<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 31, 1996
------------------------------
BBN CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 1-6435 04-2164398
- --------------------------------------------------------------------------------
(State or other jurisdiction Commission File (I.R.S. Employer
of incorporation) Number) Identification No.
150 CambridgePark Drive, Cambridge, MA 02140
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 873-2000
-------------------------------
<PAGE> 2
Item 2. Acquisition or Disposition of Assets.
On June 29, 1996 ABS Capital Partners, L.P., ABS Capital Partners II, L.P.,
St. Paul Fire and Marine Insurance Company, and FSC Corporation (together the
"Investors"), the Registrant, and BBN Domain Corporation (then, a wholly-owned
subsidiary of Registrant) entered into a Stock Purchase Agreement the
("Agreement") pursuant to which BBN Domain Corporation ("Domain") was to be
recapitalized, the Investors were to purchase all of the shares of two new
series of preferred stock of Domain (one series of which was redeemable
convertible (voting) preferred and the other series of which was redeemable
(non-voting) preferred) in exchange for $36,000,000, and the majority of the
common stock of Domain owned by Registrant was to be redeemed from Registrant in
exchange for $36,000,000. Registrant was to retain common stock which
constitutes, on a fully diluted basis, approximately 15% of the voting stock of
Domain. The closing of the transaction occurred on July 31, 1996 consistent with
the terms of the Agreement. In connection with the closing, the name of Domain
was changed to Domain Solutions Corporation.
The consideration paid by the Investors for the preferred stock of Domain,
and the consideration paid to Registrant in the redemption of shares of common
stock of Domain, was determined in arm's-length negotiations.
A copy of the Agreement is attached hereto as Exhibit I and the foregoing
statements with respect to the terms of the Agreement are qualified in their
entirety by reference to the attached Exhibit 1.
<PAGE> 3
Item 7. Financial Statements and Exhibits
b. Pro Forma Financial Information.
For purposes of this presentation, pro forma adjustments have been made to
the results of operations and balance sheets of Registrant to provide
information as to how the disposition of a majority interest of BBN Domain
Corporation might have affected the statement of operations and financial
position of Registrant. The unaudited pro forma consolidated balance sheet of
Registrant was prepared as if the disposition had occurred on June 30, 1996. The
unaudited pro forma consolidated statement of operations of Registrant was
prepared as if the disposition had occurred on July 1, 1995. This unaudited pro
forma information does not purport to be indicative of the results of operations
of Registrant that would have been obtained if the disposition had occurred on
July 1, 1995, and is not intended to be a projection of future results.
The following pro forma information is provided herewith:
1. Unaudited Pro Forma Consolidated Balance Sheet of Registrant as of
June 30, 1996
2. Unaudited Pro Forma Consolidated Statement of Operations of Registrant
for the Year Ended June 30, 1996
3. Unaudited Explanatory Notes to the Pro Forma Consolidated Financial
Statements
c. Exhibits.
1. Stock Purchase Agreement dated as of June 29, 1996 among BBN Corporation,
BBN Domain Corporation, ABS Capital Partners, L.P., ABS Capital Partners
II, L.P., St. Paul Fire and Marine Insurance Company, and FSC Corporation.
The exhibits to the Stock Purchase Agreement (except for Exhibits A, B,
C-1, and C- 2, which are filed herewith) are not being filed herewith.
Except to the extent covered by an application for an order pursuant to
Rule 24b-2 under the Securities Exchange Act of 1934, granting confidential
treatment of certain contractual provisions, which application may be filed
in the future, a copy of any other exhibit will be furnished supplementary
to the Commission, upon request. A description of the exhibits identifying
the contents of such exhibits is contained in the Stock Purchase Agreement,
and a listing of the exhibits is contained in the Table of Contents to the
Stock Purchase Agreement.
<PAGE> 4
BBN Corporation
<TABLE>
Pro Forma Consolidated Balance Sheet
As of June 30, 1996
(in thousands)
(unaudited)
<CAPTION>
6/30/96 Pro Forma 6/30/96
Actual Adjustments Pro Forma
------ ----------- ---------
<S> <C> <C> <C>
Assets:
- -------
Current assets:
Cash and cash equivalents (includes restricted $ 79,533 $36,000 $115,533
cash of $4,711 at June 30, 1996 and $12,134
at June 30, 1995)
Short-term investments 40,742 40,742
Accounts receivable, net 60,825 60,825
Other current assets 10,314 10,314
Net assets of discontinued operations 8,082 (8,082)
-------- ------- --------
Total current assets 199,496 27,918 227,414
Property, plant & equipment, net 48,069 48,069
Other assets 1,772 1,772
-------- ------- --------
$249,337 $27,918 $277,255
======== ======= ========
Liabilities and Shareholders' Equity:
- -------------------------------------
Current liabilities:
Payables and other liabilities $ 52,380 $ 7,918 $ 60,298
Accrued restructuring 7,352 7,352
Short-term capital lease obligation 4,110 4,110
Deferred revenue 15,369 15,369
-------- ------- --------
Total current liabilities 79,211 7,918 87,129
6% convertible subordinated debentures due 2012 73,170 73,170
Capital lease obligation 8,866 8,866
Commitment and contingencies
Minority interest 754 754
Redeemable convertible preferred stock of subsidiary 8,000 8,000
Shareholders' equity 79,336 20,000 99,336
-------- ------- --------
$249,337 $27,918 $277,255
======== ======= ========
</TABLE>
The accompanying explanatory notes are an integral part of the pro forma
consolidated financial statements
<PAGE> 5
<TABLE>
BBN Corporation
Pro Forma Consolidated Statement of Operations
For the Year Ended June 30, 1996
(in thousands except per-share amounts)
(unaudited)
<CAPTION>
6/30/96 Pro Forma 6/30/96
Actual Adjustments Pro Forma
------ ----------- ---------
<S> <C> <C> <C>
Revenue:
Services $ 216,551 $ $ 216,551
Products 17,788 17,788
----------- ----------- -----------
234,339 234,339
----------- ----------- -----------
Costs and expenses:
Costs of services 170,521 170,521
Costs of products 11,489 11,489
Research and development expenses 12,929 12,929
Selling, general and administrative expenses 75,064 75,064
Goodwill write-off and other charges 20,718 20,718
----------- ----------- -----------
290,721 290,721
----------- ----------- -----------
Loss from operations (56,382) (56,382)
Interest income 4,649 4,649
Interest expense (4,697) (4,697)
Minority interest (110) (110)
Other income, net 38 38
----------- ----------- -----------
Loss from continuing operations before income taxes (56,502) (56,502)
Benefit for income taxes (6,600) (6,600)
----------- ----------- -----------
Loss from continuing operations (49,902) (49,902)
Income (loss) from discontinued operations, net of tax (6,740) 20,000 13,260
----------- ----------- -----------
Net income (loss) $ (56,642) $ 20,000 $ (36,642)
=========== =========== ===========
Per-share amounts:
Loss from continuing operations $ (2.80) $ $ (2.80)
Income (loss) from discontinued operations, net of tax (0.38) 1.12 0.74
----------- ----------- -----------
Net income (loss) $ (3.18) $ 1.12 $ (2.06)
=========== =========== ===========
Shares used in per-share calculations 17,818,000 17,818,000 17,818,000
</TABLE>
The accompanying explanatory notes are an integral part of the pro forma
consolidated financial statements
<PAGE> 6
BBN CORPORATION
Explanatory Notes to the Pro Forma Consolidated Financial Statements
(unaudited)
A. Basis of Presentation
On July 31, 1996, the Registrant finalized the divestiture of a majority
interest in its BBN Domain Corporation subsidiary as described in Item 2.
of this Form 8-K. These pro forma consolidated financial statements reflect
the impact this divestiture would have had on Registrant's consolidated
historical financial statements provided herein.
B. Pro Forma Adjustments to Consolidated Balance Sheet
<TABLE>
The consolidated balance sheet as of June 30, 1996 presents as net assets
of discontinued operations the following:
<S> <C>
Assets:
Cash and cash equivalents $ 2,334
Accounts receivable, net 12,373
Property, plant & equipment, net 5,135
Other assets 2,832
-------
Total assets $22,674
-------
Liabilities:
Payables and other liabilities $ 5,943
Deferred revenue 8,649
-------
Total liabilities $14,592
-------
Net assets $ 8,082
=======
</TABLE>
The pro forma adjustments reflect the $36,000,00 cash consideration
received. The gain from the sale is currently estimated to be approximately
$20,000,000 after considering estimated costs of approximately $8,000,000
including facilities, employee-related and other costs to be incurred in
connection with the divestiture.
C. Pro Forma Adjustments to Consolidated Statement of Operations
<TABLE>
The consolidated statement of operations includes the following revenue and
expenses associated with BBN Domain Corporation:
<S> <C>
Revenue $41,322
Costs and expenses:
Cost of revenue 10,238
Research and development expenses 11,561
Selling, general and administrative expenses 26,356
--------
48,155
--------
Loss from operations (6,833)
Other income, net 93
--------
Net loss $(6,740)
========
</TABLE>
The other adjustments include the estimated $20,000,000 net gain to be
recorded.
<PAGE> 7
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BBN Corporation
By: /s/ Paul F. Brauneis
----------------------------------
Paul F. Brauneis
Vice President and Corporate Controller
Date: August 14, 1996
<PAGE> 8
EXHIBIT INDEX
Exhibit
Number Description of Exhibits
1. Stock Purchase Agreement dated as of June 29, 1996 among
BBN Corporation, BBN Domain Corporation, ABS Capital
Partners, L.P., ABS Capital Partners II, L.P., St. Paul Fire and
Marine Insurance Company, and FSC Corporation, and exhibits
A, B, C-1 and C-2.
<PAGE> 1
EXHIBIT 1
STOCK PURCHASE AGREEMENT
AMONG
BBN DOMAIN CORPORATION
BBN CORPORATION
AND
THE INVESTORS NAMED ON
EXHIBIT A HERETO
DATED AS OF JUNE 29, 1996
<PAGE> 2
TABLE OF CONTENTS
Page
1. DEFINITIONS............................................................ 1
2. SALE AND PURCHASE OF SHARES............................................ 1
2.1. Sale and Purchase of Shares................................... 1
2.2. Payment at the Closing........................................ 2
3. ADDITIONAL UNDERTAKINGS AND COVENANTS.................................. 2
3.1. Consents and Approvals........................................ 2
3.2. Access; Investigations by the Investors....................... 3
3.3. Operation of Business of the Company.......................... 4
3.4. Amendments to the Company's Articles of Organization.......... 6
3.5. No Inconsistent Negotiations.................................. 6
3.6. News Releases................................................. 7
3.7. Employees..................................................... 7
3.8. Transfer of Employee Benefits................................. 8
3.9. Reorganization of International Operations.................... 9
3.10. Subsequent Events............................................. 11
3.11. Change of Name................................................ 11
3.12. Audit......................................................... 11
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND BBN.................. 12
4.1. Organization and Standing..................................... 12
4.2. Subsidiaries.................................................. 12
4.3. Certificate or Articles of Organization and Bylaws............ 13
4.4. Capitalization................................................ 13
4.5. Directors, Officers and Employees............................. 13
4.6. Financial Statements and Forecasts............................ 14
4.7. No Liabilities................................................ 15
4.8. Accounts Receivable........................................... 15
4.9. Taxes ...................................................... 15
4.10. Conduct of Business; Absence of Material Adverse Change....... 17
4.11. Title to Property and Assets.................................. 18
4.12. Insurance..................................................... 18
4.13. Intellectual Property......................................... 18
4.14. Debt Instruments.............................................. 20
4.15. Leases ...................................................... 21
4.16. Other Agreements.............................................. 21
4.17. Books and Records............................................. 22
4.18. Litigation; Disputes.......................................... 23
4.19. Labor Relations............................................... 23
4.20. Pension and Benefit Plans..................................... 24
4.20.1. Disclosure Schedule............................... 24
4.20.2. Copies of Documents............................... 24
4.20.3. Multiemployer Plans............................... 24
<PAGE> 3
4.20.4. ESOPs............................................. 24
4.20.5. Title IV Plans.................................... 24
4.20.6. Unpaid Contributions.............................. 24
4.20.7. Contributions and Other Obligations............... 25
4.20.8. Qualified Plans................................... 25
4.20.9. Compliance with Law............................... 25
4.20.10. ERISA; Prohibited Transactions.................... 25
4.20.11. Foreign Plan...................................... 25
4.20.12. Welfare Plans..................................... 26
4.20.13. Post-retirement Plans............................. 26
4.20.14. Health Care Continuation Coverage Requirements.... 26
4.20.15 Filed Returns and Reports......................... 26
4.21. Environmental................................................. 27
4.22. Transactions with Related Parties............................. 27
4.23. Restrictions and Consents..................................... 27
4.24. Authorization................................................. 28
4.25. Absence of Violation.......................................... 28
4.26. Copies of Documents........................................... 29
4.27. Binding Obligation............................................ 29
4.28. Status of Shares.............................................. 29
4.29. Offering of Shares............................................ 29
4.30. Disclosure.................................................... 30
5. REPRESENTATIONS AND WARRANTIES OF BBN.................................. 30
5.1. Title to Common Stock......................................... 30
5.2. Authority and Capacity........................................ 30
5.3. Absence of Violation.......................................... 30
5.4. Restrictions and Consents..................................... 31
5.5. Binding Obligation............................................ 31
6. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS........................ 31
6.1. Organization and Standing..................................... 31
6.2. Authorization................................................. 31
6.3. Binding Obligation............................................ 32
7. RESTRICTED SECURITIES.................................................. 32
7.1. No Registration Under the Securities Act...................... 32
7.2. Acquisition for Investment.................................... 32
7.3. Evaluation of Merits and Risks of Investment.................. 32
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND BBN............. 33
8.1. Representations and Warranties................................ 33
8.2. Performance................................................... 33
8.3. Legal Proceedings............................................. 33
8.4. Hart-Scott-Rodino............................................. 33
8.5. Investor Representative's Certificate......................... 34
8.6. Stockholders Agreement........................................ 34
8.7. Documents at Closing.......................................... 34
<PAGE> 4
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE INVESTORS................... 34
9.1. Representations and Warranties................................ 34
9.2. Performance................................................... 35
9.3. Absence of Adverse Changes.................................... 35
9.4. Legal Proceedings............................................. 35
9.5. Officer's Certificate......................................... 35
9.6. Stockholders' Certificate..................................... 35
9.7. Opinion of Counsel............................................ 35
9.8. Stockholders Agreement........................................ 36
9.9. Documents at Closing.......................................... 36
9.10. Resignations of Directors..................................... 36
9.11. Consents...................................................... 36
9.12. Amendments to the Company's Articles of Organization.......... 36
9.13. Insurance Coverage............................................ 37
9.14. Satisfactory Sublease of Domestic and International Offices... 37
9.15. Assignment of Certain Rights.................................. 37
9.16. ABS/CalPERS Certificate....................................... 38
9.17. Delivery of Unaudited Financial Statements.................... 38
9.18. Transition Services........................................... 38
9.19. 1993 Stock Option Plan........................................ 38
10. CLOSING................................................................ 39
10.1. Closing of Sale and Purchase.................................. 39
10.2. Deliveries by the Company and BBN to the Investor
Representative.............................................. 39
10.3. Deliveries by the Investors to the Company and BBN............ 40
10.4. Deliveries by the Company to BBN.............................. 40
11. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION; REMEDIES; TAX MATTERS.... 40
11.1. Survival of Representations................................... 40
11.2. Agreement of BBN to Indemnify................................. 40
11.3. Conditions of Indemnification................................. 42
11.4. Specific Performance.......................................... 43
11.5. Tax Matters................................................... 43
12. TERMINATION............................................................ 44
12.1. Termination................................................... 44
12.2. Effect of Termination......................................... 45
13. MISCELLANEOUS.......................................................... 45
13.1. Additional Actions and Documents.............................. 45
13.2. No Brokers.................................................... 45
13.3. Expenses...................................................... 45
13.4. Assignment.................................................... 46
13.5. Entire Agreement; Amendment................................... 46
13.6. Waiver........................................................ 46
13.7. Consent to Jurisdiction....................................... 47
<PAGE> 5
13.8. Severability.................................................. 47
13.9. Governing Law................................................. 47
13.10. Notices....................................................... 47
13.11. Headings...................................................... 49
13.12. Execution in Counterparts..................................... 49
13.13. Limitation on Benefits........................................ 49
13.14. Binding Effect................................................ 49
Exhibit A List of Investors, Shares to be Purchased and Purchase Price
Payable at Closing
Exhibit B Definitions
Exhibit C-1 Terms of Series A Preferred Stock
Exhibit C-2 Terms of Series B Preferred Stock
Exhibit D Form of Non-Competition Agreement
Exhibit E Form of Stockholders Agreement
Exhibit F Form of Opinion of Ropes & Gray
Exhibit F-2 Matters to be Covered in Opinion of Baker & McKenzie
Exhibit G Form of Sublease for Cambridge Facility
Exhibit H Employees of the Company and the Subsidiaries at the Closing
Date
Exhibit I ABS/CalPERS Certificate
<PAGE> 6
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is entered into as of June 29, 1996 among BBN
Domain Corporation, a Massachusetts corporation (the "Company"), BBN
Corporation, a Massachusetts corporation "BBN"), and ABS Capital Partners, L.P.
(the "Investor Representative") and each other Person listed on EXHIBIT A hereto
(each such Person, an "Investor" and collectively, the "Investors").
WHEREAS, BBN is the owner of all of the issued and outstanding capital
stock of the Company;
WHEREAS, the Company desires to issue to the Investors, and the Investors
desire to subscribe for and acquire from the Company, a substantial equity
interest in the Company, upon the terms and conditions hereinafter set forth;
WHEREAS, the Company intends to use the proceeds received from the
Investors to redeem certain shares of its Common Stock $.01 par value (the
"Common Stock"), held by BBN;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby agree
as follows:
1. DEFINITIONS
For all purposes of this Purchase Agreement, certain capitalized terms
specified in EXHIBIT B shall have the meanings set forth in that EXHIBIT B.
except as otherwise expressly provided.
2. SALE AND PURCHASE OF SHARES
2.1. Sale and Purchase of Shares
On the basis of the representations, warranties and agreements contained
herein, and subject to the terms and conditions hereof, the Company agrees to
issue to the Investors and BBN agrees to cause the Company to issue to the
Investors, and each Investor severally agrees to purchase from the Company, the
number of shares of (a) the Company's Series A Redeemable Preferred Stock, no
par value per share (the "Series A Preferred Stock") and (b) the Company's
Series B Convertible Preferred Stock, no par value per share (the "Series B
Preferred Stock,"
<PAGE> 7
and together with the Series A Preferred Stock, the "Shares"), in each case as
set forth opposite the name of such Investor on EXHIBIT A at the purchase price
specified thereon.
2.2. Payment at the Closing
(a) At the Closing, each Investor shall pay to the Company by wire transfer
of immediately available funds the amount set forth opposite the name of such
Investor in the column on EXHIBIT A entitled "Purchase Price Payable at
Closing," which amounts total $36,000,000.
(b) Upon receipt of the aggregate purchase price for the Shares, the
Company shall immediately redeem 9,800,000 shares of its Common Stock held by
BBN at an aggregate redemption price of $36,000,000 (the "Redemption").
3. ADDITIONAL UNDERTAKINGS AND COVENANTS
The Company and BBN jointly and severally, on the one hand, and the
Investors severally but not jointly on the other hand, hereby covenant and agree
with each other as follows:
3.1. CONSENTS AND APPROVALS
(a) The Company, BBN and the Investors shall take all commercially
reasonable measures to secure such consents, authorizations and approvals
of governmental and supragovernmental authorities and of private persons or
entities with respect to the transactions contemplated by this Purchase
Agreement, and to the performance of all other obligations of such parties
hereunder, as may be required by any applicable statute or regulation of
the United States or any country state or other jurisdiction or by any
Agreement of any kind whatsoever to which the Company, any Subsidiary, BBN
or any Investor is a party or by which the Company, any Subsidiary, BBN or
any Investor is bound.
(b) The Company, BBN and the Investors shall (i) cooperate in the
filing of all forms, notifications, reports and information, if any,
required or reasonably deemed advisable pursuant to applicable statutes,
rules, regulations or orders of any governmental or supragovernmental
authority in connection with the transactions contemplated by this Purchase
Agreement and (ii) use their respective good faith efforts to cause any
applicable waiting periods thereunder to expire and any objections to the
transactions contemplated hereby to be withdrawn before the Closing.
