Exhibit 10.19
MACROVISION CORPORATION
000 Xx Xxxxxx Xxxx Xxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
------------------------------------------
STOCK AND
CONVERTIBLE NOTE PURCHASE AGREEMENT
May 24, 1991
-----------------------------------------
TABLE CONTENTS
Page
----
SECTION 1 Authorization, Purchase and Sale of the Shares: Issuance of
Convertible Note . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Sale of Series A Shares . . . . . . . . . . . . . . . . . . . 1
1.3 Sale of Common Stock . . . . . . . . . . . . . . . . . . . . . 1
1.4 Issuance of Convertible Note . . . . . . . . . . . . . . . . . 1
SECTION 2 Closing Dates; Delivery. . . . . . . . . . . . . . . . . . . . 2
2.1 Closing Dates. . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3 Representations and Warranties of the Company. . . . . . . . . 2
3.1 Organization and Standing; Articles and By-Laws. . . . . . . . 2
3.2 Corporate. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 3
3.5 Restrictions and Preemptive Rights . . . . . . . . . . . . . . 4
3.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . 4
3.7 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . 4
3.8 Material Contracts and Commitments . . . . . . . . . . . . . . 5
3.9 Title to Properties and Assets, Liens, Etc.. . . . . . . . . . 6
3.10 Compliance with Other Instruments, None Burdensome, Etc. . . . 6
3.11 Litigation, Etc. . . . . . . . . . . . . . . . . . . . . . . . 6
3.12 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.13 Registration Rights. . . . . . . . . . . . . . . . . . . . . . 7
3.14 Governmental Consent, Etc. . . . . . . . . . . . . . . . . . . 7
3.15 Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.16 Patents, Trademarks, Etc.. . . . . . . . . . . . . . . . . . . 8
3.17 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.18 Outstanding Indebtedness . . . . . . . . . . . . . . . . . . . 9
3.19 Certain Transactions . . . . . . . . . . . . . . . . . . . . . 9
3.20 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . 9
3.21 Real Property Holding Corporation. . . . . . . . . . . . . . . 9
3.22 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.23 Voting Agreements. . . . . . . . . . . . . . . . . . . . . . . 9
3.24 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.25 Best Knowledge . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 4 Representations and Warranties of the Selling Shareholder. . . 10
4.1 Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Valid Transfer . . . . . . . . . . . . . . . . . . . . . . . . 11
i
TABLE OF CONTENTS
(continued)
Page
----
4.4 Conflicts. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.5 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 5 Representations and Warranties of the Purchaser. . . . . . . . 12
5.1 Experience . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 Restricted Securities. . . . . . . . . . . . . . . . . . . . . 12
5.4 No Public Market . . . . . . . . . . . . . . . . . . . . . . . 12
5.5 Access to Data . . . . . . . . . . . . . . . . . . . . . . . . 12
5.6 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . 12
5.7 Government Consents, Etc.. . . . . . . . . . . . . . . . . . . 13
SECTION 6 Closing Conditions . . . . . . . . . . . . . . . . . . . . . . 13
6.1 Conditions to First Closing of Purchaser. . . . . . . . . . . . 13
(a) Representations and Warranties Correct. . . . . . . . . 13
(b) Consents and Waivers. . . . . . . . . . . . . . . . . . 14
(c) Employee Agreements . . . . . . . . . . . . . . . . . . 14
(d) Compliance Certificate. . . . . . . . . . . . . . . . . 14
(e) Opinion of Company's Counsel. . . . . . . . . . . . . . 14
(f) Blue Sky and Other Regulations. . . . . . . . . . . . . 14
6.2 Conditions to Second Closing of Purchaser . . . . . . . . . . . 14
(a) Representations and Warranties Correct. . . . . . . . . 14
(b) Consents and Waivers. . . . . . . . . . . . . . . . . . 14
(c) Articles; Bylaws. . . . . . . . . . . . . . . . . . . . 15
(d) Employee Agreements . . . . . . . . . . . . . . . . . . 15
(e) Compliance Certificate. . . . . . . . . . . . . . . . . 15
(f) Consummation of First Closing . . . . . . . . . . . . . 15
(g) Registration Rights Agreement . . . . . . . . . . . . . 15
(h) Opinion of Company's Counsel. . . . . . . . . . . . . . 15
(i) Blue Sky and Other Regulations. . . . . . . . . . . . . 15
(j) Redemption of Common Stock. . . . . . . . . . . . . . . 15
(k) Board of Directors Representation . . . . . . . . . . . 16
(l) Option Agreements . . . . . . . . . . . . . . . . . . . 16
(m) Voting Agreements . . . . . . . . . . . . . . . . . . . 16
6.3 Conditions to First Closing of Selling Shareholder. . . . . . . 16
