1
EXHIBIT 10.14
PREFERRED STOCK PURCHASE AGREEMENT
(SERIES C1 AND C2)
THIS PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is made as of
the day of May, 1998, by and among INTERNET ACCESS FINANCIAL CORPORATION, a
California corporation (the "Company"), with its principal office at 000 Xxxxxx
Xxxxxx, Xxxxx 000, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000 and the Investors whose names
and addresses are set forth on the Investor Schedule attached as Exhibit A
hereto (each of whom is an "Investor" and, collectively, the "Investors"). For
the purposes hereof, "C Preferred" will refer to the Company's Series Cl
Preferred Stock (the "Series C1 Preferred") and Series C2 Preferred Stock (the
"Series C2 Preferred") as defined pursuant to the Restated Articles (as defined
below).
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Sale and Issuance of C Preferred.
(a) The Company shall adopt and file with the Secretary of
State of California on or before the Closing (as defined below) the Second
Amended and Restated Articles of Incorporation in the form attached hereto as
Exhibit B (the "Restated Articles").
(b) Subject to the terms and conditions of this Agreement,
each Investor severally agrees to purchase at the Closing, and the Company
agrees to sell and issue to each Investor at the Closing, that number of shares
and series of the Company's C Preferred set forth opposite such Investor's name
on Exhibit A hereto for the purchase price set forth thereon. The shares of C
Preferred are referred to herein as the "Shares."
1.2 Closing. The initial purchase and sale of the Shares shall
take place at the offices of counsel for the Company at 1:00 p.m., on May _,
1998, or at such other time and place as the Company and the Investors initially
purchasing a majority of the C Preferred hereunder mutually agree upon orally or
in writing (which time and place are designated as the "Closing"). At the
Closing, the Company shall deliver to each Investor a certificate, registered in
such Investor's name as set forth on Exhibit A, representing the number of
shares designated on Exhibit A to be purchased by such Investor against payment
of the purchase price therefor by check or wire transfer (such wire transfers to
be sent to the trust account of Company's counsel unless otherwise agreed).
1.3 Additional Closings. The Company may sell up to the balance
of the authorized shares of C Preferred not sold at the Closing to such
individuals or entities as may be selected by the Company, at a price not less
than $5.80 per share and on the terms contained herein and in the exhibits
hereto, provided the closing for the sale of such additional shares of C
Preferred is completed not later than sixty (60) days after the date of this
Agreement. Upon execution of a signature page counterpart and without need for
an amendment hereto or thereto except to add such purchaser's name to Exhibit A
hereto, any such purchaser shall become a party to this Agreement, and shall be
deemed an "Investor" for purposes of this Agreement, and shall become a party to
that certain Second Amended and Restated Investors' Rights Agreement dated of
even date herewith, by and among the Company and the Investors hereto (the
"Investors' Rights Agreement") and shall have the rights and obligations
hereunder and thereunder.
4
2
1.4 OTS Assistance. The Company will request that its
regulatory counsel assist, at the expense of the Company, the counsel of any
Investor in rebutting, as to such Investor, the presumption of control under the
regulations of the Office of Thrift Supervision.
2. Representations and Warranties of the Company. Except as set forth in
the Schedule of Exceptions attached hereto as Exhibit C, the Company hereby
represents and warrants as follows:
2.1 Organization, Good Standing and Qualification. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of California and has all requisite corporate power and
authority to own and operate its properties and assets, and to carry on its
business as currently conducted and as proposed to be conducted. The Company is
duly qualified to transact business and is in good standing in each jurisdiction
in which the failure to so qualify would have a material adverse effect on its
business or properties. True and accurate copies of the Restated Articles and
Bylaws, each as amended and in effect at the Closing, have been delivered to the
Investors.