-2-
<PAGE> 8
3.2. ACCESS; INVESTIGATIONS BY THE INVESTORS
(a) The Company and BBN shall, through the Closing Date, provide to
the Investors, the Investor Representative, Hogan & Hartson L.L.P., KPMG
Peat Marwick, the Gartner Group and other parties reasonably agreed to by
the Company and BBN (collectively, the "Evaluators"), upon reasonable
advance notice full access to the offices, books agreements, records
(including, without limitation, tax returns and correspondence with
accountants), officers, directors, employees, consultants and contractors
of the Company and to the offices, books agreements and records of BBN
(to the extent the same relates to the business of the Company) provided
that such access shall not unreasonably interfere with normal business
operations, and will Furnish the Evaluators such financial and operating
data and other information with respect to the businesses and Assets of the
Company as the Investors may request, including, without limitation,
Agreements with clients, customers, vendors, lessors, licensors and
suppliers of the Company. Each Investor and Evaluator agrees at all times
through Closing Date to use reasonable efforts, at least as stringent as
those employed by it with respect to its own confidential information, (i)
to keep confidential all such information that is identified as being of a
confidential nature, (ii) not to use such confidential information on its
own behalf, except in connection with the transactions contemplated hereby,
or on behalf of any other person, firm or entity, and (iii) not to disclose
such confidential information to any third party (other than to the
Investors' counsel, accountants and other consultants, each of whom the
Investors will cause to be bound by the provisions of this SECTION 3.2, in
connection with the transactions contemplated hereby) without the Company's
advance written authorization; PROVIDED, HOWEVER, that the Investors shall
have no such obligations with respect to confidential information that (A)
was lawfully obtained by it not subject to restrictions of confidentiality;
(B) is a matter of public knowledge; or (C) has been or is hereafter
publicly disclosed other than by or through the Investors. In the event
this Purchase Agreement is terminated, the Investor Representative will
return to the Company or BBN, as the case may be, or destroy, at the
Company's option, all documents, workpapers and other materials Furnished
to the Investors relating to the transactions contemplated hereunder,
whether obtained before or after the execution of this Purchase Agreement.
In the event of a breach or threatened breach by any Investor of the
provisions of this Section, the Company or BBN, as the case may be, shall
be entitled to an injunction restraining that Investor from disclosing, in
whole or in part, such information.
(b) The Company hereby acknowledges that it has obtained and may
continue to obtain knowledge of and access to confidential and valuable
business information relating to the Investors not generally known by or
available to the general public. Each of the Company and BBN agrees at all
times through the Closing Date to use reasonable efforts, at least as
stringent as those employed by it with respect to its own confidential
information, (i) to keep confidential all such information that is
identified as being of a confidential nature, (ii) not to use
-3-
<PAGE> 9
such confidential information on its own behalf, except in connection with the
transactions contemplated hereby, or on behalf of any other person, firm or
entity, and (iii) not to disclose such confidential information to any third
party (other than to such Person's counsel, accountants and other consultants in
connection with the transactions contemplated hereby) without the Investor
Representative's advance written authorization; PROVIDED, HOWEVER, that neither
the Company nor BBN shall have such obligations with respect to confidential
information that (A) was lawfully obtained by it not subject to restrictions of
confidentiality; (B) is a matter of public knowledge; or (C) has been or is
hereafter publicly disclosed other than by or through the Company or BBN. In the
event this Purchase Agreement is terminated, the Company and BBN will return to
the Investor Representative all documents, workpapers and other materials
Furnished to the Company and BBN relating to the transactions contemplated
hereunder, whether obtained before or after the execution of this Purchase
Agreement. In the event of a breach or threatened breach by the Company or BBN
of the provisions of this Section, the Investor Representative shall be entitled
to an injunction restraining the Company or BBN, as the case may be, from
disclosing, in whole or in part, such information.
(c) The Investors' investigation of the financial and operating data,
Assets, Real Property and other information with respect to the businesses and
Assets of the Company and the Subsidiaries shall in no way affect the
obligations of the Company and BBN with respect to the agreements,
representations warranties, covenants and indemnification provisions set forth
in this Purchase Agreement.
3.3. OPERATION OF BUSINESS OF THE COMPANY
(a) The Company and the Subsidiaries shall, through the Closing Date,
use commercially reasonable efforts to (i) preserve their business organizations
and their present relationships with customers, suppliers, consultants,
employees and any other persons having business relations with them; and (ii)
maintain all of their respective Assets in customary repair and condition.
(b) Except as contemplated by this Purchase Agreement, as set forth in
the Disclosure Schedule, or as reasonably required to carry out their
obligations hereunder, the Company and the Subsidiaries shall, through the
Closing Date, conduct their respective businesses only in the Ordinary Course of
Business and, in addition, not: (i) issue any capital stock or any options,
warrants or other rights to subscribe for or purchase any of their capital stock
or any securities convertible into or exchangeable for their capital stock; (ii)
declare, set aside or pay any dividend or distribution with respect to their
capital stock; (iii) directly or indirectly redeem, purchase or otherwise
acquire any of their capital stock; (iv) effect a split, reclassification or
other change in or of any of their capital stock; (v) amend their certificate or
articles of organization or their bylaws or equivalent constituent documents
(except for such changes and amendments in the certificate
-4-
<PAGE> 10
or articles of organization of the Company as may be required by SECTIONS 3.4
and 9.11); (vi) grant any increase in the compensation payable or to become
payable by the Company or any Subsidiary to officers or employees of the Company
or any Subsidiary, or enter into any bonus, insurance, pension or other benefit
plan, payment or arrangement for or with any of such officers or employees other
than in the Ordinary Course of Business and in amounts not material to the
Company and the Subsidiaries, taken as a whole; (vii) borrow or agree to borrow
any funds, or directly or indirectly guarantee or agree to guarantee the
obligations of others; (viii) enter into any Agreement which may have a material
adverse effect on the businesses and operations of the Company and the
Subsidiaries, taken as a whole; (ix) place, or allow to be placed, an
Encumbrance on any Asset having a value equal to or in excess of $10,000, or
Assets having an aggregate value in excess of $25,000 ("Material Assets"); (x)
cancel any indebtedness owing to the Company or any Subsidiary or any Claims
which the Company or any Subsidiary may possess, or waive any rights of
substantial value; (xi) sell, assign or transfer any Intellectual Property
other than in the Ordinary Course of Business; (xii) sell or otherwise dispose
of any interest in any Material Asset (other than in the Ordinary Course of
Business); (xiii) violate any Law or commit any act or omit to do any act, or
engage in any activity or transaction or incur any obligation (by conduct or
otherwise), which (individually or in the aggregate) reasonably could be
expected to have a material adverse effect on the businesses of the Company and
the Subsidiaries, taken as a whole, or any of their Material Assets; or (xiv)
make any loan or advance to, or pay any amounts in respect to indebtedness owing
to, BBN or any officer or director of the Company or any Subsidiary or to any
other person, firm or corporation. Prior to the Closing Date, the Company and
BBN (i) will not do any of the things listed in clauses (b) through (r) of
SECTION 4.10 and (ii) will maintain all insurance referred to in SECTION 4.12.
(c) The Company shall notify the Investor Representative promptly of
any material adverse change in the business, operations, prospects, condition
(financial or otherwise), Assets or liabilities of the Company or of any
Subsidiary, including, without limitation, information (including, without
limitation, copies of all Documents relating thereto) concerning all Claims
instituted, or, to the Company's knowledge, threatened or asserted against or
affecting the Company or any Subsidiary or their respective businesses or
Assets at law or in equity or admiralty, before or by any court or governmental
authority.
(d) The Company and the Subsidiaries shall keep proper books of record
and account in which true and complete entries will be made of all transactions
in accordance with generally accepted accounting principles applied on a basis
consistent with prior periods, and shall supply to the Investor Representative
monthly unaudited Consolidated balance sheets and statements of income of the
Company, prepared in compliance with SECTION 4.6, as soon as practicable after
the end of each month, and such other Documents (financial or otherwise) as the
Investor Representative shall request. All such financial
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<PAGE> 11
statements and other Documents shall be attached to and made a part of the
Disclosure Schedule, but shall not excuse breaches of representations,
warranties, covenants and agreements disclosed in such statements and other
Documents.
(e) The Company shall inform and discuss with the Investor
Representative on a regular and ongoing basis the management of the businesses
and Assets of the Company and the Subsidiaries, including, without limitation
any significant new Agreements or transactions proposed to be entered into or
persons (those scheduled compensation for the fiscal year ending June 30, 1996
or proposed annual base salary exceeds $50,000) proposed to be employed or
terminated by the Company or by any Subsidiary, and any other significant
developments relating to the businesses or Material Assets of the Company or of
any Subsidiary; PROVIDED HOWEVER, that the Investor Representative shall have no
express or implied power, authority or responsibility with respect to the
Company, any Subsidiary or their businesses, Assets or Agreements.
3.4. AMENDMENTS TO THE COMPANY'S ARTICLES OF ORGANIZATION
The Company and BBN shall take all actions (corporate and otherwise)
necessary to duly authorize, adopt, file and otherwise make effective on or
prior to the Closing Date amendments and supplements to the articles of
organization of the Company setting forth the rights and preferences of the
Series A Preferred Stock and the Series B Preferred Stock in form satisfactory
to the Investor Representative and having the terms set forth on EXHIBIT C.
3.5. NO INCONSISTENT NEGOTIATIONS
Neither the Company nor BBN shall, nor shall any of them permit or
authorize any director, officer, employee or other agent of the Company or BBN,
directly or indirectly, to
(i) take any action to solicit, initiate or encourage the
submission of a Proposal, or
(ii) participate in any negotiations regarding, or furnish to any
other person, entity or group any non-public information with respect to, or
otherwise cooperate in any way with, or assist or participate in, facilitate, or
encourage, any effort or attempt by any other person, entity or group to do or
seek any of the foregoing.
In addition, the Company and BBN shall use commercially
reasonable efforts to cause any financial adviser engaged by the Company or BBN
for any purpose within the past 12 months to refrain from taking any of the
actions referred to, in clause (i) or (ii) of the immediately preceding
sentence. The Company and BBN shall immediately cease and cause to be terminated
any existing discussions
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<PAGE> 12
or negotiations with any parties (other than the Investors) conducted heretofore
with respect to any of the foregoing. BBN shall notify the Investor
Representative promptly if any Proposal, or any inquiry or contact with any
person with respect thereto, is made and shall, in any such notice to the
Investor Representative indicate in reasonable detail the identity of the of
offeror and the terms and conditions of the Proposal including the proposed
financing, for such Proposal. BBN shall not respond to any such Proposal.
3.6. NEWS RELEASES
Except as may be otherwise required for compliance with applicable federal
securities laws and New York Stock Exchange requirements, none of the Investor
Representative, any Investor, BBN or the Company shall issue or approve any news
release or other public announcement concerning the transactions contemplated by
this Purchase Agreement without the prior approval of the Investor
Representative and BBN (which approval shall not be unreasonably withheld).
3.7. EMPLOYEES
(a) The Company and each Subsidiary shall use commercially reasonable
efforts to cause (i) John Kish, James Buzzard, Connie Araps and Jeff Palmer to
execute and deliver an Agreement Not to Compete, dated as of the Closing Date,
substantially in the form of EXHIBIT D. (ii) any employees to whom the Investor
Representative, or after the Closing Date, the Company or any Subsidiary, makes
offers of employment or continued employment for the period following the
Closing Date to accept such offers of employment, and (iii) a11 persons listed
on EXHIBIT H hereto to enter into non-disclosure agreements with the Company
prior to the Closing Date in a form approved by the Investor Representative.
(b) The Company or its Subsidiaries shall employ at the Closing Date only
those persons listed on EXHIBIT H hereto, and BBN and the Company shall take all
actions necessary prior to the Closing Date to cause the Company or its
Subsidiaries to employ only such persons on such date or, as to those employees
not shown on EXHIBIT H who remote employed or entitled to employments after the
Closing Date. BBN shall provide full indemnification to the Comply, the
Subsidiaries and the Investors for all costs associated with such employees, as
provided below. All persons shown on EXHIBIT H shall be employed on an "at will"
basis except as the Investor Representative shall have otherwise agreed or, in
the case of employees of Subsidiaries, except as required by applicable laws or
pursuant to employment agreements described in the Disclosure Schedule, and BBN
shall be solely responsible for, and shall fully indemnify and hold harmless the
Company, the Subsidiaries and the Investors, in accordance with the provisions
of Section 11 hereof (but subject to no threshold, amount or time restriction
contained therein), against all liability for any termination payments,
severance payments, early
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<PAGE> 13
retirement payments, post-retirement benefits and payments, salaries, benefits,
consulting fees or any other amounts owing or alleged to be owing to any person
not set forth on EXHIBIT H.
3.8. TRANSFER OF EMPLOYEE BENEFITS
(a) For a period of 90 days after the Closing Date (or such other period as
the parties may agree), or until the establishment of Company plans if earlier,
BBN will provide for continued coverage for Company employees under its health
and dental plans, group life insurance and long-term disability plans subject to
the terms of those plans as in existence on the date of this Purchase Agreement.
The Company shall be liable for, and shall promptly reimburse BBN for, the costs
of such extended coverage, including premiums, contributions and payment of
benefits, other than payments in respect of claims incurred prior to the
Closing. Commencing as soon as reasonably possible after the Closing, the
Company shall establish separate employee benefit plans ("company Benefit
Plans") as it determines; provided that in all events the Company shall
establish health and dental plans, a group life insurance plan, long-term
disability plan and short-term disability plan, and a 401(k) savings plan.
Employees who were employed by the Company immediately prior to the Closing and
who are employed by the Company or its Subsidiaries immediately following the
Closing (i) shall be credited with service with BBN prior to the Closing for
purposes of the health and dental plans referred to in the preceding sentence
(the "Company Health/Dental Program") (ii) will not be subject to any
preexisting condition limitation or exclusion except to the extent they were so
limited or excluded from coverage under the related BBN plan, and (iii) will be
credited with co-payments and similar payments made in the current year under
the related BBN plan.
(b) Prior to the Closing, BBN shall take all such actions as may be
necessary to cause the Company's employees to become fully vested in their
account balances under the BBN Retirement Trust. The Company 401(k) plan will
accept a transfer of account balances of Company employees from the BBN
Retirement Trust subject to provision of evidence satisfactory to the
administrators of each plan of the tax-qualified status of the other plan.
Following such transfer, neither BBN nor the BBN Retirement Trust shall be
liable for benefits associated with e transferred accounts, except with respect
to fiduciary liabilities that arose prior to the transfer.
(c) No provision of this Section 3.8 shall create any third party
beneficiary rights in any employee, former employee, plan beneficiary or
employee's dependent in respect of continued employment (or resumed employment)
or any other matters and no provision of this Section 3.8 shall create any such
rights in any such persons in respect of any benefit plan or arrangement.
(d) Nothing herein shall prevent the Company at any time on or after the
Closing Date from terminating, reassigning, promoting or demoting
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<PAGE> 14
individual personnel or changing adversely or favorably the titles, powers,
duties, responsibilities, functions, locations, salaries, other compensation, or
terms and conditions of employment of individual officers and employees of the
Company.
(e) Nothing herein shall restrict in any way the right of the Company on or
after the Closing Date to establish, amend or terminate any employee benefit
plan, arrangement, program, policy or procedure. The Company shall be free at
all times to modify, add or delete any employee benefit plan, arrangement,
program, policy or procedure.
3.9. REORGANIZATION OF INTERNATIONAL OPERATIONS
(a) On or before Closing Date, BBN shall cause to be incorporated, as a
wholly-owned subsidiary of the Company, a Delaware corporation ("BBN Domain
International Holdings, Inc.").
(b) On or before the Closing Date, BBN shall transfer ownership from BBN to
BBN Domain International Holdings, Inc. all of BBNs stock holdings (which
constitute holdings sufficient to elect all of the members of the Board of
Directors or similar governing bodies of such entities) in the following
entities (together with the branch or subsidiary of the Company or BBN Domain
International Holdings, Inc. which shall hold the employees, assets and
agreements of BBN U.X. Limited referred to in Section 3.9(d), the "Foreign
Subsidiaries"):
(i) BBN Pty Limited (Australia);
(ii) BBN S.A. (France);
(iii) BBN Deutschlnnd GmbH (Germany);
(iv) Nihon BBN KK. (Japan); and
(v) BBN Singapore Pte. Ltd. (Singapore).
(c) On or before the Closing Date (or as soon as reasonably practicable
thereafter), BBN shall take commercially reasonable measures to cause the
following minority interests in the Foreign Subsidiaries to be transferred as
follows:
(i) BBN Securities Corporation will transfer to the Company all
of its stock holdings in BBN Pty Limited (Australia); and
(ii) George Conrades, Ralph Goldwasser, John Montjoy, and Paul
Brauneis to transfer all of their individual stock holdings (0.25% interest
each) in BBN SA. (France) to four individuals to be designated in writing by the
Company as soon as practicable following the execution of this Agreement.
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<PAGE> 15
(d) On or before the Closing Date, BBN U.K. Limited will execute
all agreements and documents as are reasonably necessary to transfer and/or
assign to the Company or a Subsidiary designated by the Company such employees,
assets aged agreements of BBN U.K. Limited related to the Company's business,
and to take all commercially reasonable further action thereafter to effectuate
such transfer.
(e) On or before the Closing Date, BBN shall (i) cause to be
incorporated as a subsidiary of BBN a Massachusetts corporation ("BBN
International Corporation"), and (ii) cause to be established in Italy a branch
office of BBN International Corporation.
(f) On or before the Closing Date, BBN will execute all
agreements and documents (including a Bill of Sale and Assignment Agreement) as
are reasonably necessary to transfer and/or reassign to BBN International
Corporation (Italian branch office) all of the employees, assets and agreements
relating to the operations to the Italian branch office of BBN S.A., and to take
all commercially reasonable further action thereafter to effectuate such
transfer.
(g) Notwithstanding the Company's direct or indirect ownership of
the Subsidiaries on the Closing Date, BBN shall be solely responsible for, and
shall fully indemnify and hold harmless the Company and the Investors against
all Liability for, in accordance with the provisions of Section 11 hereof (but
subject to no threshold, amount or time restriction contained therein) any
obligation or liability of any Subsidiary incurred prior to the Closing Date
other than in connection with the marketing and sale of Company software and
services, and related general and administrative activities, in each case in the
Ordinary Course of Business, unless BBN or the Company shall have identified
such obligation or liability to the Investor Representative prior to the Closing
Date and the Investor Representative shall have consented to the Company's or
the applicable Subsidiary's responsibility therefor in writing or except as
otherwise specifically contemplated by this Purchase Agreement. If any
Subsidiary receives any payment after the Closing Date to which BBN is entitled,
it will promptly forward the same to BBN.
(h) With respect to the Company's representative office in China,
the Company will take all steps necessary prior to the Closing Date, or as soon
as practicable thereafter, to wind down and terminate that office, and BBN shall
be solely responsible for, and shall fully indemnify and hold harmless the
Company and the Investors against all liability for, any costs associated
therewith (including both such costs of closure and operating costs from the
Closing Date until the date of such closure), in accordance with the provisions
of Section 11 hereof (but subject to no threshold, amount or time restriction
contained therein).
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<PAGE> 16
3.10. SUBSEQUENT EVENTS
The Company and BBN shall notify the Investor Representative promptly in
writing of the occurrence of any event, or the failure of any event to occur,
prior to the Closing that results in a material omission from, or a material
breach of. any of the covenants, representations or warranties made by or on
behalf of the Company, any Subsidiary or BBN in this Purchase Agreement, the
Disclosure Schedule or any other Document Furnished in connection with or
pursuant to this Purchase Agreement, but such notification shall not excuse
breaches of representations, warranties, covenants or agreements disclosed in
such notification. Prior to the Closing, Date, the Company and BBN, with the
consent of the Investor Representative, may amend the Disclosure Schedule to
reflect the occurrence of any event after the date of this Purchase Agreement
that would have been required to be so disclosed had such event occurred prior
to the date of this Purchase Agreement, it being agreed that the Company and BBN
shall have no obligation to amend the Disclosure Schedule with respect to events
occurring after the date of tilts Purchase Agreement in the Ordinary Course of
Business, the effect of which is immaterial to the Company or any Subsidiary.
3.11. CHANGE OF NAME
The Company agrees that it shall take all action as may be necessary or
appropriate to change its corporate name so as not to include the term "BBN" as
of the Closing Date. The Company further agrees that as soon as practicable but
in any event no later than December 31, 1996, (i) the Company and each of its
Subsidiaries shall have effected a similar change in all of its signs, forms,
purchase orders, invoices, contracts, letterhead, shipping labels and similar
material, and (ii) each of its Subsidiaries shall have taken all action as may
be necessary or appropriate to change its corporate name so as not to include
the term "BBN", provided, however, that the Company shall have the ability, if
necessary, to use the "BBN" designation in connection with the sale of the R/S
Series software products only if required to do so in a final order of a court
of competent jurisdiction, and only if the Company uses a commercially
reasonable standard of care ill so using the designation. It is understood that
neither the Company nor any Subsidiary is obligated to amend documents
representing transactions entered into prior to the Closing Date.
