dissolve or wind-up the operations of the
Company or the Guarantor;
(xi) Apply for, or consent to, the appointment of a receiver,
trustee or liquidator for the Company or the Guarantor or any of
theior respective properties; and
(xii) Enter into any agreement to do any of the foregoing.
SECTION 8. Board Composition.
(a) As of the Closing and so long as the unpaid principal amount of
the Note exceeds One Million Dollars ($1,000,000), the Lenders shall have the
right to appoint an observer (the "Board Observer") to the Board to observe and
participate in the discussion of any proceeding of the Board in a nonvoting
observer capacity; provided that the observer may not be a member or observer of
the board of directors of a direct competitor of the Company. Such observer
shall have the right to receive (i) any written material or other information
provided to members of the Board (or that any director has the right to
request); provided that such observer shall acknowledge and agree that he or she
will be bound to satisfy the same duties and obligations of confidentiality with
respect to such information as the members of the Board must satisfy and shall
execute and deliver a confidentiality agreement in form and substance reasonably
satisfactory to the Company and the Lender and (ii) any notice provided to the
Board at the same time in the same manner as the Board. If the Company proposes
to take any action by written consent in lieu of a meeting of its Board, the
Company shall give written notice thereof to such observer promptly following
the effective date of such consent, describing in reasonable detail the nature
and substance of such action. Notwithstanding the foregoing, if the Company
determines in good faith that participation by such observer in any meeting or
the distribution to the observer of any written materials described herein
relates to information deemed confidential, proprietary or attorney-client
privileged ("Protected Information"), the Company shall have the right to
exclude the observer from the portion of such meeting and from access to such
information in which the Protected Information is discussed or presented;
provided, that the Company shall so notify ComVest at as soon as practicable in
advance of such meeting. In the event such observer dies, resigns or is removed
by the Lenders, the Lenders shall be entitled to designate a replacement
observer.
17
SECTION 9. Conditions to the Obligations of the Lender. The obligation
of the Lenders to purchase the Notes and Warrants is subject to the fulfillment,
or the waiver by the Lenders, of each of the following conditions on or before
Closing:
(a) Accuracy of Representations and Warranties. Each representation
and warranty contained in Section 5 shall be true on and as of Closing with the
same effect as though such representation and warranty had been made on and as
of that date and each of the Company and the Guarantor has delivered to the
Lenders a certificate, executed by the Chief Executive Officer or Chief
Financial Officer of the Company or the Guarantor, as the case may be, dated the
date of the Closing, certifying to the fulfillment of the conditions specified
in this Sections 9(a);
(b) 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 and each of
the Company and the Guarantor has delivered to the Lenders a certificate,
executed by the Chief Executive Officer or Chief Financial Officer of the
Company or the Guarantor, as the case may be, dated the date of the Closing,
certifying to the fulfillment of the conditions specified in this Sections 9(b);
(c) Due Diligence. The Lenders shall, in their sole discretion, have
completed their legal and financial due diligence and the results of such due
diligence shall, in their sole discretion, be acceptable to the Lenders and
their legal counsel. The Disclosure Schedule delivered to the Lenders by the
Company and the Guarantor in connection with this Agreement shall not contain
any exceptions that are deemed unacceptable by the Lenders in their sole
discretion.
(d) No Material Adverse Changes. There shall not have occurred any
changes that have had or could reasonably have a Material Adverse Effect on the
operations or financial condition of the Company or the Guarantor.
(e) Certificates and Documents. Each of the Company and the Guarantor,
to the extent applicable, shall have executed and delivered to the Lenders, in
forms reasonably acceptable to the parties, the following documents:
(iv) This Agreement;
(ii) The Notes;
(iii) The Warrants;
(iv) The Registration Rights Agreement;
(v) The Security Agreement;
(vi) The Pledge Agreement;
(vii) The Guaranty
18
(viii) A certificate, as of the most recent practicable date,
as to the corporate good standing of each of the Company and the
Guarantor issued by the Secretary of State of the States of Delaware
and California;
(ix) Copies of resolutions of the Board of Directors of each of
the Company and the Guarantor 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 or the Guarantor, as applicable, as of the Closing Date; and
(x) An opinion of counsel for the Company and the Guarantor,
dated as of the Closing Date, substantially in the form attached
hereto as Exhibit F.
SECTION 10. Conditions to Obligations of the Company and the Guarantor.
The respective obligations of the Company and the Guarantor hereunder
is subject to the fulfillment, or the waiver by the Company or the Guarantor, as
applicable, of each of the following conditions on or before Closing:
(a) Accuracy of Representations and Warranties. Each representation
and warranty contained in Section 6 shall be true on and as of Closing with the
same effect as though such representation and warranty had been made on and as
of that date and each Lender has delivered to the Company and the Guarantor a
certificate, executed by the President of each Lender, dated the date of the
Closing, certifying to the fulfillment of the conditions specified in this
Section 10(a);
(b) Performance. Each Lender shall have performed and complied with
all agreements and conditions contained in this Agreement required to be
performed or complied with by the Lender prior to or at the Closing and each
Lender has delivered to the Company and the Guarantor a certificate, executed by
the President of such Lender, dated the date of the Closing, certifying to the
fulfillment of the conditions specified in this Section 10(b)
(c) Payment of Aggregate Purchase Price. The Lenders shall
have paid the Aggregate Purchase Price to the Company in accordance with Section
1(b) hereof.