2.2 Capitalization. The authorized capital stock of the Company,
immediately prior to the Closing, will consist of 20,000,000 shares of Common
Stock, of which 1,087,750 are issued and outstanding, and 909,262 are subject to
outstanding options or warrants (the "Options"), and 10,000,000 shares of
Preferred Stock, of which (a) 612,500 shares have been designated Series A
Preferred Stock, all of which are issued and outstanding, (b) 1,412,000 shares
have been designated Series B Preferred Stock, all of which are issued and
outstanding, (c) 3,500,000 shares have been designated Series CI Preferred
Stock, none of which are issued and outstanding, and (d) 500,000 shares have
been designated Series C2 Preferred Stock, none of which are issued and
outstanding. All such issued and outstanding shares have been duly authorized
and validly issued and are fully paid and nonassessable. The Company has
reserved 612,500 shares of Common Stock for issuance upon conversion of the
Series A Preferred, 1,412,000 shares of Common Stock for issuance upon
conversion of the Series B Preferred, 3,500,000 shares of Common Stock for
issuance upon conversion of the Series C1 Preferred, 500,000 shares of Common
Stock for issuance upon conversion of the Series C2 Preferred, 1,500,000 shares
of Common Stock for issuance under restricted stock purchase agreements and the
Company's 1997 Stock Option Plan (the "Option Plan") for employees, officers,
directors and consultants of the Company as may be determined and approved by
the Company's Board of Directors from time to time, and 75,537 shares of Common
Stock for issuance upon exercise of outstanding warrants. Except as provided
above, there are no outstanding rights, options, warrants, preemptive rights,
rights of first refusal or similar rights for the purchase or acquisition from
the Company of any securities of the Company. All outstanding securities have
been issued in compliance with state and federal securities laws, and in
compliance with all contractual pre-emptive rights and rights of first refusal.
2.3 Subsidiaries. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement other than the Consumer Credit Card Program
Agreement between the Company and Heritage Bank of Commerce.
2.4 Authorization. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, the Investors' Rights
Agreement attached hereto as Exhibit D, the performance of all obligations of
the Company hereunder and thereunder, and the authorization, issuance (or
reservation for issuance), sale and delivery of the Shares being sold hereunder
and the Common Stock issuable upon conversion of the C Preferred has been taken
or will be taken prior to the Closing, and this Agreement and the Investors'
Rights Agreement constitute valid and legally
5
3
binding obligations of the Company, enforceable in accordance with their
respective terms, subject to: (i) judicial principles limiting the availability
of specific performance, injunctive relief, and other equitable remedies; (ii)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect generally relating to or affecting creditors' rights; and
(iii) limitations on the enforceability of the indemnification provisions of the
Investors' Rights Agreement.
2.5 Valid Issuance of Preferred and Common Stock. The Shares that
are being purchased by the Investors hereunder, when issued, sold and delivered
in accordance with the terms of this Agreement for the consideration expressed
herein will be duly and validly issued, fully paid, and nonassessable, will have
the rights, preferences, privileges and restrictions described in the Restated
Articles, and will be free of restrictions on transfer other than restrictions
on transfer under this Agreement and the Investors' Rights Agreement and under
applicable state and federal securities laws. The Common Stock issuable upon
conversion of the C Preferred purchased under this Agreement has been duly and
validly reserved for issuance and, upon issuance in accordance with the terms of
the Restated Articles, will be duly and validly issued, fully paid, and
nonassessable and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Investors' Rights
Agreement and under applicable state and federal securities laws. Subject to
applicable restrictions on transfer under this Agreement and the Investors'
Rights Agreement and under applicable state and federal securities laws, the
issuance and delivery of the Shares and the Common Stock issuable upon
conversion thereof, as applicable, are not subject to any preemptive or other
similar rights or any liens or encumbrances.
2.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the offer, sale or issuance of the
Shares (and the Common Stock issuable upon conversion of the C Preferred), or
the consummation of any other transaction contemplated hereby, except for the
following: (i) the filing of the Restated Articles in the Office of the
Secretary of State of the State of California, which shall be filed by the
Company on or prior to the Closing; (ii) the filing of such notices as may be
required under the Securities Act of 1933, as amended (the "Securities Act");
(iii) the filing of a notice of exemption pursuant to Section 25102(f) of the
California Corporate Securities Law of 1968, as amended (the "California
Securities Law"), which shall be filed by the Company promptly following the
Closing; and (iv) the compliance with other applicable state securities laws,
which compliance will have occurred within the appropriate time periods
therefor. Based in part on the representations of the Investors set forth in
Section 3 below, the offer, sale and issuance of the Shares in conformity with
the terms of this Agreement are exempt from the registration requirements of
Section 5 of the Securities Act, from the qualification requirements of Section
25110 of the California Securities Law and from the qualification requirements
of other applicable state securities laws.
