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)
April 28, 1998
NESTOR,INC.
(Exact name of registrant as specified in charter)
Delaware 0-12-965 13-3163744
(State of other (Commission (IRS employer
jurisdiction of file number) identification
of incorporation) number)
One Richmond Square, Providence, Rhode Island 02906
(Address of principal executive offices)
Registrant's telephone number, including area code:
(401) 331-9640
N/A
(Former name or former address, if changed since last report)
Item 5. Other Events.
1) The Corporation entered into a Securities Purchase
Agreement dated as of April 28, 1998 ("Agreement") by and
between the Corporation and Transaction Systems Architects,
Inc. ("Purchaser") pursuant and subject to which the
Purchaser acquired 2,500,000 shares of Common Stock of the
Corporation at a purchase price of $2.00 per share and was
granted a five year Warrant to purchase 2,500,000 shares of
Common Stock of the Corporation at an initial exercise price
of $3.00 per share. A copy of the Agreement is annexed as
an exhibit hereto.
-2-
EXHIBITS
The following exhibit is filed herewith:
Exhibit No. Description Page Number
4 Securities Purchase Agreement
dated as of April 28, 1998
between the Registrant and
Transaction Systems Architects, Inc.
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SIGNATURES
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 thereunto duly authorized.
Dated: April 28, 1998 NESTOR,INC.
(Registrant)
By: /s/Nigel P. Hebborn
Chief Financial Officer
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT ("Agreement") is
made as of the 28th day of April , 1998 by and between Nestor,
Inc., a Delaware corporation (the "Company") and Transaction
Systems Architects, Inc., a Delaware corporation (the
"Purchaser").
RECITALS
1. The Purchaser and the Company entered into a Loan
Agreement dated March 25, 1998 (the "Loan Agreement") pursuant to
which the Purchaser agreed to lend the Company up to $1,500,000
subject to the terms and conditions thereof, of which $500,000 of
principal is outstanding as of the date hereof as evidenced by a
Note (the "Note").
B. Applied Communications, Inc., a wholly-owned
subsidiary of the Purchaser ("ACI"), and the Company are parties
to a Prism Non-Exclusive License Agreement dated September 19,
1996 as amended April 19, 1997 and January 14, 1998.
Concurrently herewith, ACI and the Company are entering into an
Amended and Restated License Agreement (the "License Agreement")
in the form of Exhibit I.
C. The Company desires to sell to the Purchaser, and
the Purchaser desires to purchase from the Company, (1) 2,500,000
shares of Common Stock of the Company, par value $.01 per share
(the "Common Stock"), and (2) a Warrant to purchase up to an
aggregate of 2,500,000 shares of Common Stock in the form set
forth as Exhibit II (the "Warrant").
D. Concurrently herewith the Company and the
Purchaser are entering into the Registration Rights Agreement in
the form set forth as Exhibit III (the "Registration Rights
Agreement").
E. Concurrently with the consummation of this
Agreement, the Company and certain stockholders of the Company
will enter into the amendments (the "Revised Agreements") set
forth as Exhibit IV hereto to certain existing agreements and
securities of the Company for the purpose of conforming such
agreements and securities to the terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants contained herein, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, each intending to be legally
bound, do hereby agree as follows:
1. SALE AND PURCHASE OF COMPANY SECURITIES; OTHER TRANSACTIONS.
The Company has authorized the issuance and sale to the
Purchaser of, (i) 2,500,000 shares of Common Stock ("the Shares")
and (ii) the Warrant. Subject to the terms and conditions herein
set forth, the Company will issue and sell to the Purchaser, and
the Purchaser will purchase from the Company, at the Closing (as
defined below) the Shares and the Warrant. The aggregate
purchase price for the Shares and Warrant shall be $5,000,000
(the "Purchase Price") payable as follows: (i) $4,500,000 in cash
and (ii) surrender of the Note.
2. CLOSING.
(a) Subject to the applicable provisions of Sections
7, 8, and 9 hereof, the closing of the sale of the Shares and the
Warrant (the "Closing") shall take place at a mutually agreed
location as soon as practicable following the satisfaction or
waiver of the applicable conditions set forth in Sections 7, 8
and 9 hereof.
(b) At the Closing, (i) the Company shall deliver to
the Purchaser certificates evidencing the Shares and the Warrant
to be purchased by the Purchaser, (ii) the Company shall pay to
the Purchaser the amount of all interest on the Note accrued
through the Closing in the form of a check or wire transfer of
immediately available funds to an account designated by the
Purchaser (iii) the Purchaser shall deliver to the Company the
Purchase Price in the form of wire transfer of immediately
available funds to an account designated by the Company in the
amount of $4,500,000 and the delivery of the Note marked as
cancelled, and (iii) the parties shall make such other deliveries
as are contemplated hereby.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the
Purchaser as follows:
(a) Organization, Standing and Power of the Company.
The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware.
The Company has all requisite power and authority to own, lease
and operate its properties, assets and business and to conduct
its business as now being conducted and is duly qualified to do
business as a foreign corporation in good standing in those
jurisdictions, other than the state of its incorporation, in
which the nature of the business conducted or property owned by
it makes such qualification necessary, except for any failures so
to qualify which would not have, individually or in the
aggregate, a material adverse effect on the business, condition
or results of operations of the Company (a "Company Material
Adverse Effect").