(a) Representations . . . . . . . . . . . . . . . . . . . . 16
(b) Consents and Waivers. . . . . . . . . . . . . . . . . . 16
(c) Compliance Certificate. . . . . . . . . . . . . . . . . 16
6.4 Conditions to Second Closing of Company . . . . . . . . . . . . 16
(a) Representations . . . . . . . . . . . . . . . . . . . . 17
(b) Other Conditions. . . . . . . . . . . . . . . . . . . . 17
ii
TABLE OF CONTENTS
(continued)
Page
----
(c) Consents and Waivers. . . . . . . . . . . . . . . . . . 17
(d) Compliance Certificate. . . . . . . . . . . . . . . . . 17
(e) Consummation of First Closing . . . . . . . . . . . . . 17
SECTION 7 Affirmative Covenants of the Company. . . . . . . . . . . . . . 17
7.1 Financial Statements and Other Information. . . . . . . . . . . 17
7.2 Rule 144A Information . . . . . . . . . . . . . . . . . . . . . 18
7.3 Inspection. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.4 Termination of Covenants. . . . . . . . . . . . . . . . . . . . 19
7.5 Key-Man Insurance . . . . . . . . . . . . . . . . . . . . . . . 19
7.6 Proprietary Rights Agreements . . . . . . . . . . . . . . . . . 19
7.7 Limitations on Transfer of Intellectual Property. . . . . . . . 19
7.8 Equity Method of Accounting . . . . . . . . . . . . . . . . . . 20
7.9 Option Agreements . . . . . . . . . . . . . . . . . . . . . . . 20
8.1 The Right of First Refusal. . . . . . . . . . . . . . . . . . . 20
8.2 Standstill. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.3 Subsequent Acquisition of Capital Stock . . . . . . . . . . . . 23
8.4 Public Offerings. . . . . . . . . . . . . . . . . . . . . . . . 24
8.5 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.6 Waiver and Assignment of Dividend rights. . . . . . . . . . . . 25
8.7 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 9 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.2 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.3 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . 26
9.4 Entire Agreement; Registration Rights Agreement . . . . . . . . 26
9.5 Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.6 Delays or Omissions . . . . . . . . . . . . . . . . . . . . . . 27
9.7 California Corporate Securities Law . . . . . . . . . . . . . . 27
9.8 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.9 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.10 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.11 Titles and Subtitles. . . . . . . . . . . . . . . . . . . . . . 28
9.12 Finder's Fees and Other Fees. . . . . . . . . . . . . . . . . . 28
9.13 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . 29
9.14 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . 29
9.15 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 29
iii
TABLE OF CONTENTS
(continued)
Page
----
EXHIBITS
A Amended and Restated Articles of Incorporation
B Convertible Note
C Schedule of Exceptions - Company
D Form of Registration Rights Agreement
E Nondisclosure Agreement and Proprietary Rights Assignment
F Schedule of Exceptions - Selling Shareholder
G-1 Form of Legal Opinion of Xxxxxxxxx, Xxxx & Xxxxxxx - First Closing
G-2 Form of Legal Opinion of Xxxxxxxxx, Wise & Xxxxxxx - Second Closing
H-1 Shareholder Option Agreement
H-2 Shareholder Option Agreement
I Voting Agreement
J Schedule of Exceptions - Exclusivity
iv
STOCK AND CONVERTIBLE NOTE PURCHASE AGREEMENT
This Stock and Convertible Note Purchase Agreement ("Agreement") is made as
of May 24, 1991 among Macrovision Corporation, a California corporation (the
"Company"), University National Bank & Trust Company, Trustee under Trust
Agreement dated May 22, 1991 (the "Purchaser"), and A. Xxxxxx Xxxxxx and Xxxxx
Xxx Xxxxxx as Trustees of the Xxxxxx Family Trust U/T/D December 18, 1990 (the
"Selling Shareholder").
SECTION 1
AUTHORIZATION, PURCHASE AND SALE OF THE SHARES; ISSUANCE OF CONVERTIBLE NOTE
1.1 AUTHORIZATION. The Company will authorize the sale and issuance,
under this Agreement, as 1,500,000 shares of its Series A Preferred Stock (the
"SERIES A SHARES") and, under The Note (as defined below), 977,578 shares of its
Series A Preferred Stock (the "CONVERSION SHARES"). The Series A Shares and the
Conversion Shares will have the rights, preferences and privileges set forth in
the Company's Amended and Restated Articles of Incorporation (the "ARTICLES") in
the form attached to this Agreement as EXHIBIT A.
1.2 SALE OF SERIES A SHARES. Subject to the terms and conditions this
Agreement, the Company will issue and sell to the Purchaser, and the Purchaser
will buy from the Company, the Series A Shares at a price of $3.00 per share
with an aggregate purchase price of $4,500,000.