2.7 Litigation. There is no action, suit, proceeding or
investigation pending or, to the best of the Company's knowledge, currently
threatened before any court, administrative agency or other governmental body
against the Company which questions the validity of this Agreement or the
Investors' Rights Agreement or the right of the Company to enter into either of
them, or to consummate the transactions contemplated hereby or thereby, or which
could result, either individually or in the aggregate, in any adverse change in
the condition (financial or otherwise), business, property, assets or
liabilities of the Company. The foregoing includes, without limitation, actions,
suits, proceedings or investigations pending or threatened (or any basis
therefor known to the Company) involving the prior employment of any of the
Company's employees, their use in connection with the Company's business of any
intellectual property, information or techniques
6
4
allegedly proprietary to any of their former employers, or their obligations
under any agreements with their former employers. The Company is not a party or
subject to, and none of its assets is bound by, the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality.
2.8 Employees. To the best knowledge of the Company, no officer
or key employee is in violation of any confidentiality agreement or any
contract, proprietary information agreement or obligation, whether written or
oral, with his former employers and, to the best knowledge of the Company, it is
not a violation of any of the foregoing for such person to assist the Company in
pursuing its business. The Company is not a party to or bound by any currently
effective employment contract, deferred compensation agreement, bonus plan,
incentive plan, profit sharing plan, retirement agreement or other employee
compensation agreement or arrangement with any collective bargaining agent. No
employees of the Company are represented by any labor union or covered by any
collective bargaining agreement. There is no pending or, to the best of the
Company's knowledge, threatened labor dispute involving the Company and any of
its employees.
2.9 Patents and Trademarks. The Company has sufficient title and
ownership of all patents, trademarks, service marks, trade names, copyrights,
trade secrets, information, proprietary rights and processes necessary for its
business as now conducted and as proposed to be conducted. There are no
outstanding options, licenses, or agreements of any kind relating to the
foregoing, nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information, proprietary
rights and processes of any other person or entity. The Company has not
received, and to the best knowledge of the Company none of its employees has
received, any communications alleging that the Company (or any employee in
connection with employment by the Company) has violated or, by conducting the
business of the Company as now conducted or as proposed to be conducted, would
violate any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity. To
the best knowledge of the Company, none of the Company's employees are obligated
under any contract (including licenses, covenants or commitments of any nature)
or other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his or her best
efforts to promote the interests of the Company or that would conflict in any
manner with the Company's business as conducted. Neither the execution nor
delivery of this Agreement or the Investors' Rights Agreement, nor the carrying
on of the Company's business by the employees of the Company, nor the conduct of
the Company's business, will, to the best of the Company's knowledge, conflict
with or result in a breach of the terms, conditions or provisions of, or
constitute a default under, any contract, covenant or instrument under which any
of such employees is now obligated. The Company does not and will not need to
utilize any inventions of any of its employees (or people it currently intends
to hire) made prior to their employment by the Company that have not previously
been fully and exclusively assigned to the Company without restrictions.
2.10 Compliance with Other Instruments.
(a) The Company is not in violation or default of any
provision of its Articles of Incorporation or Bylaws, each as amended and in
effect on and as of the Closing. The Company is not in violation or default of
any material provision of any instrument, mortgage, deed of trust, loan,
contract, commitment, judgment, decree, order or obligation to which it is a
party or by which it or any of its properties or assets are bound which
violation or default would materially adversely affect the condition (financial
or otherwise), prospects, business, property, assets or liabilities of the
7
5
Company or of any provision of any federal, state or local statute, rule or
governmental regulation which violation or default would materially adversely
affect the condition (financial or otherwise), business, property, assets or
liabilities of the Company. The execution, delivery and performance of and
compliance with this Agreement and the Investors' Rights Agreement, and the
issuance and sale of the Shares and the issuance of Common Stock upon the
conversion thereof, will not result in any such violation, be in conflict with
or constitute, with or without the passage of time or giving of notice, a
default under any such provision, require any consent or waiver under any such
provision (other than any consents or waivers that have been obtained), or
result in the creation of any mortgage, pledge, lien, encumbrance or charge upon
any of the properties or assets of the Company pursuant to any such provision.