(b) Authority; Enforceability; No Conflict. The
Company has all requisite corporate power and authority to enter
into this Agreement, the Registration Rights Agreement, the
Warrant and the Revised Agreements (such agreements other than
this Agreement are collectively referred to hereafter as the
"Related Agreements") to issue and sell the Shares and the
Warrant, and to carry out its obligations hereunder and under the
Related Agreements. The execution, delivery and performance of
this Agreement and the Related Agreements by the Company and the
issuance and sale of the Shares and the Warrant by the Company
have been duly and validly authorized by all requisite corporate
proceedings on the part of the Company. This Agreement is, and
the Related Agreements when executed and delivered by the Company
will be, and when issued and sold the Warrant will be, a valid
and binding obligation of the Company, enforceable against it in
accordance with its terms, except that (i) such enforcement may
be subject to bankruptcy, insolvency, reorganization, moratorium,
rehabilitation, liquidation, conservatorship, receivership or
other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
Subject to the receipt of the consents or approvals set forth in
Section 3(b) of the disclosure schedule delivered by the Company
to the Purchasers concurrently with the execution and delivery of
this Agreement (the "Disclosure Schedule"), the execution and
delivery of this Agreement and each Related Agreement by the
Company do not, and the consummation by the Company of the
transactions contemplated hereby and thereby will not, the
issuance and sale of the Shares and the Warrant will not, and the
performance by the Company of its obligations under the terms of
the Shares and the Warrant will not, result in or constitute:
(i) a default, breach or violation of or under the Certificate of
Incorporation or the By-laws of the Company, or (ii) a default,
breach or violation of or under any mortgage, deed of trust,
indenture, note, bond, license, lease agreement or other
instrument or obligation to which the Company is a party or by
which any of their properties or assets are bound, except for any
defaults, breaches or violations which would not have,
individually or in the aggregate, a Company Material Adverse
Effect, or (iii) a violation of any statute, rule, regulation,
order, judgment or decree of any court, public body or authority
by which the Company or any of its properties or assets are
bound, except for any violations which would not have,
individually or in the aggregate, a Company Material Adverse
Effect, or (iv) an event which (with notice or lapse of time or
both) would permit any person to terminate, accelerate the
performance required by, or accelerate the maturity of, any
indebtedness or obligation of the Company under any agreement or
commitment to which the Company is a party or by which the
Company is bound or by which any of its properties or assets are
bound, except for any accelerations or terminations which would
not have, individually or in the aggregate, a Company Material
Adverse Effect, or (v) the creation or imposition of any lien,
charge or encumbrance on any property of the Company under any
agreement or commitment to which the Company is a party or by
which the Company is bound or by which any of its respective
properties or assets are bound, except for any liens, charges or
encumbrances which would not have, individually or in the
aggregate, a Company Material Adverse Effect, or (vi) an event
which would require any consent under any agreement to which the
Company is a party or by which the Company is bound or by which
any of its respective properties or assets are bound, except for
any consents which, if not received, would not have, individually
or in the aggregate, a Company Material Adverse Effect.
(c) Capitalization. The authorized capital stock of
the Company consists of (i) 30,000,000 shares of Common Stock,
par value $.01 per share, of which 9,486,273 shares (excluding
shares held in treasury) are outstanding as of the close of
business on April 16, 1998 and 10,000,000 shares of preferred
stock, par value $1.00 per share (the "Preferred Stock"), of
which 1,363,250 shares of Series B, 170,171 shares of Series D,
1,444 shares of Series E, 599 shares of Series F, 777 share of
Series G, and 2,026 shares of Series H Preferred Stock are
outstanding as of the close of business on April 16, 1998. All
of the outstanding shares of Common Stock and Preferred Stock
have been duly authorized and validly issued, and are fully paid
and non-assessable. Immediately following the Closing,
16,253,270 shares of Common Stock will be outstanding and no
shares of Preferred Stock will be outstanding except for
1,363,250 shares of Series B and 170,171 shares of Series D
Preferred Stock. Except for the outstanding shares of Series B
and Series D Preferred Stock, and except as set forth in Section
3(c) of the Disclosure Schedule, there are no outstanding
preemptive, conversion or other rights, options, warrants or
agreements granted or issued by or binding upon the Company for
the purchase or acquisition of any shares of capital stock of the
Company or any other securities convertible into, exchangeable
for or evidencing the right to subscribe for any shares of such
capital stock. The Company is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of the capital stock of the Company or any
convertible securities, rights or options of the type described
in the preceding sentence. The Company is not a party to, and
does not have knowledge of, any agreement expressly restricting
the transfer of any shares of the capital stock of the Company.
Upon the Closing and giving effect to the transactions
contemplated hereby and the satisfaction of the conditions
provided for herein, the Shares will constitute 11% of the
outstanding Common Stock on a fully diluted basis and 14% of the
total voting power of the Company, and the Shares together with
the shares of Common Stock issuable upon exercise of the Warrant
will constitute 19.9% of the Common Stock on a fully diluted
basis and 24.6% of the total voting power of the Company.
(d) No Subsidiaries or Other Ventures. Except as set
forth in Section 3(d)(i) of the Disclosure Schedule, the Company
has no subsidiaries. Except as set forth in Section 3(d)(i) of
the Disclosure Schedule, the Company does not own, directly or
indirectly, any interest in any corporation, partnership, joint
venture, association or other entity.
(e) Status of Shares. The Shares to be issued at the
Closing have been duly authorized by all necessary corporate
action on the part of the Company. When issued and paid for as
provided in this Agreement, the Shares will be validly issued and
outstanding, fully paid and nonassessable, and the issuance of
the Shares is not and will not be subject to preemptive rights of
any other stockholder of the Company. The shares of Common Stock
to be issued upon exercise of the Warrant have been duly
authorized by all necessary corporate action on the part of the
Company and, as of the Closing, will be duly reserved for
issuance. When the shares of Common Stock are issued upon
exercise of the Warrant, such shares will be validly issued and
outstanding, fully paid and nonassessable and the issuance of
such shares will not be subject to preemptive rights of any other
stockholder of the Company.
(f) Financial Statements.
(1) The Company has heretofore delivered or made
available to the Purchaser the audited consolidated balance
sheets at December 31, 1997 and 1996, and June 30, 1996 of the
Company and the related consolidated statements of income,
stockholders' equity and cash flows for the years then ended,
including the related notes and auditor's report thereon (the
"Financial Statements"). The Financial Statements (i) present
fairly the consolidated financial condition of the Company at the
dates thereof and present fairly its consolidated results of
operations and cash flows for the periods then ended and (ii)
have been prepared in conformity with generally accepted
accounting principles ("GAAP") applied consistently with respect
to the immediately preceding fiscal period except as set forth in
the notes to the Financial Statements or in the auditor's report
thereon.
(2) The Company has heretofore delivered or made
available to the Purchaser the unaudited consolidated balance
sheet at February 28, 1998 of the Company (the "February Balance
Sheet") and the related consolidated statements of income and
cash flows for the two months then ended (such February Balance
Sheet and related consolidated statements, collectively, the
"February Financial Statements"), each of which (i) presents
fairly, in all material respects, the consolidated financial
condition of the Company at February 28, 1998, and presents
fairly its consolidated results of operations and cash flows for
the two months then ended and (ii) has been prepared in
compliance with all of the requirements of the Securities
Exchange Act of 1934, as amended, (the "Exchange Act") and the
applicable rules and regulations thereunder.
(g) SEC Reports. The Company has filed all reports,
statements, forms and documents with the Securities Exchange
Commission ("SEC") that it was required to file since December
31, 1990 (the "SEC Reports"), all of which have complied in all
material respects with all applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and
the Exchange Act. As of their respective dates, each such
report, statement, form or document, including without limitation
any financial statements or schedules included therein, did not
contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading.