3.12. AUDIT
Within 30 days following the Closing, the Company shall prepare and deliver
to the Investor Representative a Consolidated balance sheet at June 30, 1996 and
related Consolidated statements of income, cash flow and stockholders' equity
for the fiscal year then ended, which financial statements shall be audited by
Coopers & Lybrand L.L.P. (whose expenses in performing audit shall be borne by
the Company) and accompanied by an unqualified opinion of such firm of
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<PAGE> 17
independent accountants and all related notes and schedules thereto (the "1996
Audited Financial Statements"). The 1996 Audited Financial Statements shall be
consistent with the standards for historical financial statements set forth in
Section 4.6 hereof. and all amounts shown on the 1996 Audited Financial
Statements shall, in all material respects (in the good faith judgment of the
Investor Representative), be consistent with and reflect no material adjustments
to the amounts shown on the 1996 Unaudited Statements referred to in Section
9.17 not otherwise contemplated hereunder.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND BBN
Except as specifically set forth in the Disclosure Schedule (with a
disclosure with respect to a Section of this Purchase Agreement to require a
specific reference in the Disclosure Schedule to the Section of this Purchase
Agreement to which each such disclosure applies, and no disclosure to be deemed
to apply with respect to any Section to which it does not expressly apply), the
Company and BBN jointly and severally represent and warrant (which
representation and warranty shall be deemed to include the disclosure with
respect thereto so specified in the Disclosure Schedule) to the Investors as
follows:
4.1. ORGANIZATION AND STANDING
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts, and has the
full and unrestricted corporate power and authority to own, operate and lease
its Assets, to carry on its business as currently conducted, to execute and
deliver this. Purchase Agreement and to carry out the transactions contemplated
hereby. The Company is duly qualified to conduct business as a foreign
corporation and is in good standing in the states, countries and territories
listed on the Disclosure Schedule. There is no state, country or territory
wherein the absence of licensing or qualification as a foreign corporation would
have a material adverse effect upon the business of the Company as currently
conducted.
4.2. SUBSIDIARIES
The Company has no Subsidiaries and no equity investment or other
interest in, nor has the Company made advances or loans to, any corporation,
association, partnership, joint venture or other entity, except as set forth in
the Disclosure Schedule. The Disclosure Schedule sets forth (a) the authorized
capital of each direct and indirect Subsidiary of the Company and the percentage
of the outstanding capital of each Subsidiary directly or indirectly owned by
the Company, and (b) the nature and amount of any such equity investment or
other equity interest. All equity capital of Subsidiaries directly or indirectly
held by
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<PAGE> 18
the Company has been duly authorized and validly issued and is outstanding,
fully paid and nonassessable. Except as set forth in the Disclosure Schedule,
the Company directly or indirectly through wholly owned Subsidiaries, owns
all such equity capital of the direct or indirect Subsidiaries free and clear
of all Encumbrances. Each Subsidiary is duly organized, validly existing and
in good standing (or its local equivalent) under the laws of its state or
jurisdiction of organization (as listed in the Disclosure Schedule), and has
the full and unrestricted corporate power and authority to own, operate and
lease its Assets and to carry on its business as currently conducted. Each
Subsidiary is registered to conduct business and is in good standing (or its
local equivalent) in the states, countries and territories listed in the
Disclosure Schedule. There is no state, country or territory wherein the
absence of registration as a foreign corporation would have a material adverse
effect upon the business of the Subsidiaries as currently conducted.
4.3. CERTIFICATE OR ARTICLES OF ORGANIZATION AND BYLAWS
The Company has Furnished to the Investor Representative (i) a true
and complete copy of the articles of organization and the bylaws, as currently
in effect and certified by the assistant clerk of the Company, and (ii) a true
and complete copy of the organizational documents of each Subsidiary, as
currently in effect. Such copies are attached as exhibits to, and part of, the
Disclosure Schedule.
4.4. CAPITALIZATION
The authorized capital stock of the Company consists of 13,720,000
shares of common stock $.01 par value per share (the "Common Stock"), of which,
as of the date hereof, 12,250,000 shares are outstanding; all of such
outstanding shares have been validly issued and are fully paid and
nonassessable. No shares of capital stock of the Company or any Subsidiary have
been reserved for any purpose, other than issuance pursuant to the Company's
1993 Stock Option Plan in amounts set forth in the Disclosure Schedule. Except
as set forth on the Disclosure Schedule, there are no outstanding securities
convertible into or exchangeable for the capital stock of the Company or any of
the Subsidiaries and no outstanding options, rights (preemptive or otherwise),
or warrants to purchase or to subscribe for any shares of such stock or other
securities of the Company or any of the Subsidiaries. There are no outstanding
Agreements affecting or relating to the voting, issuance, purchase, redemption,
repurchase, transfer or registration for sale under the Securities Act of the
Company's common stock any other securities of the Company, or any securities of
any Subsidiary, except as contemplated hereunder.
4.5. DIRECTORS, OFFICERS AND EMPLOYEES
The Disclosure Schedule lists all current directors and of Officers of
the Company and the Subsidiaries and all managers, employees and consultants of
the
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<PAGE> 19
Company and the Subsidiaries who, individually, have received or are scheduled
to receive compensation from the Company for the fiscal year ending June 30,
1996 in excess of $50,000, showing each such person's name, positions, and
annual remuneration and material bonuses for the current fiscal year.
4.6. FINANCIAL STATEMENTS AND FORECASTS
The Company has prepared and Furnished to the Investor Representative
and there are included as exhibits that are part of the Disclosure Schedule, the
Consolidated balance sheets of the Company and the Subsidiaries as of the end of
the fiscal years ending in each of 1994 and 1995, and the Consolidated
statements of income, stockholders' equity and changes in financial position for
each of such fiscal years, accompanied by the unqualified draft option of
Coopers & Lybrand L.L.P. The Company also has prepared and Furnished to the
Investor Representative, and there are included as exhibits that are part of the
Disclosure Schedule, (a) an internal financial reporting package, which includes
the unaudited Consolidated balance sheet of the Company as of March 31, 1996,
and the unaudited Consolidated statements of income, stockholders' equity and
chances in financial position for the nine months then ended, and (b) the
forecasted Consolidated balance sheet of the Company as of June 30, 1996 and the
forecasted Consolidated statements of income, stockholders' equity and changes
in financial position for the fiscal year then ended. Except for the forecasted
financial statements, all of the financial statements, including, without
limitation, the notes thereto, referred to in this Section or Furnished to the
Investor Representative after the date hereof pursuant to this Purchase
Agreement: (a) are in accordance with the books and records of the Company and
the Subsidiaries, (b) present fairly the Consolidated financial position of the
Company and the Subsidiaries as of the respective dates and the results of
operations and changes in financial position for type respective periods
indicated, and (c) have been prepared in accordance with generally accepted
accounting principles (subject, in the case of the March 31, 1996 statements, to
the absence of footnotes and to normal year-end adjustments) applied on a basis
consistent with prior accounting periods (except with respect to the treatment
of intercompany charges as described on the Disclosure Schedule).
With respect to the forecasted financial statements, all such
forecasted financial statements (a) have been prepared on a basis consistent
with the historical financial statements furnished pursuant to this Agreement
(except with respect to the treatment of certain intercompany charges described
on the Disclosure Schedule) and (b) represent BBNs and the Company's good faith
best judgment as to the expected financial condition and results of operations
of the Company at and for the year ended June 30, 1996. All assumptions relevant
to the preparation of the forecasted financial statements are clearly set forth
therein. The Disclosure Schedule sets forth all changes in accounting methods
(for financial accounting purposes) at any time made, agreed to, requested or
required with respect to the Company or any of the Subsidiaries.
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<PAGE> 20
4.7. NO LIABILITIES
Except as reflected in the March 31, 1996 balance sheet Furnished
pursuant to this Purchase Agreement, as described on the Disclosure Schedule or
incurred in the Ordinary Course of Business (in amounts not material to the
Company and its Subsidiaries, taken as a whole), as of March 31, 1996, there
were no liabilities (whether contingent or absolute, matured or unmatured, known
or unknown) of the Company or any Subsidiary. Except as described in the
Disclosure Schedule, since March 31, 1996, the Company has not incurred any
liabilities (whether contingent or absolute, matured or unmatured, known or
unknown) other than in the Ordinary Course of Business and in amounts that are
not material to the Company and its Subsidiaries, taken as a whole.
4.8. ACCOUNTS RECEIVABLE
The accounts receivable of the Company and the Subsidiaries shown on
the balance sheets Furnished pursuant to Section 3.3(d) or 4.6, or thereafter
acquired by any of them, have been collected or, to the knowledge of the
Company, are collectible in amounts not less than the amounts thereof carried on
the books of the Company and the Subsidiaries, except to the extent of the
allowance for doubtful accounts shown on such balance sheets and the additional
write-off of certain accounts receivable set forth on the Disclosure Schedule.
4.9. TAXES
(a) All Company Tax Returns due on or before the date hereof, or which
become due after the date hereof and on or before the Closing Date, have been,
or will be, duly filed. No penalties or other charges are or will become due
with respect to any of the Company Tax Returns so filed as the result of the
late filing thereof. All of the Company Tax Returns so filed are (or, in the
case of returns becoming due after the date hereof and on or before the Closing
Date, will be) true and complete in all respects. The Company or its
Subsidiaries: (i) have paid all Taxes due or claimed to be due by any taxing
authority in connection with any of the Company Tax Returns (without regard to
whether or not such Taxes are shown as due on such Company Tax Returns); or (ii)
have established (or, in the case of amounts becoming due after the date hereof,
prior to the Closing Date will have paid or established) in financial statements
provided to the Investor Representative pursuant to Section 3.3(d) or 4.6
adequate reserves (in conformity with generally accepted accounting principles
consistently applied) for the payment of such Taxes. The amounts set up as
reserves for Taxes on the Consolidated financial statements of the Company
Furnished pursuant to Section 3.3(d) or 4.6 are sufficient for the payment of
all unpaid Taxes, whether or not such Taxes are disputed or are yet due and
payable, for or with respect to the period, and for which the Company may be
liable in its own right (including, without limitation, by reason of being a
member of the same affiliated group) or as a transferee of the
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<PAGE> 21
Assets of, or successor to, any corporation, person, associations partnership,
Joint venture or other entity.
(b) Neither the Company nor any Subsidiary, either in its own right
(including without limitation, by reason of being a member of the same
affiliated group) or as a transferee, has or on the Closing Date will have any
liability for Taxes payable for or with respect to any periods prior to and
including the Closing Date in excess of the amounts actually paid prior to the
Closing Date or reserved for in financial statements Furnished to the Investor
Representative pursuant to Section 3.3(d) or 4.6.
(c) All Company Tax Returns have been examined by the relevant taxing
authorities, or closed without audit by applicable statutes, and all
deficiencies proposed as a result of such examinations have been paid or
settled, for all taxable years prior to and including the taxable years set
forth in the Disclosure Schedule. Except as set forth in the Disclosure
Schedule, there is no action, suit, proceeding, audit, investigation or claim
pending or, to the knowledge of the Company, threatened in respect of any Taxes
for which the Company is or may become liable, nor has any deficiency or claim
for any such Taxes been proposed, asserted or, to the knowledge of the Company
or its Subsidiaries, threatened. Except as set forth in the Disclosure Schedule
(i) no agreement, waiver or consent providing for an extension of time with
respect to the assessment or collection of any Taxes against the Company is
outstanding, and (ii) no power of attorney granted by the Company with respect
to any tax matters is currently in force.
(d) The Company has Furnished or otherwise made available to the
Investor Representative true and complete copies of all Company Tax Returns
(except returns for Subsidiaries listed on Schedule 3.9) and all written
communications relating to any such Company Tax Returns or to any deficiency or
claim proposed and/or asserted, irrespective of the outcome of such matter, but
only to the extent such items relate to tax years (i) which are subject to an
audit, investigation, examination or other proceeding, or (ii) with respect to
which the statute of limitations has not expired.
(e) The Disclosure Schedule sets forth (i) all federal tax elections
previously filed and currently in effect with respect to the Company or any of
the Subsidiaries, and (ii) all elections and consents previously filed and
currently in effect for purposes of foreign, state or local Taxes, in each case
that reasonably could be expected to affect or be binding upon the Company or
any of the Subsidiaries or their respective Assets or operations after the
Closing. The Disclosure Schedule sets forth all federal Forms 3115 filed with
respect to the Company or any of the Subsidiaries.
(f) Neither the Company nor any of the Subsidiaries (i) except as set
forth in the Disclosure Schedule, is or has ever been a partner in a partnership
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<PAGE> 22
or an, owner of an interest in an entity treated as a partnership for federal
income tax purposes; (ii) has executed or filed with the Internal Revenue
Service any consent to have the provisions of Section 341(f) of the Code apply
to it; (iii) is subject to Section 999 of the Code; (iv) is a passive foreign
investment company as defined in Section 1296(a) of the Code; or (v) is a party
to an Agreement relating to the sharing, allocation or payment of, or indemnity
for, Taxes (other than an Agreement the only parties to which are the Company,
BBN and/or the Subsidiaries).
4.10. CONDUCT OF BUSINESS; ABSENCE OF MATERIAL ADVERSE CHANGE
Other than as set forth in the Disclosure Schedule, since March 31, 1996,
there has been no material adverse change, and no change except in the Ordinary
Course of Business, in the business, operations, condition (financial or
otherwise), Assets or liabilities of the Company or, to the knowledge of the
Company's and BBN's senior management, the Company's prospects (other than
matters relating to potential customers or affecting the Company's industry
generally). Except as set forth in the Disclosure Schedule, since March 31,
1996, the Company has conducted its business diligently and substantially in the
manner heretofore conducted and only in the Ordinary Course of Business, and the
Company has not, except as contemplated by this Purchase Agreement, (a) incurred
loss of, or significant injury to, any Material Assets of the Company as the
result of any fire, explosion, flood, windstorm, earthquake, labor trouble,
riot, accident, act of God or public enemy or armed forces, or other casualty;
(b) issued any capital stock, bonds or other corporate securities or debt
instruments, granted any options, warrants or other rights calling for the
issuance thereof, or borrowed any funds; (c) incurred, or become subject to, any
obligation or liability (absolute or contingent, matured or unmatured, known or
unknown), except current liabilities incurred in the Ordinary Course of
Business; (d) discharged or satisfied any Encumbrance or paid any obligation or
liability (absolute or contingent, matured or unmatured, known or unknown) other
than current liabilities shown in the balance sheets Furnished pursuant to
Section 3.3(d) or 4.6, and current liabilities incurred since March 31, 1996 in
the Ordinary Course of Business; (e) declared or made payment of, or set aside
for payment, any dividends or distributions of any Assets, or purchased,
redeemed or otherwise acquired any of its capital stock, any securities
convertible into capital stock, or any other securities; (f) mortgaged, pledged
or subjected to any Encumbrance any of its Material Assets; (g) sold, exchanged,
transferred or otherwise disposed of any of its Material Assets, or canceled any
debts or claims, except in each case in the Ordinary Course of Business; (h)
written down the value of any Material Assets or written off as uncollectible
any notes or accounts receivable, except write-downs and write-offs in the
Ordinary Course of Business, none of which, individually or in the aggregate,
are material to the Company and the Subsidiaries, taken as a whole; (i) entered
into any transactions other than in the Ordinary Course of Business; (j)
increased the rate of compensation payable, or to become payable, by it to any
of its of officers, employees,
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agents or independent contractors over the rate being paid to them on March 31
1996, other than in the Ordinary Course of Business; (k) made or permitted any
amendment or termination of any material Agreement to which it is a party or
which it owns; (1) through negotiation or otherwise made any commitment or
incurred any liability to any labor organization; (m) made any accrual or
arrangement for or payment of bonuses or special compensation of any kind to any
director, or officer or employee, other than in the Ordinary Course of Business;
(n) directly or indirectly paid any severance or termination pay to any officer
or employee in excess of two months' salary; (o) made capital expenditures, or
entered into commitments therefor, aggregating more than $100,000; (p) made any
change in any method of accounting or accounting practice; (q) entered into any
transaction of the type described in Section 4.22; or (r) made an Agreement to
do any of the foregoing.
4.11. TITLE TO PROPERTY AND ASSETS
The Company and the Subsidiaries have good, valid and marketable title to
all Assets respectively owned by them, free and clear of all encumbrances other
than those referred to in the balance sheets Furnished pursuant to Section
3.3(d) and 4.6 (or the notes thereto). The Company and the Subsidiaries do not
own any real estate, and the Company is not now and has never been a "United
States real property holding corporation" as defined in [Section]897(c)(2) of
the Code and [Section]1.897-2(b) of the regulations promulgated thereunder. All
material items of personal property of the Company and the Subsidiaries is in
good operating condition and repair and is suitable and adequate for the uses
for which it is intended or is being used.
4.12. INSURANCE
Other than as set forth in the Disclosure Schedule, the Company has
insurance coverage under policies maintained by BBN that (a) are with insurance
companies reasonably believed by BBN to be financially sound and reputable; (b)
are in full force and effect; (c) are sufficient for compliance by the Company
and by each Subsidiary with all requirements of Law and of all Agreements to
which the Company or any Subsidiary is a party; (d) are valid and outstanding
policies enforceable against the insurer; and (e) insure against risks of the
kind customarily insured against and in amounts customarily carried by companies
similarly situated and by companies engaged in similar businesses and owning
similar properties.
4.13. INTELLECTUAL PROPERTY
(a) Except to the extent (i) that non-exclusive licenses have been granted
pursuant to license agreements with customers entered into in the
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Ordinary Course of Business, (ii) that the Company is the licensee to certain
third-party software specified on the Disclosure Schedule that is embedded in or
proprietary processes with respect to the development of, the Software (as
defined below) or (iii) as otherwise set forth on the Disclosure Schedule, the
Company has exclusive ownership of all Intellectual Property with respect to the
Clintrial, Clintrace, RS/Series, Cornerstone, Probe, Patterns and Starfire
systems software (the "Software"). All rights of the Company in such
Intellectual Property are freely transferable, other than as set forth in the
Disclosure Schedule. There are no claims or demands of any other Person (other
than licensees) pertaining to any of such Intellectual Property and no
proceedings have been instituted, or are pending or, to the Company's knowledge,
threatened, which challenge the rights of the Company in respect thereof. The
Software constitutes all of the Company's material software products. The
Company has the right to use, free and clear of claims or rights of other
Persons, all customer lists (except for any restrictions contained in license
agreements regarding disclosure by the Company of customer lists of the
licensees thereunder), designs, manufacturing or other processes, computer
software, systems, data compilations, research results and other information
required for or incident to its products or its business as presently
contemplated.
(b) The Disclosure Schedule lists all patents, patent applications,
trademarks, trademark applications and registrations and registered copyrights
owned or licensed by or registered in the name of the Company or any Subsidiary
or used or to be used by the Company or any Subsidiary in its business as
presently conducted or contemplated, and all other items of Intellectual
Property that are material to the business or operations of the Company or any
Subsidiary. The Disclosure Schedule lists those patents, patent applications,
trademarks, trademark applications and registrations and registered copyrights
which have been duly registered in, filed in or issued by the United States
Patent and Trademark Office, the United States Register of Copyrights, or the
corresponding offices of other jurisdictions as identified on the Disclosure
Schedule, and have been properly maintained and renewed in accordance with all
applicable provisions of law and administrative regulations in the United States
and each such jurisdiction.
(c) All licenses or other Agreements material to the development or use of
the Software under which the Company is granted rights in Intellectual Property
are listed on the Disclosure Schedule. Except as set forth in the Disclosure
Schedule, all such licenses or other Agreements are in full force and effect,
there is no material default by any party thereto and all of the rights of the
Company thereunder are freely assignable. To the knowledge of the Company and
BBN, the licensors under such licenses and other agreements have and had all
requisite power and authority to grant the rights purported to be conferred
thereby. True and complete copies of all such licenses or other Agreements, and
any amendments thereto, have been Furnished to the Investor Representative.
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<PAGE> 25
(d) All licenses or other Agreements under which the Company has granted
rights to others in Intellectual Property owned or licensed by the Company are
in full force and effect, there is no material default by any party thereto, all
of the rights of the Company thereunder are freely assignable and such
agreements do not contain unduly burdensome provisions or subject the Company or
any Subsidiary to any material liability or obligation other than obligations
respecting warranties of non-infringement. The assignment of any license
agreements to the Company by BBN prior to Closing will be valid and effective
and will not breach any agreements to which the Company is a party. True and
complete copies of all such licenses or other Agreements, and any amendments
thereto, have been Furnished or otherwise made available to the Investor
Representative.