(b) The Company has avoided every condition, and has not
performed any act, the occurrence of which would result in the Company's loss of
any right granted under any assignment, license, distribution or other
agreement, the loss of which would materially adversely affect the condition
(financial or otherwise), business, property, assets or liabilities of the
Company.
2.11 Permits. The Company has all franchises, permits, licenses,
and any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company, and the
Company believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. The
Company is not in default under any of such franchises, permits, licenses, or
other similar authority and neither the execution, delivery nor performance of
this Agreement and the Investors' Rights Agreement and the consummation of the
transactions contemplated hereby and thereby will result in any suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to the Company, its business or operations
or any of its assets or properties.
2.12 Registration Rights. Except as provided in the Investors'
Rights Agreement, the Company has not granted or agreed to grant any
registration rights, including piggyback rights, to any person or entity.
2.13 Title to Property and Assets. The Company has good and
marketable title to all of its properties and assets free and clear of all
mortgages, liens and encumbrances, except liens for current taxes and
assessments not yet due and possible minor liens and encumbrances which do not,
in any case, in the aggregate, materially detract from the value of the property
subject thereto or materially impair the operations of the Company. With respect
to the properties and assets it leases, the Company is in compliance with such
leases and holds a valid leasehold interest free of all liens, claims or
encumbrances, and to the best knowledge of the Company, all other parties to the
leases are in compliance with all material terms of such leases. The Company's
properties and assets are in good condition and repair in all material respects.
2.14 Brokers or Finders. The Company has not agreed to incur,
directly or indirectly, any liability for brokerage or finders' fees, agents'
commissions or other similar charges in connection with this Agreement or any of
the transactions contemplated hereby,
2.15 Corporate Documents. Except for amendments necessary to
satisfy representations and warranties or conditions contained herein, the
Restated Articles and Bylaws of the Company are in the form previously provided
to the Investors' special counsel.
2.16 Financial Statements. The Company has delivered its
financial statements to the Investors, consisting of: (i) audited financial
statements as of and for the period ended
8
6
December 31, 1997; (ii) an unaudited balance sheet as of February 28, 1998, and
(iii) an unaudited income statement for the period ended February 28, 1998
(collectively the "Financial Statements"). The Financial Statements are complete
and correct in all material respects, present fairly the financial position and
results of operations of the Company at the dates and for the periods to which
they relate, have been prepared in accordance with generally accepted accounting
principles consistently followed throughout the periods involved, and show all
material liabilities, absolute or contingent, of the Company required to be
recorded therein in accordance with generally accepted accounting principles
consistently applied, except that the February 28, 1998 Financial Statements
have been prepared by the Company, have not been audited, are subject to normal
year-end audit adjustments, and do not contain footnotes normally associated
with year-end financial statements. Except as set forth in the Financial
Statements, the Company has no liabilities, contingent or otherwise, other than
(i) liabilities incurred in the ordinary course of business subsequent to
February 28, 1998, which, individually or in the aggregate, are not materially
adverse to the financial condition or operating results of the Company (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in the Financial Statements, which, individually or in the aggregate,
are not material to the financial condition or operating results of the Company
and (iii) obligations under contracts or arrangements described in this
Agreement or in the Schedule of Exceptions.