(h) Liabilities. As of the date hereof, except (i) as
set forth on the February Balance Sheet, (ii) as set forth in
Section 3(h) of the Disclosure Schedule or (iii) for liabilities
or obligations which were incurred after February 28, 1998 in the
ordinary course of business and consistent with past practices,
the Company has no liabilities, obligations, claims or losses
(whether liquidated or unliquidated, secured or unsecured,
absolute, accrued, contingent or otherwise) that would be
required to be disclosed on a consolidated balance sheet of the
Company (including the notes thereto) in conformity with GAAP.
(i) Indebtedness of the Company. Section 3(i) of the
Disclosure Schedule sets forth all outstanding secured and
unsecured Indebtedness (as defined hereinafter) of the Company in
excess of $50,000 in any individual case, or for which the
Company has commitments, on the date of this Agreement. The
Company is not in default with respect to any such Indebtedness.
"Indebtedness" means at any time, (i) all indebtedness for
borrowed money, (ii) all obligations evidenced by bonds,
debentures, notes or other similar instruments, (iii) all
reimbursement obligations and other liabilities under letters of
credit, (iv) all obligations to pay the deferred purchase price
of property or services, other than normal trade creditors in the
ordinary course, (v) all obligations in respect of capitalized
leases, (vi) all guarantees and contractual obligations of the
Company, contingent or otherwise, with respect to any
indebtedness or obligation of another, and (vii) all obligations
of the Company secured by any mortgage, pledge, lien, security
interest or other encumbrance on any asset or property of the
Company, whether or not such obligation has been assumed.
(j) Title to Properties; Liens. The Company does not
own any real property. Section 3(j) of the Disclosure Schedule
correctly describes all real property leased by the Company,
together with a description of the lease payment obligations and
lease termination provisions relating thereto. The Company
enjoys peaceful and undisturbed possession under all leases
necessary in any material respect for the operation of its
properties and assets, and all such leases are valid and
subsisting and are in full force and effect.
(k) Actions Pending. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the
Company, threatened, against the Company which questions the
validity of this Agreement or the Related Agreements or any
action taken or to be taken pursuant hereto or thereto. Except
as disclosed in Section 3(k) of the Disclosure Schedule, there is
no action, suit, claim, investigation or proceeding pending or,
to the knowledge of the Company, threatened, against or involving
the Company or any of its properties or assets. There are no
outstanding orders, judgments, injunctions, awards or decrees of
any court, arbitrator or governmental or regulatory body against
the Company.
(l) Compliance with Law. The business of the Company
has been and is presently being conducted so as to comply with
all applicable federal, state, and local governmental laws,
rules, regulations and ordinances. The Company has all material
franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals necessary for the conduct
of its business as now being conducted by it, and the Company is
in compliance therewith except for any non-compliances which
would not, individually or in the aggregate, have a Company
Material Adverse Effect.
(m) No Violations. Except as disclosed in Section
3(m) of the Disclosure Schedule, the Company is not in violation
of or default under (i) any term of its Certificate of
Incorporation or By-Laws, (ii) any of its contracts or agreements
or under any instrument by which the Company is bound, or (iii)
any outstanding indenture or other debt instrument or with
respect to the payment of principal of or interest on any
outstanding obligations for borrowed money.
(n) Taxes.
(i) The Company has duly and timely filed,
or caused to be filed, and will duly and timely file,
or cause to file, with the appropriate taxing authority
all Tax Returns (as defined below) required to be filed
on or before the date hereof by or with respect to the
Company and such Tax Returns were or will be true,
correct and complete in all material respects when
filed.
(ii) The Company has paid or caused to be
paid in full or has made adequate provision for on its
balance sheet all material Taxes (as defined below)
shown to be due on such Tax Returns. There are no
liens for Taxes upon the assets of either the Company
except for statutory Liens for current Taxes not yet
due.
(iii) None of the Tax Returns filed by or
on behalf of the Company has been examined by the
appropriate taxing authorities.
(iv) Except as set forth in Schedule 3(n)(iv)
hereto, the Company has not received any notice of
deficiency or assessment from any taxing authority with
respect to liabilities or obligations for Taxes with
respect to the Company which has not been fully paid or
finally settled, and any such deficiency or assessment
shown in Schedule 3(n)(iv) hereto is being contested in
good faith through appropriate proceedings. The
Company has not given any outstanding waivers or
comparable consents extending the application of the
statute of limitations with respect to any Taxes or Tax
Returns with respect to the Company.
(v) The Company has complied in all material
respects with all applicable laws, rules and
regulations relating to the payment and withholding of
payroll and employment taxes and have, within the time
and in the manner prescribed by law, withheld from
employee wages and paid over to the proper governmental
authorities all material payroll and employment taxes
required to be so withheld and paid over.
(vi) No audit or other administrative
proceeding or court proceeding which is material to the
financial condition of Company is presently pending
with regard to any Taxes or Tax Returns.
(vii) The amount and character of the tax
loss carryforwards as set forth in the Company's
financial statements for the year ended December 31,
1997 are materially accurate and, to the Company's best
knowledge, are not subject to any "Section 382
limitation" under Section 382 of the Code, and any
regulations promulgated thereunder. To the Company's
best knowledge, at the Closing Date, the issuance of
the Shares and the Warrant in accordance with the terms
of this Agreement and the Related Agreements will not
result in an "ownership change" under Section 382 of
the Code, and any regulations promulgated thereunder.
As of the Closing Date, the Company shall not have any
plan or intention to take any action after the Closing
Date, which to its best knowledge would result in an
"ownership change" under Section 382 of the Code and
any regulations promulgated thereunder.
(viii) For purposes of this Agreement,
"Taxes" shall mean any and all taxes, charges, fees,
levies or other like assessments (and all related
interest, additions to tax and penalties), including,
but not limited to, income, transfer, gains, gross
receipts, excise, inventory, property (real, personal
or intangible), custom, duty, sales, use, license,
withholding, payroll, employment, capital stock and
franchise taxes, imposed by the United States, or any
state, local or foreign taxing authority, whether
computed on a unitary, combined or any other basis and
"Tax Return" shall mean any report, return or other
information filed with any taxing authority with
respect to Taxes imposed upon or attributable to the
operations of the Company.
(o) ERISA. Section 3(o) of the Disclosure Schedule
contains a true and complete list of each employee benefit plan,
as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and any other bonus,
severance or termination pay, stock option or stock purchase,
incentive pay or other plan, program or arrangement covering
present or former employees of the Company which is maintained or
contributed to by the Company or any of its subsidiaries (the
"Plans"). None of the Plans is subject to the provisions of
Title IV of ERISA, and none of the Plans is a multiemployer Plan
as defined in Section 3(37) of ERISA (a "Multiemployer Plan").