(e) The Company has taken all appropriate steps required in accordance with
sound business practice to establish and preserve its ownership of all material
copyright, trade secret and other propriety rights with respect to its products
and technology. To the Company's knowledge the Company has required all
professional and technical employees and independent contractors having access
to valuable non-public information of the Company to execute agreements under
which such employees and independent contractors are required to convey to the
Company ownership of all inventions and developments conceived or created by
them in the course of their service to the Company and to maintain the
confidentiality of such information and appropriately restricting the use
thereof. The Company and BBN have no knowledge of and infringement by others of
any Intellectual Property rights of the Company.
(f) To the Company's knowledge, the present and contemplated business,
activities and products of the Company or its employees do not infringe any
Intellectual Property of any other Person. No proceeding charging the Company
with infringement of any adversely held Intellectual Property has been filed or,
to the Company's knowledge, is threatened to be filed. To the knowledge of the
Company and BBN, there exists no unexpired patent or patent application which
includes claims that would be infringed by or otherwise adversely affect the
products, activities or business of the Company. The Company is not making any
unauthorized use of any confidential information or trade secrets of any Person,
including without limitation, any former employer of any past or present
employee of the Company.
4.14. DEBT INSTRUMENTS
The Disclosure Schedule lists and briefly describes the material terms,
provisions and conditions of all mortgages, indentures, notes, guarantees and
other Agreements (other than Agreements that will terminate at the Closing) for
or relating to borrowed money (including, without limitation, conditional sales
agreements and capital leases) to which the Company or any Subsidiary is a party
or which have been assumed by the Company or any Subsidiary or to which any
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Assets of the Company or any Subsidiary are subject and, with respect to each
arrangement so listed, briefly describes the principal amount, interest rate,
original and maturity dates and any sinking fund installments, prepayment
premiums, restrictive covenants and any other material provisions. The Company
and the Subsidiaries have performed all the obligations required to be performed
by any of them to date and are not in default in any respect under any of the
foregoing, and there has not occurred any event which (whether with or without
notice, lapse of time or the happening or occurrence of any other event) would
constitute such a default.
4.15. LEASES
The Disclosure Schedule lists all leases and other Agreements under which
the Company or any Subsidiary is lessee or lessor of any Material Asset, or
holds, manages or operates any Material Asset owned by any third party, or under
which any Material Asset owned by the Company or by any Subsidiary is held,
operated or managed by a third party. The Company and the Subsidiaries are the
owners and holders of all the leasehold estates purported to be granted by the
Documents described in the Disclosure Schedule to them. Each such lease and
other Agreement is in full force and effect and constitutes a legal, valid and
binding obligation of, and is legally enforceable against, the respective
parties thereto and grants the leasehold estate it purports to grant free and
clear of all Encumbrances. All necessary governmental approvals with respect
thereto have been obtained, all necessary filings or registrations therefor have
been made, and there have been no threatened cancellations thereof and are no
outstanding disputes thereunder. The Company and the Subsidiaries have in all
respects performed all material obligations thereunder required to be performed
by any of them to date. No party is in default in any respect under any of the
foregoing, and there has not occurred any event which (whether with or without
notice, lapse of time or the happened or occurrence of any other event) would
constitute such a default. To the knowledge of the Company, all of the Assets
subject to such leases are in good operating condition and repair.
4.16. OTHER AGREEMENTS
(a) The Disclosure Schedule lists all material Agreements to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
is bound at the date hereof (other than license agreements referred to in
Section 4.16(b)). Each such Agreement is in full force and effect and
constitutes a legal, valid and binding obligation of, and is legally enforceable
against, the respective parties thereto. All necessary governmental approvals
with respect thereto have been obtained, all necessary filings or registrations
therefor have been made, and there have been no threatened cancellations thereof
and are no outstanding disputes thereunder. The Company and the Subsidiaries
have in all
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<PAGE> 27
respects performed all material obligations thereunder required to
be performed by any of them to date. No party is in default in any respect under
any of the Agreements described in the Disclosure Schedule, and there has not
occurred any event which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute such a default.
(b) Except as specified in the Disclosure Schedule (and without limiting
the foregoing), neither the Company nor any Subsidiary at a party to any oral or
written (i) Agreement for the employment of any officer, employee, consultant or
independent contractor involving payments of more than $50,000 over its
remaining term other than officers, employees, consultants or contractors set
forth on the Disclosure Schedule pursuant to Section 4.5; (ii) material license
agreement or distributor, dealer, manufacturer's representative, sales agency,
advertising, property management or brokerage agreement; (iii) Agreement with
any labor organization or other collective bargaining unit except as may be
imposed by law; (iv) Agreement for the future purchase of materials, supplies,
services, merchandise or equipment involving payments of more than $100,000 over
its remaining term (including, without limitation, periods covered by any option
to renew by either party); (v) Agreement for the purchase, sale or lease of any
real estate or other Material Assets; (vi) profit-sharing, bonus, incentive
compensation, deferred compensation, stock option, severance pay, stock
purchase, employee benefit, insurance, hospitalization, pension, retirement or
other similar plan or Agreement; (vii) Agreement for the sale of any of its
Material Assets or the grant of any preferential rights to purchase any of its
Material Assets or rights, other than in the Ordinary Course of Business; (viii)
Agreement which contains any provisions requiring the Company or any Subsidiary
to indemnity any other party thereto other than in the Ordinary Course of
Business; (ix) joint venture agreement or other Agreement involving the sharing
of profits; (x) outstanding loan to any person or entity or receivable due from
any stockholder of the Company or persons or entities controlling a controlled
by or under common control with the Company; or (xi) any Agreement (including,
without limitation, Agreements not to compete and exclusivity Agreements) that
reasonably could be interpreted to impose any material restriction on the
Company's ability to conduct its business operations in the Ordinary Course of
Business.
4.17. BOOKS AND RECORDS
The books of account, stock records, minute books and other records of the
Company and the Subsidiaries are true and complete in all material respects and
have been maintained in accordance with good business practices, and the matters
contained therein are appropriately and accurately reflected in the financial
statements of the Company Furnished pursuant to Section 4.6.
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4.18. LITIGATION; DISPUTES
(a) Except as set forth in the Disclosure Schedule, there are no actions,
suits, claims, arbitrations, proceedings or investigations pending, or, to the
Company's knowledge, threatened or reasonably anticipated against, affecting or
involving the Company or any Subsidiary or them respective businesses or Assets,
or the transactions contemplated by this Agreement, at law or in equity or
admiralty or before or by any court, arbitrator or governmental authority,
domestic or foreign. Neither the Company nor any Subsidiary is operating under,
subject to or in default with respect to any order, award, writ, injunction,
decree or judgment of any court, arbitrator or governmental authority.
(b) Neither the Company nor any Subsidiary is currently involved in or, to
the knowledge of the Company or the Subsidiaries, reasonably anticipates any
dispute with any of its current or former employees, agents, brokers,
distributors, vendors, customers, business consultants, franchisees,
franchisors, representatives or independent contractors (or any current or
former employees of any of the foregoing persons or entities) affecting the
businesses or Assets the Company or any Subsidiary.
4.19. LABOR RELATIONS
There are no strikes, work stoppages, grievance proceedings, union
organization efforts or other controversies pending or, to the Company's
knowledge, threatened or reasonably anticipated between the Company or any
Subsidiary and (i) any current or former employees of the Company or of any
Subsidiary or (ii) any union or other collective bargaining unit representing
such employees. The Company and the Subsidiaries have complied and are in
compliance with all Laws relating to employment or the workplace, including,
without limitation, provisions relating to wages, hours, collective bargaining,
safety and health, work authorization, equal employment opportunity,
immigration, withholding, unemployment compensation, worker's compensation,
employee privacy and right to know, except where a failure to comply, singly or
in the aggregate, would not have a material adverse effect to the Company and
the Subsidiaries, taken as a whole. There are no collective bargaining
agreements or employment agreements (other than agreements as may be imposed by
applicable law) between the Company or any Subsidiary and any of their
respective employees, or professional service agreements not terminable at will
relating to the businesses and Assets of the Company or of any Subsidiary, other
than as set forth on the Disclosure Schedule. The consummation of the
transactions contemplated hereby will not cause the Company, any of the
Subsidiaries or the Investors to incur or suffer any liability relating to, or
obligation to pay, severance, termination or other payments to any person or
entity except those for which BBN will fully indemnify the Company and the
Subsidiaries.
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4.20. PENSION AND BENEFIT PLANS
4.20.1. DISCLOSURE SCHEDULE
Except as set forth in the Disclosure Schedule, neither the Company nor any
Subsidiary (i) maintains any Plan or material Other Arrangement, (ii) is a party
to any Plan or material Other Arrangement or (iii) has obligations under any
Plan or material Other Arrangement.
4.20.2. COPIES OF DOCUMENTS
BBN has Furnished to the Investor Representative true and complete copies
of each of the following Documents: (i) the Documents setting forth the terms of
each U.S. Plan; (ii) for the most recent plan year, all annual reports (Form
5500 series) on each Plan that have been filed with any governmental agency;
(iii) the current summary plan description and subsequent summaries of material
modifications for each Title I Plan; (iv) all DOL opinions on any Plan and all
correspondence relating to the request for and receipt of each opinion; (v) all
IRS rulings, opinions or technical advice relating to any Plan; and (vi) all
Agreements with service providers or fiduciaries for providing services on
behalf of any Plan. For each material Other Arrangement, BBN has Furnished to
the Investor Representative true and complete copies of each policy, Agreement
or other Document setting forth or explaining the terms of the Other
Arrangement. As soon as practicable after the date of this Purchase Agreement,
BBN shall Furnish to the Investor Representative the terms of each non-U.S.
Plan.
4.20.3. MULTIEMPLOYER PLANS
No Plan is a Multiemployer Plan.
4.20.4. ESOPs
No Plan is an ESOP.
4.20.5. TITLE IV PLANS
No Plan is subject to Title IV of ERISA
4.20.6. UNPAID CONTRIBUTIONS
The Disclosure Schedule sets forth the contributions that (i) BBN or any
Subsidiary has promised or is otherwise obligated to make under the BBN
Retirement Trust and (ii) are unpaid as of the date of this Agreement.
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4.20.7. CONTRIBUTIONS AND OTHER OBLIGATIONS
BBN and the Subsidiaries have made all contributions required by and due
under the terms of the BBN Retirement Trust.
4.20.8. QUALIFIED PLANS
The BBN Retirement Trust is BBN's only Qualified Plan. The BBN Retirement
Trust complies and has complied with ERISA, the Code (including, without
limitation, the requirements for Tax qualifications described in Section 401
thereof) and all other Laws. The trust established under the BBN Retirement
Trust is exempt from federal income taxes under Section 501(a) of the Code. BBN
and the Subsidiaries have received a determination letter issued by the IRS with
respect to the BBN Retirement Trust, and BBN has Furnished to the Investor
Representative true and complete copies of such determination letter. Nothing
has occurred since the date of the most recent applicable determination letter
that would adversely affect the tax-qualified status of the BBN Retirement
Trust.
4.20.9. COMPLIANCE WITH LAW
The Company has complied with all applicable provisions of the Code, ERISA,
the National Labor Relations Act, Title VII of the Civil Rights Act of 1964, the
Age Discrimination in Employment Act, the Fair Labor Standards Act, the
Securities Act, the Securities Exchange Act of 1934, and all other Laws
pertaining to the Plans, Other Arrangements and other employee or employment
related benefits, and all premiums and assessments relating to all Plans or
Other Arrangements. The Company has no pending unfair labor practice charges,
contract grievances under any collective bargaining agreement, other
administrative charges, claims, grievances or lawsuits before any court,
governmental agency, regulatory body, or arbiter arising under any Law governing
any Plan, and there exist no facts that could give rise to such a claim.
4.20.10. ERISA; PROHIBITED TRANSACTIONS
Neither BBN nor any Subsidiary nor any of the Plans has engaged in a
violation of Section 406(a) or 406(b) of ERISA for which no exemption exists
under Section 408 of ERISA or a "prohibited transaction" (as such term is
defined in Section 4975(c)(1) of the Code), for which no exemption exists under
Section 4975(c)(2) or 4975(d) of the Code.
4.20.11. Foreign Plan
All Plans that are subject to the Laws of any jurisdiction other than the
United States of America or one of its political subdivisions have complied with
all applicable provisions of all Laws pertaining to such Plans except where a
failure
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to comply singly or in the aggregate, would not have a material adverse effect
on the Company or its Subsidiaries.
4.20.12. WELFARE PLANS
None of the Welfare Plans is funded through a trust or similar arrangement.
4.20.13. POST-RETIREMENT PLANS
Except for health care continuation coverage requirements pursuant Title 6
of ERISA, no Welfare Plan provides post-retirement medical, life insurance or
other benefits promised, provided or otherwise due now or in the future to
current, former or retired employees of the Company or any Subsidiary.
4.20.14. HEALTH CARE CONTINUATION COVERAGE REQUIREMENTS
All Welfare Plans of the Company that are subject to Section 4980B(f) of
the Code and Sections 601 through 607 of ERISA comply with and have been
administered in compliance with the health care continuation-coverage
requirements for tax-favored status under Section 4980B(f) of the Code (formerly
Section 162(k) of the Code), Sections 601 through 607 of ERISA, except where a
failure to comply, singly or in the aggregate, would not have a material adverse
effect on the Company or its Subsidiaries.
4.20.15. FILED RETURNS AND REPORTS
BBN and the Subsidiaries have (i) filed or caused to be filed all returns
and reports on Plans in which employees of the Company or Subsidiaries
participate that they are required to file and (ii) paid or made adequate
provision for all fees, interest, penalties, assessments or deficiencies that
have become due pursuant to those returns or reports or pursuant to any
assessment or adjustment that has been made relating to those returns or
reports. All other fees, interest, penalties and assessments that are payable by
or for BBN or any Subsidiary have been timely reported, fully paid and
discharged. There are no unpaid fees, penalties, interest or assessments due
from BBN or any subsidiary or from any other person that are or could become a
lien on any Asset of the Company or any Subsidiary or could otherwise adversely
affect the businesses or Assets of the Company or any Subsidiary.
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4.21. ENVIRONMENTAL
(a) The Company and each Subsidiary are in compliance with, have been in
compliance with, and have no material liability under, the Environmental Laws.
(b) The Real Property currently operated by the Company and each Subsidiary
does not contain and during the period of any ownership, tenancy or operation,
no Real Property formerly owned or operated contained, any underground
improvements used currently or in the past for the management of Hazardous
Materials, and no portion of any currently leased or operated property is or has
been used as a dump or landfill or consists of filled in land, except where the
existence thereof could not have a material adverse effect on the Company and
its Subsidiaries, taken as a whole. Neither PCBs nor asbestos-containing
materials (that would be material to the Company) are present on or in any Real
Property currently operated by the Company or its Subsidiaries.
(c) Neither the Company nor its Subsidiaries, nor any officer, director or
stockholder thereof has directly or indirectly received any Claim or knows or
suspects any fact(s) which might reasonably form the basis for any Claim
arising out of or attributable to: (i) the current or past presence, release, or
threatened, release of Hazardous Materials at or from any part of the Real
Property; (ii) the off-site disposal or treatment of Hazardous Materials
originating on or from the Real Property or the businesses or Assets of the
Company or any Subsidiary; or (iii) any violation of Environmental Laws at any
part of the Real Property or otherwise arising from the Company's or any
Subsidiary's activities (or the activities of the Company's or any Subsidiary's
predecessors in title) involving Hazardous Materials.
4.22. TRANSACTIONS WITH RELATED PARTIES
Except as contemplated by this Purchase Agreement or set forth on the
Disclosure Schedule, neither any present or former officer, director or
stockholder of the Company or any Subsidiary, nor any Affiliate of such
officer, director or stockholder, is currently a party to any transaction with
the Company or any Subsidiary, including, without limitation, any Agreement
providing for the employment of, Furnishing of Services by, rental of Assets
from or to, or otherwise requiring payments to, any such officer, director,
stockholder or Affiliate, other than transactions in the Ordinary Course of
Business with BBN.
4.23. RESTRICTIONS AND CONSENTS
There are no Agreements, Laws or other restrictions of any kind to which
the Company or any Subsidiary (or any asset thereof) is party or subject that
would prevent or restrict the execution, delivery or performance of this
Purchase
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Agreement or result in any penalty, forfeiture, Agreement termination, or
restriction on business operations of the Investors, the Company or any
Subsidiary as a result of the execution, delivery or performance of this
Purchase Agreement. The Disclosure Schedule lists all such Agreements and Laws
that reasonably could be interpreted or expected to require the consent or
acquiescence of any person or entity not party to this Purchase Agreement with
respect to any aspect of the execution, delivery or performance of this
Purchase Agreement by the Company or any Subsidiary.
4.24. AUTHORIZATION
The execution, delivery and performance by the Company of this Purchase
Agreement and all other Documents contemplated hereby, the fulfillment of and
compliance with the respective terms and provisions hereof and thereof, and the
consummation by the Company of the transactions contemplated hereby and thereby,
do not and will not: (a) require any consent or approval of the stockholders of
BBN; (b) conflict with, or violate any provision of, any Law having
applicability to the Company or any Subsidiary or any of their respective
Assets, or any provision of the certificate or articles of organization or
bylaws or equivalent constituent document of the Company or any Subsidiary; (c)
conflict with, or result in any breach of, or constitute a default under any
Agreement to which the Company or any Subsidiary is a party or by which it or
any of its Assets may be bound; or (d) result in or require the creation or
imposition of or result in the acceleration of any indebtedness, or of a
material Encumbrance, or with respect to, the Company or any Subsidiary or any
of the Assets now owned or hereafter acquired by the Company or any Subsidiary.
4.25. ABSENCE OF VIOLATION
Neither the Company nor any Subsidiary is in violation of or default under,
nor has it breached any term or provision of its certificate or articles of
organization or bylaws or any material Agreement or restrictions to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
or any Material Asset thereof is bound or affected. The Company and the
Subsidiaries have complied and are in full compliance with all Laws except where
a failure to comply, singly or in the aggregate, would not have a material
adverse effect on the Company and the Subsidiaries, taken as a whole. Neither
the Company, the Subsidiaries nor any of their officers, directors, employees or
agents (or stockholders, distributors, representatives or other persons acting
on the express, implied or apparent authority of the Company or of any
Subsidiary) have paid, given or received or have offered or promised to pay,
give or receive, any bribe or other unlawful, questionable or unusual payment of
money or other thing of value, any extraordinary discount, or any other unlawful
or unusual inducement, to or from any person; business association or
governmental official or entity in the
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United States or elsewhere in connection with or in furtherance of the business
of the Company or any Subsidiary (including, without limitation, any offer,
payment or promise to pay money or other thing of value (i) to any foreign
official or political party (or official thereof) for the purposes of
influencing any act, decision or omission in order to assist the Company or any
Subsidiary in obtaining business for or with, or directing business to, any
person, or (ii) to any person, while knowing that all or a portion of such money
or other thing of value will be offered, given or promised to any such official
or party for such purposes). The business of the Company and the Subsidiaries is
not in any manner dependent upon the making or receipt of such payments,
discounts or other inducements.
4.26. COPIES OF DOCUMENTS
True and complete copies of all Documents listed in the Disclosure Schedule
have been Furnished to, or made available for inspection by, the Investor
Representative prior to the execution of this Agreement.
4.27. BINDING OBLIGATION
This Purchase Agreement constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms; and each Document to be
executed by the Company pursuant hereto, when executed and delivered in
accordance with the provisions hereof, shall be a valid and binding obligation
of the Company, enforceable in accordance with its terms.
4.28. STATUS OF SHARES
The Shares being issued to the Investors on the Closing Date have been duly
authorized by all necessary corporate action on the part of the Company, and
such Shares, upon Closing, will be validly issued, fully paid and nonassessable.
The shares of Common Stock issuable upon conversion of the Series B Preferred
Stock have been duly authorized by all necessary corporate action on the part of
the Company and such shares of Common Stock have been validly reserved for
issuance, and upon issuance upon such conversion will be validly issued and
outstanding fully paid and nonassessable.
4.29. OFFERING OF SHARES
Neither the Company nor BBN or any Person acting on its behalf has offered
the Shares or any similar securities of the Company for sale to, solicited any
offers to buy the Shares or any similar securities of the Company from or
otherwise approached or negotiated with respect to the Company with any Person
other than the Investors and a limited number of other "Accredited Investors"
(as defined in Rule 501(a) under the Securities Act). Alex. Brown & Sons
Incorporated was the
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only agent employed by the Company or BBN for such purpose. Neither the Company
nor BBN or any other Person acting on its behalf has taken or will take any
action prior to the Closing (including, without limitations, any offering of any
securities of the Company under circumstances which would require the
integration of such offering with the offering of the Shares under the
Securities Act and the rules and regulations of the Commission thereunder) which
might subject the offering, issuance and sale of the Shares to the registration
requirements of Section 5 of the Securities Act.