2.17 Changes. Since February 28, 1998, there has not been:
(a) Any material adverse change in the business, property,
assets, liabilities, financial condition, prospects or results of operations of
the Company or its subsidiary;
(b) Any material adverse change (individually or in the
aggregate), except in the ordinary course of business, in the contingent
obligations of the Company or its subsidiary by way of guarantee, endorsement,
indemnity, warranty or otherwise;
(c) Any material damage, destruction, or loss, whether or
not covered by insurance, materially and adversely affecting the condition of
the business, property, assets or liabilities of the Company;
(d) Any waiver or compromise by the Company or its
subsidiary of a valuable right or of a material debt owed to it;
(e) Any loans made by the Company or its subsidiary to its
employees, officers, or directors other than travel advances and other advances
made in the ordinary course of business;
(f) Any extraordinary increase in the compensation or
benefits payable to any of the Company's employees, officers or directors;
(g) Any declaration or payment of any dividend by the
Company on its capital stock, any redemption, purchase or other acquisition of
shares of its capital stock or any other distribution of assets of the Company,
other than the repurchase of shares at cost from terminated employees or
consultants pursuant to the terms of written stock purchase agreements calling
for such repurchase;
(h) Any receipt of notice by the Company that there has
been a cancellation of any material contract, the cancellation or loss of which
would materially adversely affect the condition, business, property, assets or
liabilities of the Company;
9
7
(i) Any resignation or termination of employment of any
key officer to employee of the Company and any impending resignation or
termination of employment known by the Company of any key officer or employee
of the Company in either case which, if consummated, would materially adversely
affect the condition (financial or otherwise), business, property, assets or
liabilities of the Company;
(j) Any labor dispute involving the Company or any of its
employees;
(k) Any other event or condition of any character known to
the Company that has materially and adversely affected the Company's business or
prospects;
(l) Any amendment or other change to the Articles of
Incorporation or Bylaws of the Company (except as contemplated by this
Agreement);
(m) Any sale or other disposition of any right, title or
interest in or to any assets or properties of the Company or any revenues
derived therefrom other than in the ordinary course of business and consistent
with past practice;
(n) Any creation, incurring or assumption of any
indebtedness for money borrowed by the Company exceeding $50,000;
(o) Any material capital expenditures by the Company not
in the ordinary course of business; or
(p) Any material agreement or commitment by the Company
to do any of the things described in this Section 2.17.
2.18 Disclosures. The Company has provided the Investors with
all the information which the Investors have requested for deciding whether to
purchase the Shares. No representation or warranty of the Company contained in
this Agreement, the Exhibits attached hereto or in any certificate furnished or
to be furnished to the Investors at the Closing contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made.
2.19 No Conflict of Interest. The Company is not indebted,
directly or indirectly, to any of its officers or directors or to their
respective spouses or children, in any amount whatsoever other than in
connection with expenses or advances of expenses incurred in the ordinary course
of business or relocation expenses of employees. None of said officers or
directors, or any members of their immediate families are indebted to the
Company (other than in connection with purchases of the Company's stock) or, to
the Company's knowledge, have any direct or indirect ownership interest in any
firm or corporation with which the Company is affiliated or with which the
Company has a business relationship, or any firm or corporation which competes
with the Company except that officers, directors and/or shareholders of the
Company may own stock in publicly traded companies which may compete with the
Company. No officer or director or any member of their immediate families, is,
directly or, to the Company's knowledge, indirectly, interested in any material
contract with the Company. The Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
2.20 Company's Contracts. All of the contracts and agreements
with expected receipts or expenditures in excess of $50,000 or involving a
license or grant of rights to or from the
10
8
Company involving patents, trademarks, service marks, trade names, copyrights,
trade secrets or other proprietary information applicable to the business of the
Company other than non-disclosure agreements signed in the ordinary course with
prospective investors, suppliers, customers and licensees concerning prospective
relationships, to which the Company is a party as of the date of the Closing are
listed on the Schedule of Exceptions. All such contracts and agreements are
legally binding, valid and in full force and effect in all material respects,
and the Company is not aware of reduced activity relating to any such contract
or agreement (other than in the ordinary course of business) by any of the
parties to any such contract or agreement. The Company has fully complied with
all material obligations under such contracts, to the extent such compliance is
now due.
2.21 ERISA. The Company has no employee benefit plan subject to
the Employee Retirement Income Security Act of 1974.