The Company has not incurred (directly or indirectly) any
liability to the Pension Benefit Guaranty Corporation or with
respect to a Multiemployer Plan. None of the Plans is subject to
the minimum funding standards set forth in Section 302 of ERISA
or Section 412 of the Internal Revenue Code of 1986, as amended
(the "Code"). None of the Company or any of its officers or
employees has engaged in a "prohibited transaction" as defined in
Section 406 of ERISA or Section 4975 of the Code with respect to
any Plan which would subject any of such parties to a civil
penalty under Section 502(i) of ERISA or an excise tax under
Section 4975 of the Code. Each of the Plans has been operated in
all material respects in accordance with applicable law,
including ERISA and the Code. None of the Plans is an employee
welfare plan, as defined in Section 3(1) of ERISA, which provides
health or life insurance benefits to employees of the Company
following their retirement (other than coverage mandated by
applicable law). Each Plan that is intended to be qualified
under Section 401(a) of the Code is so qualified.
(p) Absence of Specified Changes. Except as set forth
in Section 3(p) of the Disclosure Schedule, during the period
from February 28, 1998 to the date hereof, there has not been
any:
(1) material adverse change in the business,
condition or results of operations of the Company;
(2) transactions involving the Company except in
the ordinary course of business;
(3) change in accounting principles, methods or
practices of the Company;
(4) amendment to the Certificate of Incorporation
or By-Laws of the Company; or
(5) agreement or understanding to take any of the
actions described above in this paragraph.
(q) Certain Fees. No broker's, finder's or financial
advisory fees or commissions will be payable by the Company with
respect to the transactions contemplated by this Agreement and
the Related Agreements.
(r) Use of Proceeds. The Company will apply the
proceeds from the sale of the Shares and the Warrant to general
working capital purposes.
(s) Intellectual Property Rights.
(i) The Company is the owner of or has rights to
use (including the right to sue for past infringement) the
intellectual and similar property of every kind and nature
used at any time in or necessary for the conduct of its
business, including without limitation, (A) Patents (meaning
all United States and foreign patents and patent
applications, patent disclosures and inventions, and all
patents issued upon said patent applications or based upon
said disclosures and inventions, including all reissues,
divisions, continuations, continuations-in-part,
substitutions, extensions or renewals of any of the
foregoing), (B) Trademarks (meaning all United States, any
political subdivision thereof, and foreign trademarks,
service marks, trade names, corporate names, company names,
business names, fictitious business names, trade styles,
logos, designs and general intangibles of like nature, all
registrations and recordings thereof, and all applications
in connection therewith, including registrations, recordings
and applications in the United States Patent and Trademark
Office (the "PTO"), any State of the United States or any
other country or jurisdiction or any political subdivision
thereof, and all goodwill symbolized thereby and/or
associated therewith and all extensions or renewals
thereof,), (C) Copyrights (meaning all copyrights, United
States and foreign copyright registrations, and applications
to register copyrights), (D) inventions, formulae,
processes, designs, know-how, show-how or other data or
information, (E) confidential or proprietary technical and
business information, processes and trade secrets, (F)
computer software and databases (including all embodiments
or fixations thereof and related documentation,
registrations and franchises, and all additions,
improvements, enhancements, updated and accessions thereto),
(G) all technical manuals and documentation made or used in
connection with any of the foregoing, and (H) all licenses
and rights with respect to the foregoing or property of like
nature, in each case as any of the foregoing have been at
any time used in or necessary for the conduct of the
business of the Company (collectively, the "Intellectual
Property Rights").
(ii) Section 3(s)(ii) of the Disclosure Schedule
sets forth a complete and accurate list of all Copyrights,
Patents, and Trademarks owned by or under obligation of
assignment to the Company. Each owner identified thereon is
listed in the records of the appropriate United States,
State or foreign agency as the sole owner of record.
(iii) Section 3(s)(iii) of the Disclosure
Schedule sets forth a complete and accurate list of (a) all
material agreements and (b) all other agreements entered
into since January 1, 1990, in each case between the Company
and any third party granting any right to use or practice
any rights under any Intellectual Property Right
(collectively, the "Intellectual Property Licenses"), except
for single-user licenses granting the right to use on a
single personal computer a single copy of application
software incorporating any of the Company's Intellectual
Property Rights.
(iv) There is no restriction or limitation on the
right of the Company to transfer any of the Intellectual
Property Rights.
(v) No trade secret, formula, process, invention,
design, know-how, show-how or any other confidential
information relating to the Company's business has been
disclosed or authorized to be disclosed to any third party
unless any such third party has entered into, or is bound
by, a confidentiality agreement that is sufficient to
protect fully the Company's proprietary interest and right
in and to such Intellectual Property Right.
(vi) The use of the Intellectual Property Rights
by the Company is not in conflict with the rights of others.
There are no pending legal or governmental proceedings,
including oppositions, interferences, proceedings or suits,
relating to the Intellectual Property Rights, and, to the
best knowledge of the Company, no such proceedings are
threatened. To the best knowledge of the Company, the
conduct of the business of the Company and the exercise of
the Intellectual Property Rights does not infringe upon or
otherwise violate, and the exercise of any rights granted to
the Company under any Intellectual Property License would
not infringe upon or violate any intellectual property
rights of any third party. To the best knowledge of the
Company, except as set forth in Section 3(s)(vi), no person
is infringing upon or otherwise violating any of the
Intellectual Property Rights. None of the Company or its
affiliates has received notice of any claims, and there are
no pending claims, of any persons relating to the scope,
ownership or use of any of the Intellectual Property Rights.
(vii) Each copyright registration, patent, and
registered trademark and application therefor listed in
Section 3(s)(ii) of the Disclosure Schedule is valid,
subsisting and in proper form, and has been duly maintained,
including the submission of all necessary filings in
accordance with the legal and administrative requirements of
the appropriate jurisdictions. There have been no failures
in complying with such requirements. Except as provided in
Section 3(s)(ii) of the Disclosure Schedule, no such
Copyright, Patent or Trademark has lapsed and there has been
no cancellation or abandonment thereof.
(viii) With respect to each patent and patent
application listed in Section 3(s) of the Disclosure
Schedule, there are no defects of form in the preparation or
filing of the applications thereof. Each pending
application is being diligently prosecuted. During the
prosecution of each Patent, (A) all pertinent prior art
references known to the Company or its counsel was properly
disclosed to the PTO, and (B) neither such counsel nor the
Company made any misrepresentation to, or concealed any
material fact from, the PTO.
(ix) The execution and delivery of this Agreement
and the Related Agreements and the taking of the actions
contemplated hereby and thereby will not alter any of the
rights of the Company in or to the Intellectual Property
Rights.
(t) Environmental Matters. The Company is in
compliance with the provisions of all federal, state and local
laws relating to pollution or protection of the environment
applicable to it or to real property leased by it or to the use,
operation or occupancy thereof, except for violations or
liabilities which individually or in the aggregate could not
reasonably be expected to have a Company Material Adverse Effect.