4.30. DISCLOSURE
No representation or warranty by the Company or BBN in this Agreement, and
no Document Furnished or to be Furnished to the Investors pursuant to this
Agreement, or in correction herewith or with the transactions contemplated
hereby, contains or will contain any untrue or misleading statement of material
fact or omits or will omit any fact necessary to make the statements of material
fact contained herein or therein, in light of the circumstances under which
made, not misleading.
5. REPRESENTATIONS AND WARRANTIES OF BBN
BBN hereby represents and warrants to the Investors as follows:
5.1. TITLE TO COMMON STOCK
BBN is, and on the Closing Date will be, the lawful owner of all of the
issued and outstanding Common Stock of the Company. Since the date of the
issuance or sale of such shares of Common Stock to BBN, there has been no event,
or action taken (or failure to take action) by or against BBN, which has
resulted or might result in the creation of any Encumbrance on such shapes.
5.2. AUTHORITY AND CAPACITY
BBN has full legal right, capacity, power and authority (corporate or
otherwise) to execute this Purchase Agreement and to consummate the transactions
contemplated hereby.
5.3. ABSENCE OF VIOLATION
The execution, delivery and performance by BBN of this Purchase Agreement
and all other Documents contemplated hereby, the fulfillment of and the
compliance with the respective terms and provisions hereof and thereof, and the
consummation of the transactions contemplated hereby and thereby, do not and
will not (a) conflict with, or violate any provision of any Law having
applicability to the
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Company, any Subsidiary or BBN; or (b) conflict with, or result in any breach
of, or constitute a default under, any Agreement to which the Company, any
Subsidiary or BBN is a party.
5.4. RESTRICTIONS AND CONSENTS
There are no Agreements, Laws or other restrictions of any kind to which
BBN is party or subject that would prevent or restrict the execution, delivery
or performance of this Purchase Agreement or result in any penalty, forfeiture,
Agreement termination, or restriction on business operations of the Investors,
the Company or any Subsidiary as a result of the execution, delivery or
performance of this Agreement. The Disclosure Schedule lists all such Agreements
and Laws that reasonably could be interpreted or expected to require the consent
or acquiescence of any person or entity not party to this Purchase Agreement
with respect to any aspect of the execution, delivery or performance of this
Purchase Agreement by the Company or any Subsidiary.
5.5. BINDING OBLIGATION
This Purchase Agreement constitutes a valid and binding obligation of BBN,
enforceable in accordance with its terms. Each Document to be executed by BBN
pursuant hereto, when executed and delivered in accordance with the provisions
hereof, will be a valid end binding obligation of BBN, enforceable in accordance
with its terms.
6. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor hereby severally represents and warrants to the Company and
BBN as follows:
6.1. ORGANIZATION AND STANDING
Such Investor is a corporation or partnership duly organized validly
existing and in good standing under the laws of the state of its organization
and has the full and unrestricted corporate or partnership power and authority
to carry on its business as currently conducted, to enter into this Purchase
Agreement and to carry out the transactions contemplated hereby.
6.2. AUTHORIZATION
The execution, delivery and performance by such Investor of this Purchase
Agreement and all other Documents contemplated hereby, the fulfillment of and
the compliance with the respective terms and provisions hereof and thereof, and
the consummation by such Investor of the transactions contemplated hereby
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and thereby have been duly authorized, (which authorization has not been
modified or rescinded and is in full force and effect) and will not: (a)
conflict with, or violate any provision of, any term or provision of the
partnership certificate or agreement or the certificate or articles of
incorporation or bylaws of such Investor or (b) conflict with, or result in any
breach of, or constitute a default under, any Agreement to which such Investor
is a party or by which such Investor is bound. No other corporate action is
necessary for such Investor to enter into this Purchase Agreement and all other
Documents contemplated hereby and to consummate the transactions contemplated
hereby and thereby.
6.3. BINDING OBLIGATION
This Purchase Agreement constitutes a valid and binding obligation of Such
Investor, enforceable in accordance with its terms. Each Document to be executed
by such Investor pursuant hereto, when executed and delivered in accordance with
the provisions hereof, shall be a valid and binding obligation of Investor,
enforceable in accordance with its terms.
7. RESTRICTED SECURITIES
Each Investor hereby severally represents, warrants and covenants as
follows:
7.1. NO REGISTRATION UNDER THE SECURITIES ACT
Such Investor understands that the Shares to be purchased by it under this
Purchase Agreement have not been registered under the Securities Act, in
reliance upon exemptions contained in the Securities Act or interpretations
thereof, and cannot be offered for sale, sold or otherwise transferred unless
such Shares being acquired hereunder subsequently are so registered or qualify
for exemption from registration under the Securities Act.
7.2. ACQUISITION FOR INVESTMENT
The Shares are being acquired under this Purchase Agreement by such
Investor in good faith solely for its own account, for investment and not with a
view toward resale or other distribution within the meaning of the Securities
Act. The Shares will not be offered for sale, sold or otherwise transferred by
such Investor without either registration or exemption from registration under
the Securities Act.
7.3. EVALUATION OF MERITS AND RISKS OF INVESTMENT
Such Investor has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of its
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investment in the Shares being acquired hereunder. Such Investor is an
"accredited investor" within the meaning of one or more paragraphs (1), (2), (3)
or (8) of Rule 501(a) under the Securities Act. Such Investor understands and is
able to bear any economic risks associated with such investment (including,
without limitation, the necessity of holding such Shares for an indefinite
period of time, inasmuch as such Shares have not been registered under the
Securities Act).
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND BBN
The obligations of the Company and BBN under this Purchase Agreement are
subject to the fulfillment, at or prior to the Closing, of each of the following
conditions, and failure to satisfy any such condition shall excuse and discharge
all obligations of the Company and BBN to carry out the provisions of this
Agreement, unless such failure is agreed to in writing by the Company and BBN:
8.1. REPRESENTATIONS AND WARRANTIES
The representations and warranties made by the Investors in this Purchase
Agreement or in any Document Furnished by the Investors pursuant to this
Purchase Agreement shall be true and complete in all material respects where
made and on and as of the Closing Date as though such representations and
warranties were made on and as of such date, except for any changes expressly
permitted by this Agreement.
8.2. PERFORMANCE
The Investors shall have performed and complied with all Agreements and
conditions required by this Purchase Agreement to be performed or complied with
by them prior to the Closing Date.
8.3. LEGAL PROCEEDINGS
No action or proceeding by or before any governmental authority shall have
been instituted or threatened taxed not subsequently dismissed, settled or
otherwise terminated) which is reasonably expected to restrain, prohibit or
invalidate the transactions contemplated by this Agreement, other than all
action or proceeding instituted or threatened by the Company or BBN.
8.4. HART-SCOTT-RODINO
All applicable waiting periods under Hart-Scott-Rodino shall have expired
or the Company and BBN shall be reasonably satisfied that no filings under
Hart-Scott-Rodino are required.
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8.5. INVESTOR REPRESENTATIVE'S CERTIFICATE
The Investor Representative shall have delivered to the Company and BBN a
certificate, dated as of the Closing Date and executed by a senior officer of
the Investor Representative, certifying to the fulfillment of the conditions set
forth in Sections 8.1 through 8.3.
8.6. STOCKHOLDERS AGREEMENT
The Company, BBN and the Investors shall concurrently execute and deliver a
Stockholders Agreement substantially in the form of Exhibit E.
8.7. DOCUMENTS AT CLOSING
All documents required to be furnished by the Investors to the Company
and/or BBN prior to or at the Closing shall have been so furnished.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE INVESTORS
The obligations of the Investors under this Purchase Agreement are subject
to the fulfillment, at or prior to the Closing, of each of the following
conditions, and failure to satisfy any such condition shall excuse and discharge
all obligations of the Investors to carry out the provisions of this Agreement,
unless such failure is agreed to in writing by the Investor Representative:
9.1. REPRESENTATIONS AND WARRANTIES
The representations and warranties made (jointly or individually) by the
Company and BBN in this Purchase Agreement and the statements contained the
Disclosure Schedule and Exhibits attached hereto or in any Document Furnished by
the Company or BBN pursuant to this Purchase Agreement (the "Disclosure
Materials") shall be true and complete in all material respects when made, and
on and as of the Closing Date as though such representations and warranties were
made on and as of such date, except for any changes occurring in the Ordinary
Course of Business disclosed to and approved by the Investor Representative and
as otherwise expressly permitted by this Agreement.
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9.2. PERFORMANCE
The Company and BBN shall have performed and complied with all Agreements
and conditions required by this Purchase Agreement to be performed or complied
with prior to the Closing Date.
9.3. ABSENCE OF ADVERSE CHANGES
There shall have been no adverse changes since the date of this Purchase
Agreement material to the Company and its Subsidiaries, taken as a whole, in the
business, operations, customer retentions, employee relations, software
development and product introductions, sales pipeline, vendor and contractor
relationships, C-RAD relationships, condition (financial or otherwise), Assets
or liabilities of the Company (regardless of whether or not such events or
changes are inconsistent with the representations and warranties given herein by
the Company and BBN), except changes contemplated by this Purchase Agreement.
9.4. LEGAL PROCEEDINGS
No action or proceeding by or before any governmental authority shall have
been instituted or threatened (and not subsequently settled, dismissed or
otherwise terminated) which is reasonably expected to restrain, prohibit or
invalidate the transactions contemplated by this Purchase Agreement other than
an action or proceeding instituted or threatened by any Investor.
9.5. OFFICER'S CERTIFICATE
The Company shall have delivered to the Investor Representative a
certificate, dated as of the Closing Date and executed by the Company's
President, in his capacity as such, certifying to the fulfillment of the
conditions specified in SECTIONS 9.1 through 9.4.
9.6. STOCKHOLDERS' CERTIFICATE
BBN shall have delivered to the Investor Representative a certificate,
dated as of the Closing Date and executed by a senior of officer of BBN,
certifying to the fulfillment of the conditions specified in SECTIONS 9.1
through 9.4.
9.7. OPINION OF COUNSEL
The Investor Representative shall have received opinions of Ropes & Gray
and Baker & McKenzie, counsel to the Company and BBN, dated as of the Closing
Date, to the effect and substantially in the form of EXHIBIT F.
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9.8. STOCKHOLDERS AGREEMENT
The Company, BBN and the Investors shall concurrently execute and deliver a
Stockholders Agreement substantially in the form of EXHIBIT E.
9.9. DOCUMENTS AT CLOSING
All documents required to be Furnished by the Company and/or BBN to the
Investors prior to or at the Closing shall have been so Furnished.
9.10. RESIGNATIONS OF DIRECTORS
The Investors shall have received the written resignations of all of the
members of the Board of Directors of the Company and any Subsidiaries designated
by the Investor Representative (effective as of the Closing).
9.11. CONSENTS
(a) The Investors shall have received all consents, authorizations and
approvals of governmental and supragovernmental parties which are required to be
obtained in order to consummate the transactions contemplated hereby, including,
without limitation, the expiration or termination of any applicable waiting
periods under Hart-Scott-Rodino, on or prior to the Closing date.
(b) The Company and BBN shall have received on or prior to the Closing Date
all consents, authorizations and approvals of governmental, supragovernmental
and private parties which are required to be obtained in order to consummate the
transactions contemplated hereby, including, without limitation, the expiration
or termination of any applicable waiting periods under Hart-Scott-Rodino, the
consents of all parties to Agreements listed on Schedule 4.16 or Schedule 9.15,
and which terminate under their respective terms as a result of the transactions
contemplated hereby, and the Company shall have delivered to the Investor
Representative a certificate, dated as of the Closing Date and executed by the
Company's President, in his capacity as such, certifying to the fulfillment of
the conditions specified in this SECTION 9.11(b).
9.12. AMENDMENTS TO THE COMPANY'S ARTICLES OF ORGANIZATION
Amendments to the Company's articles of organization as required by SECTION
3.4 shall have received all necessary corporate authorizations, shall have been
filed as necessary under the laws of the Commonwealth of Massachusetts, and
shall be effective. The Investor Representative shall have received (a) a
certified copy of resolutions of the Board of Directors of the Company and of
BBN duly authorizing and adopting such amendments, and (b) a copy of the
Company's
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articles of organizations as so amended, certified by the Secretary of the
Commonwealth of Massachusetts.
9.13. INSURANCE COVERAGE
The Company shall have obtained adequate insurance coverage customary and
reasonable for businesses of its type to replace any existing coverage that will
terminate as a result of the transactions contemplated by this Purchase
Agreement and shall have provided evidence of the same to the Investor
Representative.
9.14. SATISFACTORY SUBLEASE OF DOMESTIC AND INTERNATIONAL OFFICES
(a) The Company and BBN shall have entered into a Sublease Agreement
substantially in the form of EXHIBIT G attached hereto, with respect to its
corporate headquarters in Cambridge, Massachusetts.
(b) Except for the lease, sublease and/or other arrangements described in
the Disclosure Schedule, the Company shall have no obligations in respective of
leases for offices in any other location and BBN shall be solely responsible
for, and shall fully indemnify and hold harmless the Company and the Investors,
in accordance with the provisions of SECTION 11 hereof (but subject to no
threshold, amount or time restriction contained therein), against all liability
under any other such lease, sublease or obligations not specifically approved
prior to Closing by the Investor Representative.
9.15. ASSIGNMENT OF CERTAIN RIGHTS
BBN and BBN's subsidiaries shall have assigned and conveyed to the Company
by the Closing Date the Agreements listed on Schedule 9.15 attached hereto,
which Agreements constitute: (i) all material license agreements entered into by
BBN or a subsidiary of BBN with a third-party related to third-party software
that is embedded in, or proprietary processes with respect to the development
of, the Software; (ii) all material license agreements, distribution agreements
and resale agreements entered by BBN or a subsidiary of BBN with third parties
relating, to the Intellectual Property and the Software; and (iii) all material
former and current professional and technical independent contractor agreements
entered into by BBN or a subsidiary of BBN related to the development of the
Intellectual Property or Software. In addition, (A) BBN and BBN's subsidiaries
shall have assigned and conveyed to the Company all Agreements of a similar
nature, the terms of which are not material to the Company and the Subsidiaries,
taken as a whole, and under the provisions of which the consent of any party is
not required to effect its assignment or conveyance, on or before the Closing
Date and (B) BBN and BBN's subsidiaries shall assign and convey to the Company
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all other Agreements of a similar nature not required to be listed on Schedule
9.15 but under the provisions of which the consent of any party is required to
effect its assignment or conveyance, as soon as reasonably practicable
thereafter.
9.16. ABS/CalPERS CERTIFICATE
The Company shall have delivered to the Investor Representative an
officer's certificate substantially in the form of EXHIBIT I.
9.17. DELIVERY OF UNAUDITED FINANCIAL STATEMENTS
The Company and BBN shall have delivered to the Representatives the
unaudited Consolidated balance sheet of the Company and the Subsidiaries as of
the end of the fiscal year ending June 30, 1996 and the related unaudited
Consolidated statements of income, stockholders' equity and changes in financial
position for such fiscal year (the "1996 Unaudited Statements"). The 1996
Unaudited Statements shall be consistent with the standards for historical
financial statements set forth in Section 4.6 hereof, and all amounts shown on
the 1996 Unaudited Statements shall, in all material respects (in the good faith
judgment of the Investor Representative), be consistent with and reflect no
material adjustments to the amounts shown on the forecasted financial statements
referred to in SECTION 4.6 not otherwise contemplated hereunder.
9.18. TRANSITION SERVICES
BBN shall offer to provide to the Company certain transition services at
prices that reflect BBN's cost.
9.19. 1993 STOCK OPTION PLAN
The Company shall have amended the options issued under the 1993 Stock
Option Plan and otherwise taken all steps reasonably acceptable to the Investor
Representative so as to (i) reduce the exercise price of outstanding options to
$0.61 per share, (ii) provide that, as options vested as of the Closing Date are
exercised, an equivalent number of shares of Common Stock held by BBN shall be
redeemed at a price of $0.61 per share, and (iii) terminate the responsibility
of the Company for all outstanding unvested options held by persons (other than
T. Pyle) not listed on EXHIBIT H. BBN will fully indemnify and hold harmless the
Company and the Investors in accordance with the provisions of SECTION 11 hereof
(but subject to no threshold, amount or time restriction contained therein),
against any Claim against the Company from any present or former employee
arising from the changes effected by these arrangements.
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10. CLOSING
10.1. CLOSING OF SALE AND PURCHASE
Subject to the terms and conditions of this Purchase Agreement, the Closing
shall take place at the offices of Ropes & Gray, One International Place,
Boston, Massachusetts 02110 on July 31, 1996 (provided that BBN may extend the
Closing Date to no later than August 15, 1996 if, prior to July 31, 1996, it
delivers to the Investor Representative a list of conditions and covenants not
fulfilled by BBN on that date which it reasonably believes will be fulfilled on
or prior to August 15, 1996) or at such other time as the parties may agree to
in writing (the "Closing Date").
10.2. DELIVERIES BY THE COMPANY AND BBN TO THE INVESTOR REPRESENTATIVE
At the Closing, the Company and BBN shall deliver to the Investor
Representative the following:
(a) stock certificates in definitive form registered in the names of
the Investors, representing the Shares being purchased by them pursuant hereto;
(b) a certified copy of the resolutions adopted by the Board of
Directors of each of the Company and BBN authorizing the transactions
contemplated by this Purchase Agreement;
(c) the written resignations of all of the current members of the
Board of Directors of the Company and designated Subsidiaries (effective as of
the Closing Date), as required by SECTION 9.10;
(d) the certificates required by SECTIONS 9.5, 9.6 and 9.11(b);
(e) opinions of Ropes & Gray and Baker & McKenzie, counsel for the
Company and BBN, dated as of the Closing Date, to the effect and substantially
in the form of EXHIBIT F. as required by SECTION 9.7;
(f) certificates of incumbency and specimen signatures of the
signatory officers of the Company and BBN;
(g) good standing certificates as of a date not more than five days
prior to the Closing Date issued by the Secretary of State of the respective
states of incorporation of the Company and of each Subsidiary incorporated in
the United States, and of each state in which the Company is qualified to do
business;
(h) the articles of organization and bylaws (or equivalent constituent
documents), minute books and stock books of the Company and the
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Subsidiaries and all other books and records reasonably requested by the
Investor Representative; and
(i) such other Documents as the Investor Representative may reasonably
request.
10.3. DELIVERIES BY THE INVESTORS TO THE COMPANY AND BBN
At the Closing, each Investor shall deliver the following:
(a) to the Company, a wire transfer to the Company in the amount set
forth opposite the name of such Investor in the column on EXHIBIT A entitled
"Purchase Price Payable at Closing";
(b) to the Company and BBN, a certified copy of the resolutions
adopted by the Board of Directors of such Investor authorizing the transactions
contemplated by this Purchase Agreement; and
(c) such other Documents as the Company or BBN may reasonably request.
10.4. DELIVERIES BY THE COMPANY TO BBN
At the Closing and immediately following receipt of the aggregate
purchase price for the Shares from the Investors, the Company shall effect the
Redemption by wire transfer.
11. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION; REMEDIES; TAX MATTERS
11.1. SURVIVAL OF REPRESENTATIONS
All representations, warranties, covenants, indemnities and other
Agreements made by any party to this Purchase Agreement herein or pursuant
hereto shall also be deemed made on and as of the Closing Date as though such
representations, warranties, covenants, indemnities and other Agreements were
made on and as of such date, and all such representations, warranties, covenants
indemnities and other Agreements shall survive the Closing and any
investigation, audit or inspection at any time made by or on behalf of any party
hereto.
11.2. AGREEMENT OF BBN TO INDEMNIFY
(a) Subject to the conditions and provisions of this SECTION 11, BBN hereby
agrees to indemnify, defend and hold harmless the Investor Indemnified
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Persons from and against and in respect of all Claims asserted against,
resulting to, imposed upon or incurred by the Investor Indemnified Persons
(whether such Claims are by, against or relate to the Company, BBN or any other
party, including, without limitation, a governmental entity), directly or
indirectly, by reason of or resulting from any misrepresentation or breach of
any representation or warranty, or noncompliance with conditions or other
Agreements, given or made by BBN or the Company in this Purchase Agreement or in
the Disclosure Schedule or Exhibits attached hereto or in any Document Furnished
by or on behalf of any the Company or BBN pursuant to this Purchase Agreement.