(d) Certificates and Documents. The Lenders shall have
executed and delivered to the Company and the Guarantor, as applicable, in forms
reasonably acceptable to the parties, the following documents:
(v) This Agreement;
(ii) The Registration Rights Agreement;
(iii) The Security Agreement; and
(iv) Copies of resolutions of the Board of Managers of each
Lender authorizing and approving all matters in connection with this
Agreement
19
and the transactions contemplated hereby, certified by the
Secretary or Assistant Secretary of such Lender as of the Closing
Date; ; provided that, to the extent such certificates are not
delivered at the Closing, each Lender hereby covenants and agrees to
provide their respective certificates on or by January 10, 2004.
SECTION 11. Indemnification.
(a) The Company shall indemnify and hold harmless each Lender, its
officers, directors, employees, agents and consultants (each, a "Lender
Indemnified Party"), from and against any and all costs, claims, damages,
losses, liabilities and expenses (including reasonable attorneys' fees)
(together, the "Losses") which may be suffered or incurred by such Lender
Indemnified Party by reason of (i) any material misrepresentation or breach of
warranty by the Company in this Agreement or the other Closing Documents or (ii)
any material default of any obligation, agreement or covenant of the Company
under this Agreement or the other Closing Documents, in each case so long as
such Losses were not caused by the gross negligence or willful misconduct of
such Lender Indemnified Party.
(b) The Guarantor shall indemnify and hold harmless each Lender
Indemnified Party, from and against any and all Losses which may be suffered or
incurred by such Lender Indemnified Party by reason of (i) any material
misrepresentation or breach of warranty by the Guarantor in this Agreement or
the other Closing Documents or (ii) any material default of any obligation,
agreement or covenant of the Guarantor under this Agreement or the other Closing
Documents, in each case so long as such Losses were not caused by the gross
negligence or willful misconduct of such Lender Indemnified Party.
(b) Each Lender shall indemnify and hold harmless the Company and the
Guarantor, and their respective officers, directors, employees, agents and
consultants (each, a "Company Indemnified Party"), from and against any and all
Losses which may be suffered or incurred by such Company Indemnified Party by
reason of any material misrepresentation or breach of warranty by the Company in
this Agreement or the other Closing Documents, so long as such Losses were not
caused by the gross negligence or willful misconduct of such Company Indemnified
Party; provided, however, that the payment of any Losses by the Lenders under
this Section 11(b) shall be made on a pro rata basis.
SECTION 12. Fees and Expenses. On the Closing Date, the Company shall
pay ComVest a closing fee (the "Closing Fee") equal to One Hundred and Fifty
Thousand Dollars ($150,000), by check or wire transfer. In addition, the Company
shall reimburse ComVest on the Closing Date for ComVest's actual out-of-pocket
expenses incurred in connection with the negotiation and preparation of this
Agreement and the other agreements and documents contemplated hereby and the
closing of the transactions contemplated hereby or related hereto, including but
not limited to, ComVest's costs of performing due diligence and ComVest's
reasonable attorney's fees and disbursements, which shall not exceed Thirty-Five
Thousand Dollars ($35,000) without the prior written consent of the Company. The
Company shall be responsible for its own costs and expenses incurred in
connection with this transaction.
SECTION 13. Rights Upon Termination. So long as the Lenders have
proceeded in good faith to consummate this Agreement and the transactions
contemplated hereby, in the event
20
the Company elects not to consummate this transaction for any reason, the
Company shall pay to ComVest a financial advisory and structuring fee (the
"Advisory Fee") equal to Two Hundred and Fifty Thousand Dollars ($250,000) which
shall, at the sole option of ComVest, be payable in cash or shares of Common
Stock valued at the average closing price for the Common Stock for the ten (10)
full trading days preceding the date of issuance; provided, however, that, in
the event ComVest elects to received shares of Common Stock in payment of the
Advisory Fee, the number of shares of Common Stock issued or issuable to ComVest
shall not exceed Nineteen and Nine-Tenths Percent (19.9%) of the outstanding
shares of Common Stock on the date of issuance. Upon the Company's election to
terminate this transaction, ComVest shall have ten (10) days in which to make an
election to receive either cash or shares of Common Stock from the Company. Any
Advisory Fee that becomes due shall be payable to the Lenders within five (5)
days following ComVest's receipt of notice from the Company that the Company has
elected not to consummate this transaction. Any Advisory Fee paid pursuant to
this Section 13 shall be in addition to any expenses and costs payable by the
Company to the Lender in accordance with Section 12 hereof. The Company hereby
acknowledges that, in the event the Company is required to pay the Advisory Fee
in accordance with this Section 13, the Company be deemed to have received
advisory services from ComVest in consideration of such Advisory Fee.