The Company has not engaged in any activity in violation of any
provision of any federal, state or local law relating to
pollution or protection of the environment, which violation could
reasonably be expected to have a Company Material Adverse Effect.
The Company has no liability, absolute or contingent, under any
federal, state or local law relating to pollution or protection
of the environment, except for liabilities which individually or
in the aggregate could not reasonably be expected to have a
Company Material Adverse Effect.
(u) Registration Rights. Except as set forth in
Section 3(u) of the Disclosure Schedule, the Company is not a
party to any agreement granting registration rights to any person
with respect to any of its equity or debt securities. Upon
execution of the Revised Agreements and the consents listed in
Section 3(b) of the Disclosure Schedule, the Purchaser's rights
under the Registration Rights Agreement will not be subordinated
to the registration rights of any other person.
(v) Agreements. Section 3(v) of the Disclosure
Schedule contains a list of each agreement or instrument
(including any and all amendments thereto) to which the Company
is a party as of the date hereof and which is or, immediately
following the consummation of the transactions contemplated by
this Agreement, will be, material to the business, condition or
results of operations of the Company. Each such agreement or
instrument (including any and all amendments thereto) is in full
force and effect and constitutes a legal, valid and binding
obligation of (i) the Company and (ii) to the best knowledge of
the Company, the other respective parties thereto, and, to the
best knowledge of the Company, no person is in default or breach
of (with or without the giving of notice or the passage of time)
any such agreement or instrument.
(w) Availability of Documents. Section 3(w) of the
Disclosure Schedule contains a true, correct and complete copy of
the Company's Certificate of Incorporation, together with all
amendments thereto. The Company has also heretofore provided or
made available to the Purchaser an accurate copy of its by-laws
and has heretofore made available for inspection by the Purchaser
all written agreements, arrangements, commitments and documents
referred to herein or in the Disclosure Schedule, in each case,
together with all amendments and supplements thereto. The
Company has heretofore made available for inspection by the
Purchaser its corporate minute books. Such corporate minute
books contain the minutes of all the meetings of stockholders,
board of directors and any committees thereof which have been
held since the Company's date of incorporation and all written
consents to action executed in lieu thereof.
(x) Business Relations. To the knowledge of the
Company,no client, customer or supplier will cease to do business
with the Company due to the consummation of the transactions
contemplated by this Agreement or the Related Agreements.
(y) Interest in Competitors, Suppliers, Customers,
etc. Except as set forth on Section 3(y) of the Disclosure
Schedule or with respect to the ownership of less than 1% of the
outstanding publicly traded securities of an entity, neither the
Company nor its officers, directors, or affiliates have any
ownership interest in any competitor, supplier, customer or
franchisee of the Company.
(z) Private Offering. Assuming the accuracy of the
Purchaser's representations set forth in Section 4(c) herein, the
offer and sale of the Shares and the Warrant hereunder is exempt
from the registration and prospectus delivery requirements of the
Securities Act. Neither the Company nor any person acting on
behalf of it has taken or will take any action which would
subject the offering and issuance of any of such securities to
the provisions of Section 5 of the Securities Act or to the
provisions of any securities law, rule or regulation of any
applicable jurisdiction.
(aa) NASDAQ Listing Qualifications. Except for the
minimum bid price, upon Closing, the Company will be in full
compliance with the initial listing requirements of The Nasdaq
SmallCap Market and after due inquiry the Company has no
knowledge of any condition, event, or circumstance relating to
the Company, its officers, directors, or significant stockholders
which would cause the Company's application to list the Common
Stock on The Nasdaq SmallCap Market not to be approved.
(bb) Disclosure. No representation or warranty to
Purchaser contained in this Agreement and no statement contained
in the Disclosure Schedule or any Officer's Certificate of the
Company furnished pursuant to the provisions hereof, contains any
untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein
not misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser represents and warrants to the Company as
follows:
(a) Organization and Standing of the Purchaser. The
Purchaser is a corporation duly organized, validly existing and
in good standing (to the extent such concept exists) under the
laws of the State of Delaware.
(b) Authority; Enforceability; No Conflict. The
Purchaser has all requisite corporate power and authority to
enter into this Agreement and to carry out its obligations
hereunder. The execution, delivery and performance of this
Agreement by the Purchaser have been duly and validly authorized
by all requisite corporate proceedings on the part of the
Purchaser. This Agreement is a valid and binding obligation of
the Purchaser, enforceable against it in accordance with its
terms, except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium,
rehabilitation, liquidation, conservatorship, receivership or
other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought. The
execution and delivery of this Agreement by the Purchaser do not,
and consummation by the Purchaser of the transactions
contemplated hereby will not, result in or constitute (i) a
default, breach or violation of or under the organizational
documents of the Purchaser, or (ii) a default, breach or
violation of or under any mortgage, deed of trust, indenture,
note, bond, license, lease agreement or other instrument or
obligation to which the Purchaser is a party or by which any of
its properties or assets are bound, except for any defaults,
breaches or violations which would not, individually or in the
aggregate, have a material adverse effect on the Purchaser or
prevent or materially delay the consummation by the Purchaser of
the transactions contemplated hereby, or (iii) a violation of any
statute, rule, regulation, order, judgment or decree of any
court, public body or authority, except for any violations which
would not, individually or in the aggregate, have a material
adverse effect on the Purchaser or prevent or materially delay
the consummation by the Purchaser of the transactions
contemplated hereby.
(c) Acquisition for Investment. The Purchaser is
either an "accredited investor," as that term is defined in
230.501(a) of the rules and regulations promulgated by the SEC
under the 1933 Act or a person described in 230.506(b)(ii) of
such rules and regulations. The Purchaser is acquiring the
Shares and the Warrant solely for its own account for the purpose
of investment and not with a view to or for sale in connection
with any distribution thereof, and has no present intention or
plan to effect any distribution of such Shares or the Warrant.
The Purchaser acknowledges that it is able to bear the financial
risks associated with an investment in the Shares and the
Warrant. The Shares and Warrant may bear a legend to the
following effect:
"THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE IN RELIANCE
ON CERTAIN EXEMPTIONS FROM REGISTRATION
THEREUNDER. THE SALE, PLEDGE, HYPOTHECATION
OR OTHER TRANSFER OF SUCH SECURITIES IS
SUBJECT TO COMPLIANCE WITH APPLICABLE
SECURITIES LAWS AND REGULATIONS."