(b) Except with respect to Claims based upon fraud by BBN in connection
with the representations, warranties or covenants of BBN contained in this
Purchase Agreement or any of the transactions contemplated by this Purchase
Agreement, or as otherwise provided in this Purchase Agreement, BBN shall not
be required to provide any indemnification under the provisions of this SECTION
11.2 unless and until the aggregate losses of the Investor Indemnified Persons
exceed $100,000, whereupon the Investor Indemnified Persons shall be entitled to
indemnification for the aggregate cumulative amount of losses in excess of such
$100,000. In addition, except with respect to Claims based upon fraud by BBN in
connection with the representations, warranties or covenants of BBN contained in
this Purchase Agreement or any of the transactions contemplated by this
Agreement, or as otherwise provided in this Purchase Agreement, the maximum
aggregate amount of indemnification which the Investor Indemnified Parties shall
be entitled to from BBN under this SECTION 11.2 shall be an amount equal to the
Purchase Price.
(c) Except as set forth below or as otherwise provided in this Purchase
Agreement, it shall be a condition to the right of any Investor Indemnified
Person to indemnification pursuant to this Section that such Investor
Indemnified Person shall assert a Claim for such indemnification no later than
the earlier of (i) the date on which the Company delivers audited financial
statements for the year ended June 30, 1998 or (ii) October 31, 1998.
Notwithstanding the foregoing, any Claim relating to any provision of Section
4.9 may be made throughout the period ending one year following the latter of
(i) the expiration of all applicable statutes of limitation (including
extensions), and (ii) the final determination of (and the expiration of time to
appeal) any audit, examination, investigation or other proceeding relating to
Taxes covered by, or any Claim under, SECTION 4.9 hereof.
(d) BBN hereby irrevocably waives any and all right to recourse against the
Company or any Subsidiary with respect to any Claim asserted by an Investor
Indemnified Person as to which BBN is liable for indemnification under or
pursuant to this Purchase Agreement. BBN shall not be entitled to contribution
from, subrogation to or recovery against the Company or any Subsidiary with
respect to any Claim asserted by an Investor Indemnified Person as to which BBN
is liable for indemnification under or pursuant to this Purchase Agreement.
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(e) Except for Claims of, or based upon, fraud by BBN in connection with
the representations, warranties or covenants of BBN contained in this Purchase
Agreement or any of the transactions contemplated by this Purchase Agreement,
this SECTION 11.2 and the related procedures contained in SECTION 11.3 hereof
shall provide the sole and exclusive remedy for any and all losses with respect
to any inaccuracy in or breach of the representations or warranties or breach or
nonperformance of any of the covenants or agreements made by any party in or
pursuant to this Purchase Agreement.
11.3. CONDITIONS OF INDEMNIFICATION
The obligations and liabilities of the Company, BBN and the Investors
hereunder with respect to their respective indemnities pursuant to this SECTION
11 resulting from any Claim shall be subject to the following terms and
conditions:
(a) The indemnified party shall give prompt written notice to the
indemnifying party of any Claim which is asserted against, resulting to, imposed
upon or incurred by such indemnified party and which may give rise to liability
of the indemnifying party pursuant to this SECTION 11, stating (to the extent
known or reasonably anticipated) the nature and basis of such Claim and the
amount thereof.
(b) The indemnifying party shall engage counsel with respect to any such
Claim, such representation (including the compromise or settlement of any Claim)
to be undertaken on behalf of the indemnified party, and the indemnified party
shall have right to approve such counsel (such approval not to be unreasonably
withheld). In the event the indemnifying party elects not to undertake such
defense by its own counsel, the indemnifying party shall give prompt written
notice of such election to the indemnified party, and the indemnified party will
undertake the defense thereof by counsel or other representatives designated by
it, at the cost and expense of the indemnifying party (such costs and expenses
of such defense to be advanced by the indemnifying party as incurred by the
indemnified party).
(c) In the event that any Claim shall arise out of a transaction or cover
any period or periods wherein the Company and BBN, on the one hand, and the
Investors, on the other hand, shall each be liable hereunder for part of the
liability or obligation arising therefrom then the parties shall, each choosing
its or his own counsel and bearing its or his own expense, defend such Claim,
and no settlement or compromise of such Claim may be made without the joint
consent or approval of each party (which consent shall not be unreasonably
withheld), except where the respective liabilities and obligations of the
parties are clearly allocable or attributable on the basis of objective facts.
(d) The amount which any indemnifying party is or may be required to pay
any indemnified party pursuant to this SECTION 11 shall be measured taking
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into account (i) any income tax savings (and income tax cost attributable to the
indemnity payment) actually realized (or occurred) that affect the overall
economic impact of the losses to the indemnified party and (ii) any insurance
proceeds actually realized and adverse insurance consequences incurred (such as
premium adjustments and other detriments) that affect the overall economic
impact of the losses to the indemnified party.
11.4. SPECIFIC PERFORMANCE
In addition to any other remedies which the Investors may have at law or in
equity, the Company and BBN hereby acknowledge that the Shares and the Company
and the Subsidiaries are unique, and that the harm to the Investors resulting
from a failure to close the transaction due to breaches by the Company or BBN of
their respective obligations cannot be adequately compensated by damages.
Accordingly, the Company and BBN agree that in the event of a failure to close
the transaction as a result of breaches by the Company or BBN, the Investors
shall have the right to have all obligations, undertakings, Agreements,
covenants and other provisions of this Purchase Agreement specifically performed
by the Company or BBN, as the case may be, and that the Investor Representative
shall have the right to obtain an order or decree of such specific performance
in any of the courts of the United States of America or of any state or other
political subdivision thereof.
11.5. TAX MATTERS
(a) Notwithstanding anything in this Purchase Agreement to the contrary,
BBN shall indemnify the Investors and the Company and hold them harmless for,
from and against all liability for all Taxes (other than Taxes for which
reserves are recorded on the audited financial statements) of the Company and
the Subsidiaries for all Tax periods up to and including the Closing Date,
including, without limitation, any liability for Taxes imposed upon the Company
and any Subsidiary pursuant to Treasury Regulation [Section]1.1502-6 or any
similar provision of state, local or foreign law as a result of being a member
of a Consolidated group. In the case of any tax period that begins prior to and
ends after the Closing Date, the Taxes of the Company and the Subsidiaries for
which BBN is responsible shall be computed as if such taxable period ended on
and included the Closing Date.
(b) The Company shall notify BBN in writing upon receipt by the Company of
notice of any pending or threatened federal, state, local or foreign Tax audits
or assessments which may affect the Tax liabilities of the Company for which BBN
would be required to indemnify pursuant to SECTION 11.5(a), provided that
failure to comply with this provision shall not affect such right to
indemnification hereunder except to the extent such failure materially impairs
BBN's ability to contest any such Tax liabilities. BBN shall have the sole right
to represent the Company's interests to any Tax audit or administrative or court
proceeding relating to taxable periods ending on or before the Closing Date, and
to employ counsel of its
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<PAGE> 49
choice at its cost and expenses provided, however, that the Investors and their
representatives shall be permitted, at their cost and expense, to be present at,
and participate in, any such audit or proceeding. BBN shall be permitted, at its
cost and expense, to be present at, and participate in, any audit or proceeding
in respect of a taxable period ending after the Closing Date for which it may be
required to indemnify pursuant to SECTION 11.5(a).
(c) BBN shall prepare or cause to be prepared and file or cause to be filed
on a timely basis (in each case, at its own cost and expense and in a timely
manner consistent with past practice) all Tax Returns with respect to the
Company for taxable periods ending on or prior to the Closing Date. BBN shall
provide the Investors with copies of such Tax Returns covering any taxable
period ending on or prior to the Closing Date, on or prior to the due date
thereof (including any extension thereto). BBN shall remit (or cause to be
remitted) any Taxes due in respect of such Tax Returns. The Company shall
prepare or cause to be prepared and shall file or cause to be filed on a timely
bases all other Tax Returns with respect to the Company, and shall provide to
BBN a copy of any such return filed for a taxable period beginning before and
ending after the Closing Date. In connection therewith, BBN shall be responsible
and shall promptly pay any Taxes for which BBN has agreed to indemnify the
Investors and the Company pursuant to SECTION 11.5(a) hereof.
(d) After the Closing Date, each of BBN, the Company and the Investors
shall (and shall cause their respective Affiliates to): (i) assist the other
party in preparing any Tax Returns which such other party is responsible for
preparing and filing in accordance with SECTION 11.5(c), including giving
access, upon reasonable request, to information, records and documents necessary
to prepare such Tax Returns; and (ii) cooperate fully in preparing for any
audits of, or disputes with taxing authorities regarding, Taxes of the Company.
12. TERMINATION
12.1. TERMINATION
This Purchase Agreement may be terminated at any time before the Closing
Date under any one or more of the following circumstances:
(a) by the mutual consent of the parties hereto; or
(b) by the Company, BBN or tile Investor Representative, by written notice
of termination to the other parties hereto, if the Closing has not occurred by
September 1, 1996.
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<PAGE> 50
Notwithstanding this Section 12.1, a party who is in breach of any of its
obligations or representations and warranties set forth in this Purchase
Agreement shall not have the right to terminate this Purchase Agreement.
12.2. EFFECT OF TERMINATION
In the event of termination of this Purchase Agreement as provided in
Section 12.1, this Purchase Agreement shall forthwith become void and have no
effect except (i) the confidentiality provisions contained in Section 3.2 and
the provisions relating to the payment of expenses contained in Section 13.3
shall survive any termination of this Purchase Agreement, and (ii)
notwithstanding anything to the contrary contained in this Purchase Agreement,
no party shall be relieved or released from any liabilities or damages arising
out of its willful breach of any provision of this Purchase Agreement or any
intentional misrepresentation or breach of warranty hereunder.
13. MISCELLANEOUS
13.1. ADDITIONAL ACTIONS AND DOCUMENTS
Each of the parties hereto hereby agrees to take or cause to be taken such
further actions, to execute, deliver and file or cause to be executed, delivered
and filed such further Documents, and will obtain such consents, as may be
necessary or as may be reasonably requested in order to fully effectuate the
purposes, terms and conditions of this Purchase Agreement.
13.2. NO BROKERS
Each of the parties hereto represents and warrants to the other parties
(and to each of them) that such party has not engaged any broker, finder or
agent in connection with the transactions contemplated by this Purchase
Agreement and has not incurred (and will not incur) my unpaid liability to any
broker, finder or agent for any brokerage fees, finders' fees or commissions,
with respect to the transactions contemplated by this Purchase Agreement, except
that BBN engaged Alex. Brown & Sons Incorporated, whose fees are BBN's sole
responsibility. Each part agrees to indemnify, defend and hold harmless each of
the other parties from and against any and all claims asserted against such
parties for any such fees or commissions by any persons purporting to act or to
have acted for or on behalf of the indemnifying party.
13.3. EXPENSES
Subject to the provisions of Section 11 and Section 13.2, in the event of a
Closing, the Company shall pay an expenses incident to this Purchase
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<PAGE> 51
Agreement and the transactions contemplated hereunder, including all legal and
accounting fees and disbursements of the Investors and BBN, and, in the event
the Closing does not occur for any reason other than a breach of this Purchase
Agreement by the Investors, the Company shall bee all such expenses of the
Investors up to an aggregate of $200,000 (unless such failure to close is due to
a willful breach of, or intentional misrepresentation under, this Purchase
Agreement by BBN or the Company, in which case the Company's shall bear all
expenses of the Investors without limit).
13.4. ASSIGNMENT
Each Investor shall have the right to assign its rights and obligations
under this Purchase Agreement, in whole or in part, to an Affiliate or to
designate any of its Affiliates (to the extent permitted by Law) to receive
directly the Shares to be purchased hereunder or to exercise any of the rights
of such Investor, or to perform any of its obligations. Neither the Company nor
BBN shall assign its rights and obligations under this Purchase Agreement, in
whole or in part, whether by operation of law or otherwise, without the prior
written consent of the other parties hereto, and any such assignment contrary to
the terms hereof shall be null and void and of no force and effect. In no event
shall the assignment by the Company, BBN or any Investor of its respective
rights or obligations under this Purchase Agreement, whether before or after the
Closing, release the Company, BBN or such Investor from its respective
liabilities and obligations hereunder.
13.5. ENTIRE AGREEMENT; AMENDMENT
This Purchase Agreement, including the Disclosure Schedule, the Exhibits
and other Documents referred to herein or Furnished pursuant hereto, constitutes
the entire Agreement among the parties hereto with respect to the transactions
contemplated herein, and it supersedes all prior oral or written Agreements,
commitments or understandings with respect to the matters provided for herein.
No amendment, modification or discharge of this Purchase Agreement shall be
valid or binding unless set forth in writing and duly executed and delivered by
the party against whom enforcement of the amendment, modification, or discharge
is sought.
13.6. WAIVER
No delay or failure on the part of any party hereto in exercising any
right, power or privilege under this Purchase Agreement or under any other
Documents Furnished in connection with or pursuant to this Purchase Agreement
shall impair any such right, power or privilege or be construed as a waiver of
any default or any acquiescence therein. No single or partial exercise of any
such right, power or privilege shall preclude the further exercise of such
right, power or privilege, or the exercise of any other right, power or
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<PAGE> 52
privilege. No waiver shall be valid against any party hereto unless made in
writing and signed by the party against whom enforcement of such waiver is
sought and then only to the extent expressly specified therein.
13.7. CONSENT TO JURISDICTION
(a) This Purchase Agreement and the duties and obligations of the Company,
BBN and the Investors hereunder and under each of the Documents referred to
herein shall be enforceable aghast any of the Company, BBN or the Investors in
the courts of the United States of America and of the States of Massachusetts
and Maryland. For such purpose, the Company, BBN and each of the Investors
hereby irrevocably submit to the non-exclusive jurisdiction of such courts, and
agrees that all claims in respect of this Purchase Agreement and such other
Documents may be heard and determined in any of such courts.
(b) The Company, BBN and each of the Investors hereby irrevocably agree
that a final judgment of any of the courts specified above in any action or
proceeding relating to this Purchase Agreement or to any of the other Documents
referred to herein or therein shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
13.8. SEVERABILITY
If any part of any provision of this Purchase Agreement or any other
Agreement or document given pursuant to or in connection with this Purchase
Agreement shall be invalid or unenforceable in any respect, such part shall be
ineffective to the extent of such invalidity or unenforceability only, without
in any way affecting the remaining parts of such provision or the remaining
provisions of this Purchase Agreement.
13.9. GOVERNING LAW
This Purchase Agreement, the fights and obligations of the parties hereto,
and any claims or disputes relating thereto, shall be governed by and construed
in accordance with the laws of the State of Maryland (excluding the choice of
law rules thereof).
13.10. NOTICES
All notices, demands, requests, or other communications which may be or are
required to be given, served, or sent by any party to any other party pursuant
to this Purchase Agreement shall be in writing and shall be hand delivered, sent
by overnight courier or mailed by first-class, registered or certified mail,
return receipt
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<PAGE> 53
requested, postage prepaid, or transmitted by telegram, telecopy or telex,
addressed as follows:
(i) If to the Investors:
c/o ABS Capital Partners, L.P.
135 East Baltimore Street
Baltimore, Maryland 21202
Attention: Frederick L. Bryant
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
111 South Calvert Street, Suite 1600
Baltimore, Maryland 21202
Attention: Michael J. Silver
(ii) If to the Company:
BBN Domain Corporation
150 CambridgePark Drive
Cambridge, Massachusetts 02140
Attention: John Kish
(iii) If to BBN:
BBN Corporation
l00 CambridgePark Drive
Cambridge, Massachusetts 02140
Attention: John Montjoy, Jr.
with a copy (which shall not constitute notice) to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Gregory D. Sheehan
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request, or complication which shall be hand delivered,
sent, mailed, telecopied or telexed in the manner described above, or which
shall be delivered to a telegraph company, shall be deemed sufficiently given,
served, sent, received or delivered for all purposes at such time as it is
delivered to the addressee (with the return receipt, the delivery receipt, or
(with respect to a telecopy or telex)
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<PAGE> 54
the answer back being deemed conclusive, but not exclusive, evidence of such
delivery) or at such time as delivery is refused by the addressee upon
presentation.
13.11. HEADINGS
Section headings contained in this Purchase Agreement are inserted for
convenience of reference only, shall not be deemed to be a part of this Purchase
Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
13.12. EXECUTION IN COUNTERPARTS
To facilitate execution, this Purchase Agreement may be executed in as many
counterparts as may be required. It shall not be necessary that the signatures
of, or on behalf of, each party, or that the signatures of all persons required
to bind any party, appear on each counterpart; but it shall be sufficient that
the signature of, or on behalf of, each party, or that the signatures of the
persons required to bind any party, appear on one or more of the counterparts.
All counterparts shall collectively constitute a single Agreement. It shall not
be necessary in making proof of this Purchase Agreement to produce or account
for more than a number of counterparts containing the respective signatures of,
or on behalf of all of the parties hereto.
13.13. LIMITATION ON BENEFITS
The covenants, undertakings and agreements set forth in this Purchase
Agreement shall be solely for the benefit to and shall be enforceable only by,
the parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and permitted assigns, except that the
agreements set forth in Section 11 also shall be for the benefit of, and
enforceable by, Investor Indemnified Persons, BBN Indemnified Persons and their
respective successors, heirs, executors, administrators, legal representatives
or permitted assigns.
13.14. BINDING EFFECT
Subject to any provisions hereof restricting assignment, this Purchase
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors, heirs, executors, administrators, legal
representatives and assigns.
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<PAGE> 55
IN WITNESS WHEREOF, the parties hereto have duly executed this Purchase
Agreement, or have caused this Purchase Agreement to be duly executed on their
behalf, as of the day and year first above written.
[Corporate Seal] BBN DOMAIN CORPORATION
Attest:
- ------------------------------ ---------------------------------
[Corporate Seal] BBN CORPORATION
Attest:
- ------------------------------ ---------------------------------
THE INVESTORS:
ABS CAPITAL PARTNERS, L.P.
By: ABS Partners L.P.
By:
-------------------------------
General Partner
ABS CAPITAL PARTNERS II, L.P.
By: ABS Partners II, LLC
By:
-------------------------------
Manager
ST. PAUL FIRE AND MARINE
INSURANCE COMPANY
By:
-------------------------------
Authorized Representative
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<PAGE> 56
IN WITNESS WHEREOF, the parties hereto have duly executed this Purchase
Agreement, or have caused this Purchase Agreement to be duly executed on their
behalf, as of the day and year first above written.
[Corporate Seal] BBN DOMAIN CORPORATION
Attest:
- ------------------------------ ---------------------------------
[Corporate Seal] BBN CORPORATION
Attest:
- ------------------------------ ---------------------------------
THE INVESTORS:
ABS CAPITAL PARTNERS, L.P.
By: ABS Partners L.P.
By:
-------------------------------
General Partner
ABS CAPITAL PARTNERS II, L.P.
By: ABS Partners II, LLC
By:
-------------------------------
Manager
ST. PAUL FIRE AND MARINE
INSURANCE COMPANY
By:
-------------------------------
Authorized Representative
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<PAGE> 57
IN WITNESS WHEREOF, the parties hereto have duly executed this Purchase
Agreement, or have caused this Purchase Agreement to be duly executed on their
behalf, as of the day and year first above written.
[Corporate Seal] BBN DOMAIN CORPORATION
Attest:
- ------------------------------ ---------------------------------
[Corporate Seal] BBN CORPORATION
Attest:
- ------------------------------ ---------------------------------
THE INVESTORS:
ABS CAPITAL PARTNERS, L.P.
By: ABS Partners L.P.
By:
-------------------------------
General Partner
ABS CAPITAL PARTNERS II, L.P.
By: ABS Partners II, LLC
By:
-------------------------------
Manager
ST. PAUL FIRE AND MARINE
INSURANCE COMPANY
By:
-------------------------------
Authorized Representative
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<PAGE> 58
FSC CORPORATION
By:
---------------------------------
Title: Vice President
--------------------------------
c/o BancBoston Capital, Inc.
100 Federal Street, MS01-32-01
Boston, MA 02110
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<PAGE> 59
<TABLE>
EXHIBIT A
<CAPTION>
Name and Address Purchase Price
of Investor Shares to be Purchased Payable at Closing
----------- ---------------------- ------------------
<S> <C> <C>
ABS Capital Partners, L.P. 125,091.50 Series A Shares $14,999,983.435
135 E. Baltimore Street 4,083,333.50 Series B Shares
Baltimore, MD 21202
ABS Capital Partners II, L.P. 125,091.50 Series A Shares $14,999,983.435
135 E. Baltimore Street 4,083,333.50 Series B Shares
Baltimore, MD 21202
St. Paul Fire and Marine 46,701 Series A Shares $ 5,600,010.84
Insurance Company 1,524,444 Series B Shares
c/o St. Paul Venture Capital
8500 Normandale Lake Blvd.
Suite 1940
Bloomington, MN 55437
FSC Corporation 3,336 Series A Shares $ 400,022.29
c/o BancBoston Capital, Inc. 108,889 Series B Shares
100 Federal Street
MS01-32-01
Boston, MA 02110
</TABLE>
<PAGE> 60
EXHIBIT B
TO STOCK PURCHASE AGREEMENT
DATED AS OF JUNE 30, 1996
-------------------------
DEFINITIONS
"AFFILIATE" means: (a) with respect to a person, any member of such
person's family; (b) with respect to an entity, any officer, director,
stockholder, partner or investor of or in such entity or of or in any Affiliate
of such entity; and (c) with respect to a person or entity, any person or entity
which directly or indirectly through one or more intermediaries, Controls, is
Controlled by, or is under common control with such person or entity.