1.3 SALE OF COMMON STOCK BY SELLING SHAREHOLDER. Subject to the terms
and conditions of this Agreement, the Selling Shareholder will sell to the
Purchaser, and the Purchaser will buy from the Selling Shareholder, 2,269,100
shares of the Company's Common Stock (the "COMMON SHARES") at a price of
$2.644220175 per share and with an aggregate purchase price of $6,000,000. The
Common Shares and the Series A Shares will be collectively referred to as the
"SHARES".
1.4 ISSUANCE OF CONVERTIBLE NOTE. Subject to the terms and conditions
of this Agreement, the Company will issue to the Purchaser a note in the
principal amount of $3,037,994.40 which is convertible into the Conversion
Shares according to the terms and conditions of the Convertible Note attached as
EXHIBIT B (the "NOTE").
1
SECTION 2
CLOSING DATES; DELIVERY
2.1 CLOSING DATES. The closing of the purchase and sale of the Common
Shares under this Agreement will be held at the offices of Xxxx & Freidenrich,
000 Xxxxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx at 12:00 p.m., local time, on May 24,
1991 (the "FIRST CLOSING") or at such other time and place upon which the
Company, the Purchaser and the Selling Shareholder shall agree. The closing of
the purchase and sale of the Series A Shares and the issuance of the Note under
this Agreement will be held at the offices of Xxxx & Freidenrich, 000 Xxxxxxxx
Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx at 1:00 p.m., local time, on June 5, 1991 (the
"SECOND CLOSING") or at such other time and place upon which the Company and the
Purchaser shall agree. The dates of the First Closing and Second Closing are
referred to as the "CLOSING DATES."
2.2 DELIVERY. Subject to the terms of this Agreement:
(a) At the First Closing, the Selling Shareholder will deliver
to the Purchaser a certificate or certificates representing the Common Share to
be purchased by the Purchaser, accompanied by duly executed stock powers in a
form appropriate for the transfer of the Common Shares to the Purchaser, against
payment of the purchase price to the Selling Shareholder in a form mutually
acceptable to the Purchaser and the Selling Shareholder.
(b) At the Second Closing, the Company will deliver to the
Purchaser a certificate representing the Series A Shares to be purchased by the
Purchaser and an original of the Note, against payment of the purchase price by
check payable to the Company or wire transfer per the Company's instructions.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser that, except as set
forth on a Schedule of Exceptions attached as EXHIBIT C, which exceptions shall
be deemed to be representations and warranties as if made under this Agreement:
3.1 ORGANIZATION AND STANDING; ARTICLES AND BY-LAWS. The Company is a
corporation duly organized and existing under, and by virtue of, the laws of the
State of California and is in good standing under such laws. The Company has
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 qualified to do business as a foreign corporation
in each jurisdiction in which the failure to be so qualified would have a
material adverse effect on the
2
Company's business as now conducted or as now proposed to be conducted. The
Company has furnished the Purchaser's counsel with copies of its Articles and
Bylaws, as amended, and these copies are true, correct and complete and contain
all amendments through each respective Closing Date.
3.2 CORPORATE POWER. The Company has now, or will have at the First
Closing and the Second Closing, all requisite legal and corporate power to enter
into this Agreement, the Registration Rights Agreement in the form attached as
EXHIBIT D (the "REGISTRATION RIGHTS AGREEMENT"), and the Note, and has or will
have taken prior to the First Closing all corporate action on the part of the
company, its officers, directors and shareholders necessary to authorize,
execute and deliver this Agreement, the Registration Rights Agreement, the Note
and the Voting Agreement, and to complete the redemption contemplated by Section
6.2(j) of this Agreement (the "REDEMPTION"); and has or will have taken prior to
the Second Closing all such corporate action necessary (i) to sell and issue the
Series A Shares, (ii) to issue the Note, (iii) to issue the Conversion Shares,
(iv) to issue the shares of Common Stock issuable upon conversion of the Series
A Shares and the Conversion Shares, and (v) to carry out and perform its
obligations under the terms of this Agreement, the Registration Rights
Agreement, the Note and the Voting Agreement. This Agreement, the Registration
Rights Agreement, the Note and the Voting Agreement are each valid and binding
obligations of the Company enforceable in accordance with their terms, except as
the indemnification provisions of Section 3.7 of the Registration Rights
Agreement may be limited by principles of public policy, and subject to the
effect of applicable bankruptcy, insolvency, reorganization, moratorium or other
laws of general application relating to or affecting enforcement of creditors'
rights and rules or laws concerning equitable remedies.