5. CONDUCT OF BUSINESS OF THE COMPANY.
Except as expressly contemplated by this Agreement or the
Related Agreements, during the period from the date hereof
through the Closing, the Company will conduct its operations
according to its ordinary course of business and consistent with
past practice, and the Company will use its best efforts to
preserve intact its business organization, to keep available the
services of its officers and employees and to maintain existing
relationships with customers and others having business
relationships with it. Without limiting the generality of the
foregoing, and except as otherwise expressly contemplated by this
Agreement or the Related Agreements or as set forth in Section 5
of the Disclosure Schedule, prior to the Closing, the Company
will not, without the prior written consent of the Purchaser:
(a) amend its Certificate of Incorporation or By-Laws;
(b) (i) except in accordance with the existing terms
of the convertible securities, warrants, options and other
agreements disclosed on Section 3(c) of the Disclosure Schedule,
authorize for issuance, issue, sell, deliver or agree or commit
to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights
to purchase or otherwise) any securities of any class, or (ii)
amend in any respect any of the terms of any such securities
outstanding as of the date hereof, except to the extent required
by the express terms on the date hereof of such securities;
(c) split, combine or reclassify any shares of its
capital stock, declare, set aside or pay any dividend or other
distribution (whether in cash, stock, or property or any
combination thereof) in respect of its capital stock (except for
dividends on the existing preferred stock in accordance with its
terms), or redeem, retire, repurchase or otherwise acquire,
directly or indirectly, any of its securities or adopt a plan of
complete or partial liquidation or resolutions providing for or
authorizing any such liquidation;
(d) incur any additional Indebtedness, except for
short-term borrowings or other Indebtedness incurred in the
ordinary course of business, or mortgage or pledge any of its
assets, tangible or intangible;
(e) acquire, sell, lease or dispose of any assets
outside the ordinary course of business;
(f) make any change in any of the accounting
principles or practices, methods or practices or business
policies used by it;
(g) acquire (by merger, consolidation, or acquisition
of stock or assets) any corporation, partnership or other
business organization or division thereof;
(h) pay, discharge or satisfy any claims, liabilities
or obligations (absolute, accrued, contingent or otherwise),
other than pursuant to the terms of this Agreement, the payment,
discharge or satisfaction in the ordinary course of business
consistent with past practice or, in accordance with their terms,
of liabilities reflected or reserved against in the February
Balance Sheet (or the notes thereto) or incurred in the ordinary
course of business consistent with past practice;
(i) increase the compensation payable to the officers
and employees of the Company, except for increases in salary or
wages (a) in accordance with past practice or (b) in conjunction
with promotions or other changes in job status in the ordinary
course of business;
(j) pay, loan or advance any amounts to, transfer or
lease any properties or assets to or enter into any contract or
agreement with any officers, directors, employees or shareholders
of the Company, except with respect to directors' fees and
compensation to officers and employees at rates in accordance
with past practice, and except with respect to reimbursable
business expenses of a nature and in amounts reasonably related
to the requirements of the business of the Company;
(k) waive or release any rights of material value or
terminate or fail to renew any material contract; or
(l) take, or agree in writing or otherwise to take,
directly or indirectly, any of the actions described in Sections
5(a) through 5(k).
6. ADDITIONAL AGREEMENTS.
(a) Access to Information; Confidentiality. From the
date hereof to the Closing, the Company shall afford the
officers, employees and agents of the Purchaser access during
normal business hours to the Company's officers, employees,
agents, properties, offices and all books and records of the
Company, and shall furnish the Purchaser with all financial,
operating and other data and information concerning the Company
as the Purchaser, through its officers, employees or agents, may
request and shall cooperate fully with the Purchaser and its
representatives in their examination of the Company.
The Purchaser will, and will cause its affiliates,
partners, directors, officers, employees, agents, representatives
and financial advisors (collectively, "Representatives") to, hold
in strict confidence all Confidential Information (as hereinafter
defined), and not disclose the same to any person without the
prior consent of the Company, unless compelled to disclose any
such Confidential Information by judicial or administrative
process or, in the written opinion of their counsel, by other
requirements of law. Prior to disclosing any Confidential
Information to any such person, the Purchaser will inform such
person and its representatives of the confidential nature thereof
and will obtain from such person its agreement to be bound by the
provisions of this paragraph as if references herein to the
Purchaser were references to such person. If this Agreement is
terminated, the Purchaser will promptly return to the Company or
destroy all documents (including all copies thereof) furnished by
the Company and received by the Purchaser or any of its
Representatives containing such Confidential Information. For
purposes hereof, "Confidential Information" shall mean all
confidential nonpublic information concerning the Company that
the Purchaser obtains from the Company, or its representatives,
excluding any such information that subsequently becomes publicly
available (other than directly or indirectly through acts of the
Purchaser) and excluding any such information which is currently
in the possession of the Purchaser or its affiliates or obtained
by them from the Company in connection with the performance of
the License Agreement.
(b) Best Efforts. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its
best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all things reasonably necessary, proper
or advisable under applicable laws and regulations to consummate
and make effective the transactions contemplated by this
Agreement and the Related Agreements as promptly as practicable.
In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this
Agreement and the Related Agreements, the proper officers and
directors of each party hereto shall take all such reasonable and
necessary action.
(c) Public Announcements. The Purchaser and the
Company will consult with each other before issuing any press
release or otherwise making any public statements with respect to
the transactions contemplated by this Agreement and the Related
Agreements, and shall not issue any such press release or make
any such public statement prior to such consultation, except as
may be required by applicable law, and then only after reasonable
prior notice and giving reasonable opportunity to comment to the
other party. The Company shall not disclose the identity of the
Purchaser in any such press release or other public statement
without the prior written consent of the Purchaser, except as may
be required by applicable law, and then only after giving the
Purchaser reasonable prior notice and reasonable opportunity to
comment of the disclosure.
(d) Supplements to Disclosure Schedule. Prior to the
Closing, the Company will supplement or amend the Disclosure
Schedule with respect to any matter hereafter arising which, if
existing or occurring at the date of this Agreement, would have
been required to be set forth or described in the Disclosure
Schedule. No supplement or amendment of the Disclosure Schedule
made pursuant to this section shall be deemed to cure any breach
of any representation or warranty made in this Agreement unless
the Purchaser specifically agrees thereto in writing.
(e) Directors. For so long as the Purchaser or any of
its wholly-owned subsidiaries shall own and/or have the right to
acquire from the Company at least 2,500,000 million shares
(subject to adjustment for stock splits, stock dividends,
subdivisions, etc.) of Common Stock in the aggregate, the
Purchaser shall be entitled to propose one candidate (the
"Purchaser Designee") for election to the Board of Directors of
the Company. Subject to its fiduciary duties to stockholders,
the Company will recommend to its stockholders that the Purchaser
Designee be elected to the Company's Board of Directors.