2.22 Environmental Regulations. Except for failures which will
not materially adversely affect the business of the Company, the Company has
met, and continues to meet, all applicable local, state, federal and national
environmental regulations and has disposed of its waste products and effluents
and/or has caused others to dispose of such waste products and effluents, in
accordance with all applicable state, local, federal and national environmental
regulations and in such a manner that no harm has resulted or will result to any
of its respective employees or properties or to any other person or entities or
their properties.
2.23 Confidentiality and Inventions Agreements. Each employee
with access to confidential information regarding the Company's operations
("Designated Employee") and each founder and officer of the Company has executed
a Confidentiality and Inventions Agreement. Each consultant of the Company has
executed a Consulting Agreement. Typical forms of such Confidentiality and
Inventions Agreements and Consulting Agreements have been made available for
inspection by counsel for the Investors and the Company represents that all of
such Agreements adequately protect the Company with respect to its proprietary
information. The Company, after reasonable investigation, is not aware that any
of its Designated Employees, officers or consultants are in violation of such
agreements.
2.24 Insurance. The Company maintains the insurance policies set
forth in the Schedule of Exceptions.
2.25 Agreements; Action. The Company has not engaged in the past
three months in any discussion (i) with any representative of any corporation or
corporations regarding the merger of the Company with or into any such
corporation or corporations, (ii) with any corporation, partnership, association
or other business entity or individual regarding the sale, conveyance or
disposition of all or substantially all of the assets of the Company or a
merger, consolidation or other transaction or series of related transactions in
which more than fifty percent (50%) of the voting power of the Company would be
disposed of (other than with respect to the financing that is the subject of
this Agreement), or (iii) regarding any other form of liquidation, dissolution
or winding up of the Company.
2.26 Certain Tax Representations. The Company is not a real
property holding corporation within the meaning of Section 897(c)(2) of the
Internal Revenue Code of 1986, as amended, and any regulations promulgated
thereunder. The Company is a "qualified small business" within the meaning of
Section 1202(d) of the Internal Revenue Code of 1986, as amended. The Company
has filed on a timely basis all income tax returns required to be filed by it
pursuant to all applicable laws or regulations.
11
9
3. Representations and Warranties of the Investors. Each Investor
hereby severally represents and warrants to the Company with the respect to the
transactions contemplated hereby that:
3.1 Experience. Such Investor is experienced in evaluating early
stage companies such as the Company, is able to fend for itself in transactions
such as the one contemplated by this Agreement, has such knowledge and
experience in financial and business matters that Investor is capable of
evaluating the merits and risks of Investor's prospective investment in the
Company, has the ability to bear the economic risks of the investment and is an
"accredited investor" within the meaning of Regulation D as promulgated by the
Securities and Exchange Commission.
3.2 Investment. Such Investor is acquiring the Shares (and the
Common Stock issuable upon conversion of the Shares) for investment for such
Investor's own account and not with the view to, or for resale in connection
with, any distribution thereof. Such Investor understands that the Shares (and
the Common Stock issuable upon conversion of the Shares) have not been
registered under the Securities Act by reason of a specific exemption from the
registration provisions of the Securities Act which depends upon, among other
things, the bona fide nature of the investment intent as expressed herein. Such
Investor further represents that it does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participation to any third person with respect to any of the Shares (or any
Common Stock acquired upon conversion of the Shares). Such Investor understands
and acknowledges that the offering of the Shares pursuant to this Agreement and
any issuance of Common Stock on conversion of the Shares will not be registered
under the Securities Act on the ground that the sale provided for in this
Agreement and the issuance of securities hereunder is exempt from the
registration requirements of the Securities Act.
3.3 Rule 144. Such Investor acknowledges that the Shares (and the
Common Stock issuable upon conversion of the Shares) must be held indefinitely
unless subsequently registered under the Securities Act or an exemption from
such registration is available. Such Investor is aware of the provisions of Rule
144 promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions. Such Investor covenants that, in the absence of an effective
registration statement covering the stock in question, such Investor will sell,
transfer, or otherwise dispose of the Shares (and any Common Stock issued on
conversion of the C Preferred) only in a manner consistent with such Investor's
representations and covenants set forth in this Section 3. In connection
therewith, such Investor acknowledges that the Company will make a notation on
its stock books regarding the restrictions on transfers set forth in this
Section 3 and will transfer securities on the books of the Company only to the
extent not inconsistent therewith.