SECTION 14. Miscellaneous.
(a) Transferability. This Agreement shall, (i) without the prior
written consent of the Company or the Guarantor, be transferable by the Lenders
to any of their respective affiliates and shall, (ii) with the prior written
consent of the Company and the Guarantor (which consent shall not be
unreasonably withheld), be transferable by the Lenders to any third party; in
each case provided that such transferee expressly agrees to assume the
obligations of the Lender under this Agreement and otherwise to become bound by
the terms of this Agreement. The Company or the Guarantor, as the case may be,
may not transfer their respective rights and obligations hereunder without the
prior written consent of the Lenders, as provided in accordance with Section 9
of the Security Agreement.
(b) Successors and Assigns. Except as otherwise expressly provided
herein, this Agreement shall bind and inure to the benefit of the Company, the
Guarantor and each Lender and the respective permitted successors and assigns of
each Lender and the permitted successors and assigns of the Company and the
Guarantor.
(c) Entire Agreement. This Agreement and the other writings referred
to herein or delivered pursuant hereto which form a part hereof contain the
entire agreement among the parties with respect to the subject matter hereof and
supersede all prior and contemporaneous arrangements or understandings, whether
written or oral, with respect thereto.
(d) Amendments. The terms and provisions of this Agreement may not be
modified or amended, or any of the provisions hereof waived, temporarily or
permanently, except pursuant to a writing executed in accordance with Section 9
of the Security Agreement. Any amendment or modification made pursuant to this
Section 14(d) shall be binding upon each of the parties hereto and upon the
successors and assigns thereof.
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(e) Survival of Representations and Warranties. Unless this Agreement
is terminated under Section 13 hereof, all agreements, representations,
warranties and covenants contained herein shall survive the execution and
delivery of this Agreement and the closing of the transactions contemplated
hereby.
(f) Notices. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be delivered by hand, sent
via a reputable nationwide overnight courier service or mailed by first class
certified or registered mail, return receipt requested, postage prepaid:
If to the Company or the Guarantor, at Xxx Xxxxxx Xxxxxx, Xxxxxxx
Xxxxx, Xxxxx 0000, Xxx Xxxxxxxxx, XX 00000, Attention: General Counsel, or at
such other address or addresses as may have been furnished in writing by the
Company to the Lender, with a copy to Xxxxxx Sonsisni Xxxxxxxx & Xxxxxx, 000
Xxxx Xxxx Xxxx, Xxxx Xxxx, XX 00000, Attn: N. Xxxxxxx Xxxxxxxx, Esq.; or
If to ComVest, at 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000, Attention:
Xxxx Xxxxxxxx, or at such other address or addresses as may have been furnished
to the Company in writing by ComVest, with a copy to Xxxxxxxxx Traurig, LLP, The
MetLife Building, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxx X.
Annex, Esq.; or
If to DCC, at 0000 Xxxxxx Xxxxxx Xxxxxxx, Xxxxx Xxxxx, Xxx Xxxxx, XX
00000, Attention: Xxxxxxx Xxxxxx, or at such other address or addresses as may
have been furnished to the Company in writing by DCC, with a copy to Xxxxxxxxx
Xxxxxxx, LLP, The MetLife Building, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxx X. Annex, Esq.
Notices provided in accordance with this Section 14(e) shall be deemed
delivered upon personal delivery, one business day after being sent via a
reputable nationwide overnight courier service, or two business days after
deposit in the mail.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts each of
which, when so executed and delivered, shall be an original but all of which
together shall constitute one and the same instrument.
(h) Governing Law. This Agreement shall be governed by and construed
in accordance with the law of the State of New York applicable to contracts made
and to be performed wholly therein. Any action or proceeding arising out of or
relating to this Agreement shall be commenced in a federal or state court having
competent jurisdiction in the State of New York, and for the purpose of any such
action or proceeding, each of the parties and any assignees thereof submits to
the personal jurisdiction of the State of New York. The parties hereby
irrevocably consents to the exclusive personal jurisdiction of any state or
federal court for New York County in the State of New York or the Southern
District of New York. The parties hereby waive any objection to venue and any
objection based on a more convenient forum in any action instituted under this
Agreement.
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(h) 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.
(i) 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.
(j) Further Assurances. The parties shall execute and deliver any
other documents, agreements, certificates or instruments required in order to
consummate the transactions contemplated by this Agreement and the other Closing
Documents.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
COMPANY:
COMMERCE ONE, INC.
By /s/Xxxx X. Xxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxx
Title: Chief Executive Officer
GUARANTOR:
COMMERCE ONE OPERATIONS, INC.
By /s/Xxxx X. Xxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxx
Title: Chief Executive Officer
LENDERS:
COMVEST INVESTMENT PARTNERS II LLC
By:/s/Xxxxxx Blue
-------------------------------
Name: Xxxxxx Blue
Title: President
DCC VENTURES, LLC
By:/s/Xxxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Secretary and Treasurer
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