(f) NASDAQ Listing Application. As soon as
practicable, but in no event more than 30 days after the bid
price of the Common Stock closes at the minimum amount for any
minimum time period required by The Nasdaq SmallCap Market
initial listing requirements, the Company will complete and file
a listing application for the Common Stock together with all
required documents and shall use its best efforts to cause the
Common Stock including the Shares and the shares issuable upon
exercise of the Warrant to be listed and to continue to be listed
on The Nasdaq SmallCap Market.
(g) Termination of Loan Agreement. Any obligation of
the Purchaser to make any loans under the Loan Agreement shall
terminate upon the Closing. The Purchaser shall file a Uniform
Commercial Code statement to terminate its security interest in
collateral for loans under the Loan Agreement.
(h) Conversion of Preferred Stock. The Company agrees
to use its reasonable efforts to take, or cause to be taken, all
reasonable actions, and to do, and cause to be done, all things
reasonably necessary for the conversion of the shares of Series B
and Series D Preferred Stock of the Company including all accrued
dividends thereon into Common Stock at the applicable conversion
rates provided in the respective terms of such series as soon as
practicable after the Closing.
7. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY
TO ISSUE THE SHARES AND WARRANT AND OF THE PURCHASER TO
PURCHASE THE SHARES AND THE WARRANT.
The respective obligations hereunder of the Company to issue
and sell the Shares and the Warrant and of the Purchaser to
purchase the Shares and the Warrant are subject to the
satisfaction, at or before the Closing, of each of the following
conditions set forth in paragraphs (a) through (c) below.
(a) Consents. The consents and approvals set forth in
Section 3(b) of the Disclosure Schedule shall have been obtained.
(b) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or enforced by any court or
governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this
Agreement.
(c) Related Agreements. The Related Agreements shall
have been executed and delivered by the parties thereto.
8. CONDITIONS PRECEDENT TO THE OBLIGATION OF
THE COMPANY TO SELL THE SHARES AND WARRANT.
The obligation hereunder of the Company to sell the Shares
and Warrant to the Purchaser is further subject to the
satisfaction, at or before the Closing, of each of the following
conditions set forth in paragraphs (a) and (b) below. These
conditions are for the Company's sole benefit and may be waived
by the Company at any time in its sole discretion.
(a) Accuracy of the Purchaser's Representations and
Warranties. The representations and warranties of the Purchaser
shall be true and correct in all material respects as of the date
when made and as of the Closing as though made at that time
(except for representations and warranties that speak as of a
particular date).
(b) Performance by the Purchaser. The Purchaser shall
have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the
Purchaser at or prior to the Closing.
9. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASER
TO PURCHASE THE SHARES AND WARRANT.
The obligation of the Purchaser hereunder to acquire and pay
for the Shares and Warrant is subject to the satisfaction, at or
before the Closing, of each of the following conditions set forth
in paragraphs (a) through (h) below. These conditions are for
the Purchaser's sole benefit and may be waived by the Purchaser
at any time in its sole discretion.
(a) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company
shall be true and correct in all material respects as of the date
when made and as of the Closing as though made at that time
(except for representations and warranties that speak as of a
particular date).
(b) Performance by the Company. The Company shall
have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing.
(c) Legal Opinion. The Purchaser shall have received
the opinion of Baer Marks & Upham, substantially in the form set
forth in Exhibit V hereto.
(d) Compliance with Securities Laws. The offering and
sale by the Company, at or prior to the Closing, of the Shares
and Warrant shall have been made in compliance with all
applicable requirements of federal and state securities laws and
the Purchaser shall have received evidence thereof in form and
substance reasonably satisfactory to it.
(e) No Offerings. Neither the Company nor any of its
subsidiaries shall have offered, placed or sold, or caused or
agreed to be offered, placed or sold, any securities or other
obligations other than as part of the contemplated sale of the
Shares and Warrant and the capital structure as reflected herein.
(f) Regulatory Approvals. All regulatory approvals
shall have been obtained by the Purchaser.
(g) Conversion of Preferred Stock. All shares of
Series E, Series F, Series G and Series H Preferred Stock of the
Company including all accrued dividends thereon shall be
converted into Common Stock at the applicable conversion rates
provided in the respective terms of such series.
(h) Cancellation of Warrants for Preferred Stock. All
warrants for Preferred Stock or other rights to acquire any
shares of Preferred Stock of the Company shall be cancelled or
converted to warrants or other rights to acquire Common Stock at
a price per share no less than would have been payable for the
Common Shares if the warrants or other rights had been exercised
and the Preferred Stock thereby acquired converted into Common
Stock.
10. TERMINATION.
(a) Right To Terminate. Notwithstanding anything to
the contrary set forth in this Agreement, this Agreement may be
terminated and the transactions contemplated herein abandoned at
any time prior to the Closing:
(i) at any time by mutual written consent of the
Company and the Purchaser;
(ii) by either the Company or the Purchaser if the
Closing shall not have occurred by June 30, 1998; provided,
however, that the right to terminate this Agreement under this
Section 10(a)(ii) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been
the cause of, or resulted in, the failure of the Closing to occur
on or before such date; or
(iii) by either the Company or the Purchaser if a
court of competent jurisdiction shall have issued an order,
decree or ruling permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement, and
such order, decree, ruling or other action shall have become
final and nonappealable.
(b) Obligations to Cease. In the event that this
Agreement shall be terminated pursuant to Section 10(a) hereof,
all obligations of the parties hereto under this Agreement shall
terminate and there shall be no liability of any party hereto to
any other party except that (i) the provisions of the second
paragraph of Section 6(a), Section 11, and Section 12(b) shall
survive, and shall be and remain in full force and effect and
(ii) nothing herein will relieve any party from liability for any
willful breach of this Agreement.
11. INDEMNIFICATION.
(a) General Indemnity. The Company agrees to
indemnify and save harmless the Purchaser (and its directors,
officers, partners, affiliates, representatives, advisors,
successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses
(including, without limitation, interest, penalties, reasonable
attorneys' fees, charges and disbursements) incurred by the
Purchaser as a result of (i) any breach of the representations,
warranties or covenants made by the Company herein or in the
Related Agreements or (ii) any action, proceeding or claim
commenced or threatened by a third party in connection with this
Agreement, the Related Agreements and the transactions
contemplated hereby and thereby. The Purchaser agrees to
indemnify and save harmless the Company (and its directors,
officers, partners, affiliates, representatives, advisors,
successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses
(including, without limitation, interest, penalties, reasonable
attorneys' fees, charges and disbursements) incurred by the
Company as a result of any breach of the representations,
warranties or covenants made by the Purchaser herein or in the
Related Agreements. No party shall be entitled to
indemnification hereunder unless and until the aggregate amount
of such party's indemnification claims exceeds $15,000 and then
to the full extent of such claims.