3.4 No Public Market. Such Investor understands that no public
market now exists for any of the securities issued by the Company, and that the
Company has made no assurances that a public market will ever exist for any of
the Company's securities.
3.5 Access to Data. Such Investor has received and reviewed
information about the Company and has had an opportunity to discuss the
Company's business, management and financial affairs with its management and to
review the Company's facilities.
3.6 Authorization. This Agreement when executed and delivered by
such Investor will constitute a valid and legally binding obligation of the
Investor, enforceable in accordance with its terms, subject to: (i) judicial
principles respecting election of remedies or
12
10
limiting the availability of specific performance, injunctive relief, and other
equitable remedies; (ii) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect generally relating to or affecting
creditors' rights; and (iii) limitations on the enforceability of the
indemnification provisions of the Investors' Rights Agreement.
3.7 Brokers or Finders. Such Investor has agreed not to incur,
directly or indirectly, any liability for brokerage or finder's fees, agents'
commissions or other similar charges in connection with this Agreement or any of
the transactions contemplated hereby.
4. Conditions of Investors' Obligations at Closing. The obligations of the
Investors under subsection 1.1 (b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective unless Investors purchasing a majority of
the C Preferred hereunder and each Investor purchasing more than 500,000 Shares
consent in writing thereto:
4.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
4.2 Performance. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing.
4.3 Compliance Certificate. The Chairman and Chief Executive
Officer of the Company shall deliver to each Investor at the Closing a
certificate stating that the conditions specified in Sections 4.1 and 4.2 have
been fulfilled.
4.4 Board Election. Xxx Xxxxxxx shall have been elected or
appointed to the Board, effective immediately after consummation of the Closing.
4.5 Opinion of Company Counsel. The Investors shall have
received from Howard, Rice, Nemerovski, Canady, Xxxx & Rabkin, A Professional
Corporation, counsel for the Company, an opinion, dated as of the Closing, in
the form attached hereto as Exhibit E.
4.6 Investors' Rights Agreement. The Company and the Investors
shall have entered into the Investors' Rights Agreement.
4.7 Blue Sky. The Company shall have obtained all necessary
permits and qualifications, if any, or secured an exemption therefrom, required
by any state or country for the offer and sale of the Shares.
4.8 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby, and all documents and instruments incident to these transactions, shall
be reasonably satisfactory in substance to the Investors and their counsel.
4.9 Restated Articles. The Restated Articles shall have been
filed with and approved by the Secretary of State of California.
4.10 Second Amendment to Stock Restriction Agreement. Xx. Xxxxxx
Xxxx shall have executed and delivered the Second Amendment to Stock Restriction
Agreement set forth in Exhibit F.
13
11
4.11 Contemporaneous Investment. At least 1,550,000 Shares shall
have been purchased at the initial Closing and the Company shall have received
the purchase price therefor.
4.12 Certain Regulatory Matters. The Investors or their counsel
will be satisfied as to regulatory matters.
5. Conditions of the Company's Obligations at Closing. The obligations
of the Company to the Investors under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by each
Investor:
5.1 Representations and Warranties. The representations and
warranties of each Investor contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.
5.2 Payment of Purchase Price. Each Investor shall have delivered
the purchase price specified on Exhibit A hereto against delivery of the Shares
by the Company to such Investor.
5.3 Blue Sky. The Company shall have obtained all necessary
permits and qualifications, if any, or secured an exemption therefrom, required
by any state or country for the offer and sale of the Shares.
5.4 Investors' Rights Agreement. Each Investor shall have
executed the Investors' Rights Agreement on or prior to the date of the Closing.
5.5 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby, and all documents and instruments incident to these transactions, shall
be reasonably satisfactory in substance to the Company and its counsel.
6. Miscellaneous.
6.1 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of California.