"AGREEMENT" means any concurrence of understanding and intention between
two or more persons (or entities) with respect to their relative lights and/or
obligations or with respect to a thing done or to be done (whether or not
conditional, executory, express, implied, in writing or meeting the requirements
of contract), including, without limitation contracts, leases, promissory notes,
covenants, easements, rights of way, covenants, commitments, arrangements and
understandings.
"ASSETS" means assets of every kind and everything that is or may be
available for the payment of liabilities (whether inchoate, tangible or
intangible), including, without limitation, real and personal property.
"BBN" means BBN Corporation, a Massachusetts corporation.
"CLAIMS" means all demands, claims, pending or threatened actions or causes
of action, suits, orders, legal proceedings, formal or informal notice of any
complaint, directive, citation, notice of responsibility or potential
responsibility, information request, assessments, losses, damages (including,
without limitation, diminution in value), liabilities, costs and expenses,
including, without limitation, interest, penalties and attorneys' fees and
disbursements.
"CLOSING" means the closing of the sale and purchase of the Shares pursuit
to the Purchase Agreement.
"CLOSING DATE" has the meaning set forth in Section 10.1 hereof
"CODE" means the Internal Revenue Code of 1986, as amended, and all Laws
promulgated pursuant thereto or in connection therewith.
<PAGE> 61
"COMMON CONTROL ENTITY" means any trade or business under common control
(as such term is defined in Section 414(b) or 414(c) of the Code) with the
Company or any Subsidiary.
"COMMON STOCK" means the shares of common stock, $.01 par value per share,
of the Company.
"COMPANY" means BBN Domain Corporation, a Massachusetts corporation.
"COMPANY TAX RETURNS" means all federal, state, local, foreign and other
applicable tax returns, declarations of estimated tax reports required to be
filed by, or which include, the Company or any of the Subsidiaries (without
regard to extensions of time permitted by law or otherwise).
"CONSOLIDATED" means, with respect to financial statements, a consolidation
with respect to the reporting of assets, liabilities and operating accounts of
the Company and its international operations.
"CONTROL" means possession, directly or indirectly, of power to direct or
cause the direction of management or policies (whether through ownership of
voting securities, by Agreement or otherwise).
"DOL" means the Department of Labor or its successors.
"DISCLOSURE SCHEDULE" means the disclosure schedule identified as the
Disclosure Schedule to the Purchase Agreement.
"DOCUMENTS" means any paper or other material (including without
limitation, computer storage media) on which is recorded (by letters, numbers or
other marks) information that may be evidentially used, including, without
limitation, legal opinions, mortgages, indentures, notes, instruments, leases,
Agreements, insurance policies, reports, studies, financial statements
(including, without limitation, the notes thereto), other written financial
information, schedules, certificates, charts, maps, plans, photographs, letters,
memoranda and all similar materials.
"ENCUMBRANCE" means, with respect to any Asset, any mortgage, lien, pledge,
encumbrance, security interest, deed of trust, order, decree, judgment, charge,
or any other type of arrangement that has the effect of creating a security
interest in respect of such Asset.
"ENVIRONMENTAL LAWS" means any Laws (including without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act), now or
hereafter in effect relating to the generation, production installation, use,
storage, treatment, transportation, release, threatened release, or
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<PAGE> 62
disposal of Hazardous Materials, noise control, or the protection of human
health, safety, natural resources, animal health or welfare, or the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all Laws promulgated pursuant thereto or in connection therewith.
"ESOP" means an employee stock ownership plan" as such term is defined in
Section 407(d)(6) of ERISA or Section 4975(e)(7) of the Code.
"EXHIBIT" means an exhibit attached to the Purchase Agreement.
"FURNISHED" means supplied, delivered or provided in any way.
"HART-SCOTT-RODINO" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and all Laws promulgated pursuant thereto or in connection
therewith.
"HAZARDOUS MATERIALS" means any wastes, substances, radiation, or materials
(whether solids, liquids or gases) which are subject to regulation under any
Environmental Laws; (iii) the presence of which on the Real Property cause or
threaten to cause a nuisance pursuant to applicable statutory or common law upon
the Real Property or to adjacent properties; (iv) without limitation, which
contain polychlorinated biphenyls (PCBs), asbestos, lead-based paints,
urea-formaldehyde form insulation, and petroleum or petroleum products
(including without limitation, crude oil or any fraction thereof or (iv) which
pose a hazard to human health, safety, natural resources, industrial hygiene, or
the environment, or an impediment to working conditions.
"INDIVIDUAL ACCOUNT PLAN" means a Plan that is or was an "individual
account plan" as such term is defined in Section 3(34) of ERISA.
"INTELLECTUAL PROPERTY" means all franchises, patents, patent
qualifications, trademarks, service marks, trade names, trade styles, brands,
private labels, copyrights, know-how, computer software, industrial designs and
drawings and general intangibles of a like nature, trade secrets, licenses, and
rights and filings with respect to the foregoing, and all reissues, extensions
and renewals thereof.
"INVESTOR" means each Person named on EXHIBIT A hereto.
"INVESTOR INDEMNIFIED PERSONS" means each Investor and their respective
Affiliates (including the Company but excluding BBN), employees,
representatives, agents, officers and directors.
"INVESTOR REPRESENTATIVE" means ABS Capital Partners, L.P.
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<PAGE> 63
"LAWS" means all foreign, federal, state and local statutes, laws,
ordinances, regulations, rules, resolutions, orders, determinations, writs,
injunctions, awards, (including, without limitation, awards of any arbitrator),
judgments and decrees applicable to the specified persons or entities and to the
businesses and Assets thereof (including, without limitation, Laws relating to
securities registration and regulation; the sale, leasing, ownership or
management of real property; employment practices, terms and conditions, and
waged and hours; building standards, land use and zoning; safety, health and
fire prevention; and environmental protection, including Environmental Laws).
"MATERIAL ASSETS" has the meaning specified in Section 3.3(b) hereof.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as such term is defined
in Section 3(37) of ERISA.
"OTHER ARRANGEMENT" means a benefit program or practice providing for
bonuses, incentive compensation, vacation pay, severance pay, insurance,
restricted stocks options, employee discounts, company cars, tuition
reimbursement or any other perquisite or benefit (including, without limitation,
any fringe benefit under Section 132 of the Code) to employees, of officers or
independent contractors that is not a plan.
"ORDINARY COURSE OF BUSINESS" means ordinary course of business consistent
with past practices and prudent business operations.
"PENSION PLAN" means an "employee pension benefit plan" as such term is
defined in Section 3(2) of ERISA.
"PERSON" means any individual, partnership, joint venture, corporation,
trust, unincorporated organization, government or department or agency of a
government.
"PLAN" means any plan, program or arrangement, whether or not written, that
is or was an "employee benefit plan" as such term is defined in Section 3(3) of
ERISA and (a) which was or is established or maintained by the Company or any
Subsidiary; (b) to which the Company or any Subsidiary contributed or was
obligated to contribute or to fund or provide benefits; or (c) which provides or
promises benefits to any person who performs or who has performed services for
the Company or any Subsidiary and because of those services is or has been (i) a
participant therein or (ii) entitled to benefits thereunder.
"PROPOSAL" means any proposal, offer or indication of interest of any
Persons entity or group relating to any acquisition or purchase of all or (other
than in the Ordinary Course of Business) any portion of the assets of, or any
equity in, the Company or any business combination with the Company, other than
the transactions contemplated by the Purchase Agreement.
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<PAGE> 64
"PURCHASE AGREEMENT" means this Stock Purchase Agreement, including the
Disclosure Schedule and all Exhibits hereto.
"PURCHASE PRICE" means the purchase price for the Shares to be sold and
purchased pursuant to the Purchase Agreement.
"QUALIFIED PLAN" means a Pension Plan that satisfies, or is intended by the
Company to satisfy, the requirements for tax qualification described in Section
401 of the Code.
"R/S SERIES" means software products of the Company including RS/1, RS/1
PC, RS/Explore, RS/Discover, RS/Decision, and RS/Graph.
"REAL PROPERTY" means any real property currently operated or leased, or
formerly owned, operated, or leased, by the Company or its Subsidiaries.
"REDEMPTION" has the meaning set forth in Section 2.2(b) hereof.
"SECTION" means a Section (or a subsection) of the Purchase Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and all laws
promulgated pursuant thereto or in connection therewith.
"SUBSIDIARY" means a corporation or other entity of which at least 80% of
the outstanding securities or other interests having rights to vote or otherwise
exercise Control are held, directly or indirectly, by the Company, including
entities to be established by or transferred to the Company pursuant to Section
3.9 hereof.
"TAXES" means all federal, state, local and foreign taxes (including,
without limitation, income, profit, franchise, sales, use, real property,
personal property, ad valorem, excise, employment, social security and wage
withholding taxes) and installments of estimated taxes, assessments,
deficiencies, levies, imports, duties, license fees, registration fees,
withholdings, or other similar charges of every kind, character or description
imposed by any governmental or quasi-governmental authorities, and any interest,
penalties or additions to tax imposed thereon or in collection therewith.
"TITLE I PLAN" means a Plan that is subject to Title I of ERISA.
"WELFARE PLAN" means an "employee welfare benefit plan" as such term is
defined in Section 3(1) of ERISA.
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<PAGE> 65
EXHIBIT C-1
-----------
SERIES A REDEEMABLE
PREFERRED STOCKS
The following sections set forth the powers, rights and preferences, and
type qualifications, limitations and restrictions thereof, of the Corporation's
Series A Redeemable Preferred Stock.
Section 1. Designation and Amount.
----------------------
1A. NUMBER OF SHARES. The designation of the series of Preferred Stock,
[no] par value per share, provided for herein shall be "Series A Redeemable
Preferred Stock" (hereinafter referred to as the "Series A Preferred"), and the
number of authorized shares constituting Series A Preferred is 500,000. Unless
specifically provided to the contrary, the term Series A Preferred shall include
Additional Shares of Series A Preferred (as hereinafter defined). The shares of
Series A Preferred shall only be issued in connection with the consummation of
the transactions contemplated by the Stock Purchase Agreement dated as of June
____, 1996, by and among the Corporation, BBN Corporation and the Investors
named on Exhibit A thereto (the "Stock Purchase Agreement"), and pursuant to
Section 2 hereof.
1B. RESTRICTIONS ON REISSUANCE. All shares of Series A Preferred redeemed,
purchased or otherwise acquired by the Corporation shall be retired and canceled
and shall be restored to the status of authorized but unissued shares of
Preferred Stock, without designation as to series, and may thereafter be issued,
but not as shares of Series A Preferred.
1C. STATED VALUE PER SHARE. The Stated Value Per Share of the Series A
Preferred shall be [One Hundred] United States Dollars [($100)], PROVIDED,
HOWEVER, that if BBN Corporation shall be required to pay to the Investors any
amount pursuant to Section 2.3(a) of the Stock Purchase Agreement (an
"Adjustment Amount"), the Stated Value Per Share of the Series A Preferred shall
be reduced by that portion of the Adjustment Amount allocable to the Series A
Preferred under the Stock Purchase Agreement, divided by the number of shares of
Series A Preferred originally issued pursuant to the Stock Purchase Agreement,
and the Stated Value Per Share of Additional Shares of Series A Preferred
thereafter issued shall be equal to the Stated Value Per Share of the Series A
Preferred as so adjusted.
1D. RANK. The Series A Preferred shall, with respect to dividend rights,
rights upon liquidation, winding up or dissolution, and redemption rights, rank;
(i) junior to any other series of Preferred Stock duly established by the Board
<PAGE> 66
of Directors of the Corporation the terms of which shall specifically provide
that such series shall rank prior to the Series A Preferred, whether now
existing or hereafter created (the "Senior Preferred Stock"), (ii) on a parity
with any other series of Preferred Stock duly established by the Board of
Directors of the Corporation, the terms of which shall specifically provide that
such series shall rank on a parity with the Series A Preferred, whether now
existing or hereafter created (the "Parity Preferred Stock"), and (iii) prior to
any other class or series of capital stock of the Corporation, including,
without limitation, the Series B Redeemable Convertible Preferred Stock of the
Corporation, [no] par value (the "Series B Preferred"), and all classes of the
Common Stock, par value $0.01 per share, of the Corporation, whether now
existing or hereafter created (the "Common Stock"); all of such classes or
series of capital stock of the Corporation to which the Series A Preferred ranks
prior, including without limitation the Series B Preferred and the Common Stock,
and including, without limitation, junior securities convertible into or
exchangeable for other junior securities or phantom stock representing junior
securities, are collectively referred to herein as "Junior Securities").
Section 2. Dividends.
---------
2A. GENERAL OBLIGATION. Subject to any prior preferences and other rights
of any Senior Preferred Stock and to the provisions of this Section 2, the
record holders of the Series A Preferred shall be entitled to receive when, as
and if declared by the Corporation's Board of Directors and to the extent
permitted under the Massachusetts Business Corporation Law, as amended,
cumulative preferential dividends on the shares of the Series A Preferred, at an
annual rate per share, calculated on the Stated Value Per Share of the Series A
Preferred plus accrued but unpaid dividends thereon, and no more, of ten percent
(10%). Dividends on the Series A Preferred shall accrue on a semi-annual basis
with respect to the dividend periods ending on the last day of each of June and
December. Dividends on the Series A Preferred shall be cumulative from the first
date on which shares of Series A Preferred are issued (the "Original Issue
Date"), whether or not declared and whether or not in any dividend period there
shall have been net profits or net assets of the Corporation legally available
for the payment of those dividends.
2B. PAYMENT OF DIVIDENDS. Any dividend on the Series A Preferred accrued
and payable as provided in this Section 2 shall be paid either, as so elected by
the Board of Directors of the Corporation, (i) in cash, (ii) by issuing a number
of additional shares (or partial shares) of the Series A Preferred (the
"Additional Shares of the Series A Preferred") for each such share (or partial
share) of Series A Preferred then outstanding equal to the dividend then payable
on each such share (or partial share) or Series A Preferred for the dividend
period then ended (or such shorter period for which dividends are so being paid)
(expressed as a dollar amount) divided by the Stated Value Per Share or (iii) in
any combination thereof to the extent declared by the Board of Directors,
dividends accrued for each semiannual
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<PAGE> 67
period ending on the last day of the next preceding June and December,
respectively, shall be paid on the fifth day of July and January (or if any such
day is not a business day, the business day next preceding such day) in each
year (each such date being referred to as a "Dividend Payment Date"). Any
dividends not paid on a Dividend Payment Date thereafter shall accumulate and
shall be considered "accrued but unpaid" for all purposes hereunder until paid.
The amount of dividends Accruing for any period shorter than a full semiannual
dividend period shall be determined on the basis of twelve 30-day months and a
360-day year, and the actual number of days elapsed in the period for which a
dividend is payable. Dividends paid on the shares of Series A Preferred in an
amount less than the total amount of such dividends at the time accrued on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. Dividends for any past semiannual dividend
period that are accrued but unpaid may be declared and paid at any time, without
reference to any regular Dividend Payment Date, to the holders of record on the
record date for such dividend payment.
2C. DIVIDENDS ON JUNIOR SECURITIES. The Corporation shall not declare and
pay any dividends on Junior Securities unless all accrued and unpaid dividends
on the Series A Preferred have been paid in full.
Section 3. Liquidation.
-----------
In the event of any dissolution liquidation or winding up of the
Corporation, whether voluntary or involuntary (a "Liquidation"), the holders of
shares of Series A Preferred shall be entitled to receive out of the assets of
the Corporation legally available for distribution to stockholders (whether
representing capital or surplus), before any payment or distribution shall be
made on the Common Stock or any other Junior Securities (but after distribution
of such assets amount, or payment thereof over to, creditors of the Corporation
and to holders of any stock of the Corporation with liquidation rights senior to
the Series A Preferred), cash in the amount of the Stated Value Per Share (the
"Series A Preferred Liquidation Distribution") plus an amount equal to all
accrued and unpaid dividends thereon (whether or not earned or declared) to and
including the date of final distribution. After the Series A Preferred
Liquidation Distribution has been made, the holders of shares of Series A
Preferred shall not be entitled to any further participation in any distribution
of assets of the Corporation. If the assets distributable upon such dissolution,
liquidation or winding up (as provided above) shall be sufficient to pay cash in
an amount equal to the amount of the Series A Preferred Liquidation Distribution
to the holders of shares of Series A Preferred Stock, then such assets or the
proceeds thereof shall be distributed among the holders of the Series A
Preferred ratably in proportion to the respective amounts of the Series A
Preferred Liquidation Distribution to which they otherwise would be entitled.
Neither the voluntary sale, conveyance, exchange or transfer of all or
substantially all of the property or assets of the Corporation, nor the
consolidation
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<PAGE> 68
or merger of the Corporation with any other corporation (any such event, a
"Reorganization Event"), shall be deemed to be a Liquidation of the Corporation;
PROVIDED, HOWEVER, that upon the occurrence of a Reorganization Event, any
holder of the Series A Preferred may exercise its right of redemption as
provided in Section 4A hereof.
Section 4. Redemptions.
-----------
4A. REDEMPTION AT THE OPTION OF THE HOLDER. Any holder of the Series A
Preferred may, by written notice to the Corporation, require the redemption of
all or any portion of the shares of Series A Preferred owned by such holder at a
redemption price per share equal to the Stated Value Par Share of the Series A
Preferred plus an amount equal to all accrued and unpaid dividends thereon
(whether or not earned or declared) to and including the date of redemption (the
"Redemption Price") at any time following the earlier to occur of the following:
(i) the closing of an underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock for the account of the Corporation to the
public having an aggregate offering price for all shares of Common Stock
resulting in the net proceeds to the Corporation of not less than Twenty Million
dollars ($20,000,000), and as to which the public offering price per share of
Common Stock multiplied by the number of fully diluted shares of Common Stock
outstanding immediately prior to closing of the offering (including, for
purposes of this calculation, the aggregate number of shares of Common Stock
into which all shares of Series B Preferred then outstanding may be converted)
shall equal not less than Eighty Million dollars ($80,000,000); (ii) a
Liquidation; (iii) a Reorganization Event; or (iv) the fifth anniversary of the
Original Issue Date.
4B. REDEMPTION PAYMENT. The Corporation shall pay the Redemption Price for
the shares of Series A Preferred requested to be redeemed in any such notice
within thirty (30) days after the date of such notice (or such later date upon
which the certificates evidencing the shares of Series A Preferred are
surrendered to the Corporation) (the "Redemption Date"). If the funds of the
Corporation legally available for payment of the Redemption Price of Series A
Preferred on any Redemption Date are insufficient to pay the Redemption Price
for the total number of shares of Series A Preferred to be redeemed on such
date, those funds which are legally available shall be used to redeem the
maximum possible number of such shares ratably based upon the number of such
shares of Series A Preferred requested to be redeemed by the holders thereof
at any time thereafter when additional funds of the Corporation are legally
available for the redemption of the Series A Preferred, such finds shall
immediately be used to redeem the balance of the shares of Series A Preferred
that the Corporation has become obligated to redeem on my Redemption Date but
which it has not redeemed, or in the event any person other than the Corporation
is the surviving or resulting corporation in any Reorganization Event, such
person shall upon consummation of such
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<PAGE> 69
Reorganization Event, redeem such balance of Series A Preferred shares (and the
Corporation shall so provide in its agreements with such person relating to such
Reorganization Event).
4C. DIVIDENDS AFTER REDEMPTION DATE. No share of Series A Preferred that is
redeemed is entitled to any dividends accruing after the Redemption Date. On the
Redemption Date of any share of Series A Preferred, all rights of the holder of
such share shall cease, and such share shall be deemed to be no longer
outstanding.
Section 5. Voting Rights.
-------------
Except as otherwise required by law, the holders of Series A Preferred
shall not be entitled to vote on any matters submitted to the Corporation's
stockholders for decision at any annual or special meeting of the stockholders
of the Corporation.
Section 6. Registration of Transfer.