(b) Indemnification Procedure. Any party entitled to
indemnification under this Section 11 (an "indemnified party")
will give prompt written notice to the indemnifying party of any
claim with respect to which it seeks indemnification promptly
after the discovery by such party of any matters giving rise to a
claim for indemnification; provided that the failure of any party
entitled to indemnification hereunder to give notice as provided
herein shall not relieve the indemnifying party of its
obligations under this Section 11 except to the extent that the
indemnifying party is actually prejudiced by such failure to give
notice. In case any action, proceeding or claim is brought
against an indemnified party in respect of which indemnification
is sought hereunder, the indemnifying party shall be entitled to
participate in and, unless in the reasonable judgment of the
indemnified party a conflict of interest between it and the
indemnifying party may exist in respect of such action,
proceeding or claim, to assume the defense thereof, with counsel
reasonably satisfactory to the indemnified party. In the event
that the indemnifying party advises an indemnified party that it
will contest such a claim for indemnification hereunder, or
fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election to
defend, settle or compromise, at its sole cost and expense, any
action, proceeding or claim (or discontinues its defense at any
time after it commences such defense), then the indemnified party
may, at its option, defend, settle or otherwise compromise or pay
such action or claim. In any event, unless and until the
indemnifying party elects in writing to assume and does so assume
the defense of any such claim, proceeding or action, the
indemnified party's costs and expenses arising out of the
defense, settlement or compromise of any such action, claim or
proceeding shall be losses subject to indemnification hereunder.
The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to
the indemnifying party all information reasonably available to
the indemnified party which relates to such action or claim. The
indemnifying party shall keep the indemnified party fully
apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. If the
indemnifying party elects to defend any such action or claim,
then the indemnified party shall be entitled to participate in
such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any
settlement of any action, claim or proceeding effected without
its written consent, provided, however, that the indemnifying
party shall not unreasonably withhold, delay or condition its
consent. Anything in this Section 11 to the contrary
notwithstanding, the indemnifying party shall not, without the
indemnified party's prior written consent, settle or compromise
any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or
which does not include, as an unconditional term thereof, the
giving by the claimant or the plaintiff to the indemnified party
of a release from all liability in respect of such claim. The
indemnification required by this Section 11 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred. The indemnity
agreements contained herein shall be in addition to (i) any cause
of action or similar right of the indemnified party against the
indemnifying party or others, (ii) the indemnification rights of
the indemnified party under any other agreement, and (iii) any
liabilities the indemnifying party may be subject to pursuant to
the law.
12. MISCELLANEOUS.
(a) Brokers. The Company and the Purchaser represent
and warrant to each other that they have not taken any action
which will result in any liability of the other to pay any
broker's or finder's fee with respect to this Agreement or the
transactions contemplated hereby.
(b) Expenses. Each party hereto shall pay its own
fees and expenses incurred in connection with this Agreement.
(c) Survival of Representations, Warranties and
Covenants. The representations and warranties set forth herein
shall survive the Closing until sixty days after the Company
shall have delivered to the Purchaser the audited financial
statements of the Company and its consolidated subsidiaries (if
any) for the fiscal year ended December 31, 1998, certified by
the Company's independent public accountants; provided that the
representations and warranties shall survive such date to the
extent written notice of any breach thereof is given on or prior
to such date and representations and warranties relating to Taxes
shall survive until a date which is six months after the
expiration of the applicable statute of limitations. The
covenants of the Company set forth herein shall endure for so
long as the Purchaser shall continue as a stockholder of the
Company or for such shorter period as may be specified herein.
(d) Assignment and Binding Effect. Neither the
Company nor the Purchaser shall assign all or any part of this
Agreement without the prior written consent of the other;
provided, however, that the Purchaser, without such prior written
consent, may assign its rights hereunder to any entity or
entities directly or indirectly controlled by, or under common
control with, it; provided, further, that no such assignment
shall relieve the Purchaser of its obligations under this
Agreement. This Agreement shall be binding upon and inure to the
benefit of the permitted successors and assigns of the parties
pursuant to this paragraph.
(e) Headings. Subject headings are included for
convenience only and shall not affect the interpretation of any
provisions of this Agreement.
(f) Notices. Any notice, demand, request, waiver, or
other communication under this Agreement shall be in writing and
shall be deemed to have been duly given on the date of service if
personally served or on the third day after mailing if mailed to
the party to whom notice is to be given, by first class mail,
registered, return receipt requested, postage prepaid and
addressed as follows:
To the Company: Nestor, Inc.
One Richmond Square
Providence, Rhode Island 02906
Attention: Chief Executive Officer
With copies to: Baer Marks & Upham
805 Third Avenue
New York, NY 10022-7513
Attention: Herbert S. Meeker, Esq.
To the Transaction Systems Architects, Inc.
Purchaser: 224 South 108 Avenue
Omaha, Nebraska 68154
Attention: David P. Stokes
(g) Governing Law. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF
DELAWARE AS APPLIED TO CONTRACTS MADE AND TO BE PERFORMED
ENTIRELY IN THE STATE OF DELAWARE.
(h) Entire Agreement. This Agreement, including the
Exhibits and Schedules hereto, sets forth the entire
understanding and agreement of the parties hereto relating to the
matters set forth herein and supersedes any and all other
understandings, negotiations or agreements between the parties
hereto relating to the matters set forth herein.
(i) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, and all
of which together shall constitute a single agreement.
(j) Severability. In the event that any one or more
of the provisions contained in this Agreement shall for any
reason be held to be invalid, illegal or unenforceable, the same
shall not affect any other provision of this Agreement, but this
Agreement shall be construed in a manner which, as nearly as
possible, reflects the original intent of the parties.
(k) Words in Singular and Plural Form. Words used in
the singular form in this Agreement shall be deemed to import the
plural, and vice versa, as the sense may require.
(l) Amendment and Modification. This Agreement may be
amended or modified only by written agreement executed by all
parties hereto.
(m) Waiver. At any time prior to the Closing, any
party hereto may (i) extend the time for the performance of any
of the obligations or other acts of any other party hereto, (ii)
waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto,
and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party
granting such waiver but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or future failure.
(n) Specific Enforcement. The Purchaser and the
Company acknowledge and agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were
not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the
United States or any state thereof having jurisdiction, this
being in addition to any other remedy to which they may be
entitled at law or equity.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
NESTOR, INC.
By: /s/Nigel P. Hebborn
Title: Chief Financial Officer
TRANSACTIONS SYSTEMS ARCHITECTS, INC.
By: /s/ William Fisher
Title: President