6.2 Successors and Assigns. Except as otherwise provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
6.3 Entire Agreement; Amendment. This Agreement and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement among the parties with regard to the subjects hereof and thereof.
Neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought.
6.4 Notices, Etc. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, return receipt requested, or otherwise
delivered by hand or by messenger, addressed (a) if to an Investor, at such
Investor's address set forth on Exhibit A, or at such other address as such
Investor shall have furnished to the Company in writing, or (b) if to any other
holder of any Shares, at such address as such holder shall have furnished the
Company in writing, or, until any such holder so furnishes an address to the
Company, then to and at the address of the last holder of such Shares
14
12
who has so furnished an address to the Company, or (c) if to the Company, at its
address set forth on the first page of this Agreement addressed to the attention
of the Chairman and Chief Executive Officer, or at such other address as the
Company shall have furnished to the Investors. If notice is provided by mail,
notice shall be deemed to be given upon proper deposit with the United States
mail.
6.5 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any holder of any Shares upon any breach or
default of the Company under this Agreement shall impair any such right, power
or remedy of such holder, nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing or as provided in this
Agreement. All remedies, either under this Agreement or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
6.6 California Corporate Securities Law. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES
IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE, OR OTHER APPLICABLE LAW. THE RIGHTS OF ALL PARTIES
TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING
OBTAINED, UNLESS THE SALE IS SO EXEMPT.
6.7 Expenses. Each party hereto shall bear its own expenses;
provided, however, that conditioned upon the Closing occurring, the Company will
reimburse the Investors for the reasonable fees (not to exceed $15,000) and
expenses of a single counsel for the Investors who have not previously purchased
securities in the Company.
6.8 Finder's Fees. The Company and each Investor shall each
indemnify and hold the other harmless from any liability for any commission or
compensation in the nature of a finder's fee (including the costs, expenses and
legal fees of defending against such liability) for which the Company or such
Investor, or any of their respective partners, employees, or representatives, as
the case may be, is responsible.
6.9 Counterparts. This Agreement may be executed in any number
of counterparts, each of which may be executed by less than all parties hereto,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
6.10 Severability of this Agreement. In the event that any
provision of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement will continue
in full force and effect without said provision and the parties agree to replace
such provision with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of such provisions;
provided that no
15
13
such severability will be effective against a party if it materially and
adversely changes the economic benefits of this Agreement to such party.
6.11 Attorneys' Fees in a Dispute. In the event of any action to
enforce the terms hereof, the prevailing party will be entitled to receive its
reasonable attorneys' fees and costs in connection therewith.
(This space intentionally left blank.)
16
14
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
INTERNET ACCESS FINANCIAL CORPORATION
By:
----------------------------------------
Xxxxxx Xxxx, Chairman and
Chief Executive Officer
[SIGNATURE PAGE TO THE STOCK PURCHASE AGREEMENT]
17
15
INVESTORS:
----------------------------------------
By:
-------------------------------------
Name:
Title:
[SIGNATURE PAGE TO THE STOCK PURCHASE AGREEMENT]
18
16
EXHIBIT A
INVESTOR SCHEDULE
NAME NO. OF SHARES OF C PREFERRED SERIES AGGREGATE CONSIDERATION PAID
19
17
EXHIBIT B
SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
20
18
EXHIBIT C
SCHEDULE OF EXCEPTIONS
This disclosure of exceptions is made and given pursuant to Section 2 of
the Preferred Stock Purchase Agreement dated as of May _, 1998 (the
"Agreement"), by and between INTERNET ACCESS FINANCIAL CORPORATION (the
"Company") and the Investors named therein. Unless the context otherwise
requires, all capitalized terms are used herein as defined in the Agreement. The
numbers below correspond to the section numbers of representations and
warranties in the Agreement that are most directly modified by the disclosures,
but all disclosures are intended to modify all of the Company's representations
and warranties.
21
19
EXHIBIT D
SECOND AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
22
20
EXHIBIT E
OPINION OF COMPANY COUNSEL
23
21
EXHIBIT F
SECOND AMENDMENT TO STOCK RESTRICTION AGREEMENT
24