------------------------
The Corporation shall keep at its principal office a register for the
registration of issuances and transfers of Series A Preferred. Upon the
surrender of any certificate representing Series A Preferred at such place, the
Corporation shall, at the request of the record holder of such certificate,
execute and deliver (at the Corporation's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the number of
shares of Series A Preferred represented by the surrendered certificate. Each
such new certificate shall be registered in such name and shall represent such
number of shares of Series A Preferred as is requested by the holder of the
surrendered certificate and shall be substantially identical in form to the
surrendered certificate, and dividends shall accrue on the Series A Preferred
represented by such new certificate from the date to which dividends have been
fully paid on such Series A Preferred represented by the surrendered
certificate.
Section 7. Replacement.
-----------
Upon receipt of evidence reasonably satisfactory to the Corporation (an
affidavit of the registered holder shall be satisfactory) of the ownership and
the loss, theft, destruction or mutilation of any certificate evidencing shares
of Series A Preferred, and in the case of any such loss, theft or destruction,
upon receipt of indemnity reasonably satisfactory to the Corporation (provided
that if the holder is a financial institution or other institutional investor,
its own agreement shall be satisfactory), or, in the case of any such mutilation
upon surrender of such certificate, the Corporation shall (at its expense)
execute and deliver in lieu of such certificate a new certificate of like kind
representing the number of shares of Series A Preferred represented by such
lost, stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate, and dividends
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<PAGE> 70
shall accrue on the Series A Preferred represented by such new certificate from
the date to which dividends have been fully paid on the shares of Series A
Preferred represented by such lost, stolen, destroyed or mutilated certificate.
Section 8. Amendment and Waiver.
--------------------
No amendment, modification or waiver shall be binding or effective with
respect to any provision hereof without the prior affirmative vote or written
consent of the holders of a majority of the shares of Series A Preferred
outstanding at the time such action is taken; PROVIDED, HOWEVER, that without
the prior affirmative vote or written consent of each holder of the Series A
Preferred then outstanding no such action shall change (i) the rate at which or
the manner in, which dividends on the Series A Preferred Stock accrue or the
form of consideration in which such dividends are payable or the times at which
such dividends become payable or the amount payable on redemption of the Series
A Preferred or the times at which redemption of the Series A Preferred is to
occur, (ii) the priority of payment of dividends to the Series A Preferred,
(iii) the Stated Value Per Share of the Series A Preferred, (iv) the rights of
the Series A Preferred Stock upon a Reorganization Event, or (v) the percentage
required to approve any chance in this Section 8.
Section 9. Notices.
-------
Except as otherwise expressly provided hereunder, all notices referred to
herein shall be in writing and shall be delivered by registered or certified
mail, return receipt requested and postage prepaid, or by reputable overnight
courier service, charges prepaid, and shall be deemed to have been given when so
mailed or sent (i) to the Corporation, at its principal executive offices and
(ii) to any stockholder, at such holder's address as it appears in the stock
records of the Corporation (unless otherwise indicated by any such holder).
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<PAGE> 71
EXHIBIT C-2
-----------
SERIES B REDEEMABLE
CONVERTIBLE PREFERRED STOCK
The following sections set forth the powers, rights and preferences, and
the qualifications, limitations and restrictions thereof, of the Corporation's
Series B Redeemable Convertible Preferred Stock.
Section 1. Designation and Amount.
----------------------
1A. NUMBER OF SHARES. The designation of the series of Preferred Stock [no]
par value per share, provided for herein shall be "Series B Redeemable
Convertible Preferred Stock" (hereinafter referred to as the "Series B
Preferred"), and the number of authorized shares constituting Series B Preferred
is 9,800,000. The shares of Series B Preferred shall only be issued in
connection with the consummation of the transactions contemplated by the Stock
Purchase Agreement dated as of June ___, 1996, by and among the Corporation,
BBN Corporation and the Investors named on Exhibit A thereto (the "Stock
Purchase Agreement").
1B. RESTRICTIONS ON REISSUANCE. All shares of Series B Preferred redeemed,
purchased or otherwise acquired by the Corporation shall be retired and canceled
and shall be restored to the status of authorized but unissued shares of
Preferred Stock, without designation as to series, and may thereafter be issued,
but not as shares of Series B Preferred.
1C. STATED VALUE PER SHARE. The Stated Value Per Share of the Series B
Preferred shall be $0.61, PROVIDED, HOWEVER, that if BBN Corporation shall be
required to pay to the Investors any amount pursuant to Section 2.3(a) of the
Stock Purchase Agreement (an "Adjustment Amount"), the Stated Value Per Share of
the Series B Preferred shall be reduced by that portion of the Adjustment Amount
allocable to the Series B Preferred under the Stock Purchase Agreement, divided
by the number of shares of Series B Preferred originally issued pursuant to the
Stock Purchase Agreement.
1D. RANK. The Series B Preferred shall, with respect to dividend rights,
rights upon liquidation, winding up or dissolution, and redemption rights, rank
(i) junior to the Corporation's Series A Redeemable Preferred Stock, no par
value (the "Series S Preferred"), and any other series of Preferred Stock duly
established by the Board of
<PAGE> 72
Directors of the Corporation, the terms of which shall specifically provide that
such series shall rank prior to the Series B Preferred, whether now existing or
hereafter created (the "Senior Preferred Stock"), (ii) on a parity with any
other series of Preferred Stock duly established by the Board of Directors of
the Corporation, the terms of which shall specifically provide that such series
shall rank on a parity with the Series B Preferred, whether now existing or
hereafter created (the "Parity Preferred Stock", and (iii) prior to any other
class or series of capital stock of the Corporation including, without
limitation, all classes of the Common Stock, par value $0.01 per share, of the
Corporation, whether now existing or hereafter created (the "Common Stock"; all
of such classes or series of capital stock of the Corporation to which the
Series B Preferred ranks prior, including without limitation the Common Stock,
and including without limitation, junior securities convertible into or
exchangeable for other juror securities or phantom stock representing prior
securities, are collectively referred to herein as "Junior Securities").
Section 2. Dividends.
---------
Each holder of shares of the Series B Preferred shall be entitled to
receive, when and as declared by the Board of Directors, if at all, dividends on
a parity with each holder of shares of Colon Stock. Such dividends shall be
payable per share of Series B Preferred in an amount equal to the dividends per
share payable on the renumber of shares of Common Stock; into which each share
of Series B Preferred would be convertible under Section 6 hereof on the record
date for determining eligibility to receive such dividends, or if no such record
date is established, on the date such dividends are actually paid.
Section 3. Liquidation.
-----------
In the event of any dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary (a "Liquidation"), the holders of
shares of Series B Preferred shall be entitled to receive out of the assets of
the Corporation legally available for distribution to stockholders (whether
representing capital or surplus), before any payment or distribution shall be
made on the Common Stock or any other Junior Securities (but after distribution
of such assets among, or payment thereof over to, creditors of the Corporation
and to holders of any stocks of the Corporation with liquidation rights senior
to the Series B Preferred, including holders of the Series A Preferred and other
Senior Preferred Stock), cash in the amount of the Stated Value Per Share (the
"Series B Preferred Liquidation Distribution"). After the Series B Preferred
Liquidation Distribution has been made, the holders of shares of Series B
Preferred shall not be entitled to any further participation in any distribution
of assets of the Corporation. If the assets distributable upon such dissolution,
liquidation or winding up (as provided above) shall be insufficient to pay cash
in an amount equal to the amount of the Series B Preferred Liquidation
Distribution to the holders of shares of Series B Preferred Stock, then such
assets or the proceeds thereof shall be distributed among the holders of the
Series B Preferred ratably in proportion to the respective amounts of the Series
B Preferred Liquidation Distribution to which they otherwise would be entitled.
Neither the voluntary sale, conveyance, exchange or transfer of
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<PAGE> 73
all or substantially all of the property or assets of the Corporation, nor the
consolidation or merger of the Corporation with any other corporation (any such
event, a "Reorganization Event"), shall be deemed to be a Liquidation of the
Corporation; PROVIDED, HOWEVER, that upon the occurrence of a Reorganization
Event, any holder of the Series B Preferred may exercise its right of redemption
as provided in Section 4A hereof.
Section 4. Redemptions.
-----------
4A. REDEMPTION AT THE OPTION OF THE HOLDER. Any holder of the Series B
Preferred may, by written notice to the Corporation, require the redemption of
all or any portion of the shares of Series B Preferred owned by such holder at a
redemption price per share equal to the Stated Value Per Share of the Series B
Preferred (the "Redemption Price") at any time following the earlier to occur of
the following; (i) the closing of an underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of Common Stock for the account of the Corporation
to the public having an aggregate offering price for all shares of Common Stock
resulting in the net proceeds to the Corporation of not less than Twenty Million
dollars ($20,000,000), and as to which the public offering price per share of
Common Stock multiplied by the number of shares of fully diluted Common Stock
outstanding immediately prior to closing of the offering (including for purposes
of this calculation, the aggregate number of shares of Common Stock into which
all shares of Series B Preferred then outstanding may be converted pursuant to
Section 6 hereof shall equal not less than Eighty Million dollars ($80,000,000)
(a "Qualified Public Offering"); (ii) a Liquidation; (iii) a Reorganization
Event; or (iv) the sixth anniversary of the Original Issue Date.
4B. REDEMPTION PAYMENT. The Corporation shall pay the Redemption Price for
the shares of Series B Preferred requested to be redeemed in any such notice
within thirty (30) days after the date of such notice (or such later date upon
which the certificates evidencing the shares of Series B Preferred are
surrendered to the Corporation) (the "Redemption Date"). If the funds of the
Corporation legally available for payment of the Redemption Price of Series B
Preferred on any Redemption Date are insufficient to pay the Redemption Price
for the total number of shares of Series B Preferred to be redeemed on such
date, those fads which are legally available shall be used to redeem the maximum
possible number of such shares ratably based upon the number of such shares of
Series B Preferred requested to be redeemed by the holders thereof. At any time
thereafter when additional funds of the Corporation are legally available for
the redemption of the Series B Preferred, such funds shall immediately be used
to redeem the balance of the shares of Series B Preferred that the Corporation
has become obligated to redeem on any Redemption Date but we it has not
redeemed, or in the event any person other than the Corporation is the surviving
or resulting corporation in any
3
<PAGE> 74
Reorganization Event, such person shall, upon consummation of such
Reorganization Event, redeem such balance of Series B Preferred shares (and the
Corporation shall so provide in its agreements with such person relating to such
Reorganization Event).
Section 5. Voting Rights.
-------------
The holders of the Series B Preferred shall be entitled to notice of all
stockholders meetings in accordance with the Corporation's bylaws, and except as
otherwise required by law, the holders of the Series B Preferred shall be
entitled to vote on all matters submitted to the stockholders for a vote
together with the holders of the Common Stock voting together as a single class,
and each share of Series B Preferred (including fractional shares) shall be
entitled to one vote for each whole share of Common Stock that would be issuable
upon conversion of such share on the record date for determining eligibility to
participate in the action being taken.
Section 6. Optional Conversion.
-------------------
6A. General.
-------
At any time and from time to time after the issuance thereof, any holder of
Series B Preferred may convert all or any of the shares of Series B Preferred
held by such holder into a number of shares of Common Stock computed by
multiplying the number of shares to be converted by the Stated Value Per Share
of the Series B Preferred, and dividing the result by the applicable Conversion
Price then in effect. The initial conversion rate for the Series B Preferred
shall be one share of Common Stock for each share of Series B Preferred
surrendered for conversion, representing an initial "Conversion Price" of $0.11
per share of Common Stock. The applicable conversion rate and the Conversion
Price from time to time in effect is subject to adjustment as hereinafter
provided.
6B. Conversion Procedure.
--------------------
(i) Any holder of shares of Series B Preferred desiring to convert any
portion thereof into Common Stock shall surrender each certificate representing
one or more shares of such Series B Preferred to be converted, duly endorsed in
favor of the Corporation or if blank and accompanied by proper instruments of
transfer, at the principal business of office of the Corporation (or such other
place as may be designated by the Corporation), and shall give written notice to
the Corporation at that office of its election to convert the some, setting
forth therein the name or names (with the address or addresses) in which the
shares of Common Stock are to be issued.
(ii) The conversion rights of any share of Series B Preferred subject to
redemption hereunder shall term rate on the Redemption Date for such share
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<PAGE> 75
unless the Corporation has failed to pay to the holder thereof the Redemption
Price thereof.
(iii) As soon as possible after a conversion has been effected (but in any
event within three business days in the case of subparagraph (a) below), the
Corporation shall deliver to the converting holder:
(a) a certificate or certificates representing the number of shares
of Common Stock issuable by reason of such conversion in such
name or names and such denomination or denominations as the
converting holder has specified;
(b) payment of the amount payable under subparagraph (vi) below with
respect to such conversion; and
(c) a certificate representing any shares of Series B Preferred which
were represented by the certificate or certificates delivered to
the Corporation in connection with such conversion but which were
not converted.
(iv) The issuance of certificates for shares of Common Stock upon
conversion of Series B Preferred shall be made without charge to the holders of
such Series B Preferred for any issuance tax in respect thereof or other cost
incurred by the Corporation in connection with such conversion and the related
issuance of shares of Common Stock.
(v) The Corporation shall not close its books against the transfer of
Series B Preferred or of Common Stock issued or issuable upon conversion of
Series B Preferred in any manner which interferes with the timely conversion of
Series B Preferred. The Corporation shall assist and cooperate (but the
Corporation shall not be required to expend substantial efforts or funds) with
any holder of Series B Preferred required to make any governmental filings or
obtain any governmental approval prior to or in connection with any conversion
of shares of Series B Preferred hereunder (including, without limitation, making
any filings required to be made by the Corporation).
(vi) If any fractional interest in a share of Common Stock would, except
for the provisions of this subparagraph, be deliverable upon any conversion of
shares of a holder's Series B Preferred, the Corporation, in lieu of delivering
the fractional share therefor, shall pay an amount to the holder thereof equal
to an amount bearing the same ratio to the fair market value of a whole share of
Common Stock of the Corporation, as determined in good faith by the
Corporation's Board of Directors ("Fair Market Value"), as the fractional
interest to which the stockholder would otherwise be entitled bears to a whole
share of Common Stock.
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<PAGE> 76
(vii) The Corporation shall at all times reserve and keep available out of
its authorized but Issued shares of Common Stock, solely for the purpose of
issuance upon the conversion of the Series B Preferred, not less than the number
of shares of Common Stock issuable upon the conversion of all outstanding Series
B Preferred that may then be exercised. All shares of Common Stock which are so
issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable and be from all taxes, liens and charges. The Corporation shall
take all such actions as may be necessary to ensure that all such shares of
Common Stock may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which shares of Common Stock may be listed (except for official notice of
issuance which shall be immediately delivered by the Corporation upon each such
issuance).
6C. SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Corporation at any
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) the outstanding shares of one or more classes of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced, and if the Corporation at any
time combines (by reverse stocks split or otherwise) the outstanding shares of
one or more classes of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
6D. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. In
connection with any Reorganization Event, (i) the holders of Series B Preferred
shall thereafter have the right to acquire and receive, in lieu of or in
addition to (as the case may be) the shares of Common Stock immediately
theretofore acquirable and receivable upon the conversion of such holder's
Series B Preferred, such shares of stock, securities, cash or other assets (or,
if not practicably attainable, the reasonable equivalent thereof) as such holder
would have received in connection with such Reorganization Event if such holder
had converted its Series B Preferred immediately prior to such Reorganization
Event, and (ii) dividends and amounts in respect of dividends hereunder payable
in shares of Common Stock prior to such Reorganization Event shall be payable,
in lieu of each share of Common Stock, in such shares of stock, securities, cash
or other assets (or reasonable equivalent thereof) as the holder of one share of
Common Stock received in connection with such Reorganization Event. The
Corporation shall make appropriate provisions to ensure that the requirements of
the previous sentence are effected.
6E. Notices.
-------
(i) Immediately upon any adjustment of the Conversion Price, the
Corporation shall give written notice thereof to all holders of Series B
Preferred, setting forth in reasonable detail and certifying the calculation of
such adjustment.
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<PAGE> 77
(ii) The Corporation shall give written notice to all holders of Series B
Preferred at least 20 days prior to the date on which the Corporation closes its
books or fixes a record date (a) with respect to any dividend or distribution
upon Common Stock, (b) with respect to any pro rata subscription offer to
holders of Common Stock or (c) for determining rights to vote with respect to
any liquidation or Reorganization Event.
Section 7. Mandatory Conversion.
--------------------
Unless the holder thereof delivers a notice of its election to exercise its
right of redemption under Section 4A hereof prior thereto, each share of Series
B Preferred shall automatically be converted into shares of Common Stock at the
then effective Conversion Price upon the closing of a Qualified Public Offering
(in the event of which offering, the person(s) entitled to receive the Common
Stock issuable upon such conversion of the Series B Preferred shall not be
deemed to have converted that Series B Preferred until immediately prior to the
closing of such offering).
Section 8. Liquidating Dividends.
---------------------
If the Corporation declares or pays a dividend upon the Common Stock
payable otherwise than in cash out of legally available funds (determined in
accordance with generally accepted accounting principles, consistently applied)
except for a stock dividend payable in shares of Common Stock (a "Liquidating
Dividend"), then the Corporation shall pay to the holders of the Series B
Preferred at the time of payment thereof the Liquidating Dividend which would
have been paid to such holders had such Series B Preferred been converted
immediately prior to the record date fixed for determining the stockholders
entitled to receive payment of such Liquidating Dividend, or, if no record date
is fixed, the date as of which the record holders of Common Stock entitled to
such dividends are to be determined.
Section 9. Purchase Rights.
---------------
If at any time the Corporation grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants securities or other
property ("Purchase Rights") pro rata to the record holders of any class of
Common Stock, then each holder of Series B Preferred shall be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such holder would have acquired if such holder had held
the number of shares of Common Stock acquirable upon conversion of such holder's
shares of Series B Preferred immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.
Section 10. Registration of Transfer.
------------------------
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<PAGE> 78
The Corporation shall keep at its principal office a register for the
registration of issuances and transfers of Series B Preferred. Upon the
surrender of any certificate representing Series B Preferred at such place, the
Corporation shall, at the request of the record holder of such certificate
execute and deliver (at the corporation's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the slumber of
shares of Series B Preferred represented by the surrendered certificate. Each
such new certificate shall be registered in such name and shall represent such
number of shares of Series B Preferred as is requested by the holder of the
surrendered certificate and shall be substantially identical in form to the
surrendered certificate, and dividends shall accrue on the Series B Preferred
represented by such new certificate from the date to which dividends have been
fully paid on such Series B Preferred represented by the surrendered
certificate.
Section 11. Replacement.
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Upon receipt of evidence reasonably satisfactory to the Corporation (an
affidavit of the registered holder shall be satisfactory) of the ownership and
the loss, theft, destruction or mutilation of any certificate evidencing spares
of Series B Preferred, and in the case of any such loss, theft or destruction,
upon receipt of indemnity reasonably satisfactory to the Corporation (provided
that if the holder is a financial institution or other institutional investor,
its own agreement shall be satisfactory), or, in the case of any such mutilation
upon surrender of such certificate, the Corporation shall (at its expense)
execute and deliver in lieu of such certificate a new certificate of like kind
representing the number of shares of Series B Preferred represented by such
lost. stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate, and dividends shall accrue on
the Series B Preferred represented by such new certificate from the date to
which dividends have been fully paid on the shares of Series B Preferred
represented by such lost, stolen, destroyed or mutilated certificate.
Section 12. Amendment and Waiver.
--------------------
No amendment, modification or waiver shall be binding or effective with
respect to any provision hereof without the prior affirmative vote or written
consent of the holders of a majority of the shares of Series B Preferred
outstanding at the time such action is taken; PROVIDED, HOWEVER, that without
the prior affirmative vote or written consent of holders of at least 75% of the
Series B Preferred then outstanding, no such action shall change (i) the amount
payable on redemption of the Series B Preferred or the times at which redemption
of the Series B Preferred is to occur, (ii) any Conversion Price of the Series B
Preferred or the number of shares or class of stock into which the Series B
Preferred is convertible (ii) the priority of payment of dividends to the Series
B Preferred, (iii) the Stated Value Per Share of the Series B Preferred, (iv)
the rights of the Series B Preferred Stock upon a Reorganization Event, (v) the
voting rights of the Series B Preferred,
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(vi) the provisions for mandatory conversion of the Series B Preferred, (vii)
the rights of holders of the Series B Preferred to acquire Purchase Rights, or
(viii) the percentage required to approve any change in this Section 12.
Section 13. Notices.
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Except as otherwise expressly provided hereunder, all notices referred to
herein shall be in writing and shall be delivered by registered or certified
mail, return receipt requested, and postage prepaid, or by reputable overnight
courier service, charges prepaid, and shall be deemed to have been given when so
mailed or sent (i) to the Corporation, at its principal executive offices and
(ii) to any stockholder, at such holder's address as it appears in the stock
records of the Corporation (unless otherwise indicated by any such holder).
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