3.3 SUBSIDIARIES. The Company has no subsidiaries or affiliated
companies and does not otherwise own or control, directly or indirectly, any
equity interest in any corporation, association or business entity.
3.4 CAPITALIZATION. The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock, of which 8,331,670 shares are
issued and outstanding as of the Firs Closing Date and, immediately prior to the
effectiveness of the Redemption, as of the Second Closing Date; and 5,000,000
shares of Preferred Stock, of which 2,477,578 shares will have been designated
as Series A Preferred Stock prior to the Second Closing, and none of which are
or will be issued and outstanding at any time prior to the Second Closing. All
such issued and outstanding shares have been duly authorized and validly issued,
and are fully paid and nonassessable, and were issued in compliance with all
applicable state and federal laws concerning the issuance of securities. The
Company has duly reserved (i) the Conversion Shares, (ii) 977,578 shares of
Common Stock for issuance upon conversion of the Conversion Shares,
(iii) 1,500,000 shares of Common Stock for issuance upon conversion of the
Series A Shares, and (iv) 1,050,000 shares of Common Stock for issuance to
employees or directors under stock or option plans or arrangements approved by
the Company's
3
Board of Directors, of which options to purchase 877,850 shares of Common Stock
are issued and outstanding as of the First Closing Date and, immediately prior
to the effectiveness of the Redemption, as of the Second Closing Date. Except
as set forth above, there are no options, warrants, rights of first refusal,
preemptive or subscription rights or other rights to purchase any of the
Company's authorized or unissued capital stock or other securities of the
Company.
3.5 RESTRICTIONS AND PREEMPTIVE RIGHTS.
(a) RESTRICTIONS. The Series A Shares, when issued in
compliance with the provisions of this Agreement, the Conversion Shares, when
issued in compliance with the provisions of the Note, and the shares of Common
Stock issuable upon conversion of the Series A Shares and Conversion Shares,
when issued in accordance with the provisions of the Company's Articles, will be
validly issued, fully paid and nonassessable and will be free of any liens or
encumbrances; provided, however, that all such shares may be subject to
restrictions on transfer under state and/or federal securities laws as set forth
in this Agreement, and as may be required by future changes in such laws. The
rights, preferences, privileges of and restrictions on the Company's Common
Stock and Preferred Stock are as set forth in the Articles.
(b) PREEMPTIVE RIGHTS. Except as set forth in this Agreement,
no person has any right of first refusal or any preemptive rights in connection
with the issuance of the Series A Shares, the Note, the Conversion Shares or
shares of Common Stock issuable upon conversion of the Series A Shares or
Conversion Shares, or any future issuance of securities by the Company.
3.6 FINANCIAL STATEMENTS. The Company has delivered to the Purchaser
its (i) audited statement of operations and statement of cash flows for the year
ended December 31, 1990 and audited balance sheet for the year then ended, and
(ii) unaudited statement of operations and statement of cash flows for the
period ended March 31, 1991 and unaudited interim balance sheet for the period
ended March 31, 1991 (collectively referred to as the "FINANCIAL STATEMENTS").
The Financial Statements are complete and correct in all material respects and
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated and accurately
set out and describe the financial condition and operating results of the
Company, except that unaudited financial statements do not contain footnotes,
and are subject to nonrecurring year-end audit adjustments which, in the
aggregate, will not be materially adverse.
3.7 ABSENCE OF CHANGES. Since March 31, 1991: (a) the Company has not
entered into any transaction which was not in the ordinary course of business,
(b) there has been no material adverse change in the condition (financial or
otherwise) of the business, property, assets or liabilities of the Company other
than changes in the ordinary course of its business, none of which, individually
or in the aggregate, has been materially adverse, (c) there has been no damage
to, destruction of or loss of
4
physical property (whether or not covered by insurance) materially adversely
affecting the assets, prospects, financial condition, operating results,
business or operations of the Company, (d) the Company has not declared or paid
any dividend or made any distribution on its stock, or redeemed, purchased or
otherwise acquired any of its stock, (e) except as contemplated by this
Agreement, the Company has not materially changed any compensation arrangement
or agreement with any of its key employees or executive officers, or materially
changed the rate of pay of its employees as a group, (f) the Company has not
received notice that there has been a cancellation of an order for the Company's
products or a loss of a customer of the Company, the cancellation or loss of
which would materially adversely affect the business of the Company, (g) the
Company has not materially changed or amended any material contract by which the
Company or any of its assets are bound or subject, except as contemplated by
this Agreement, (h) there has been no resignation or termination of employment
of any key officer or employee of the Company and the Company does not know of
any impending resignation or termination of employment of any such officer or
employee that if consummated would have a material adverse effect on the
business of the Company, (i) there has been no labor dispute involving the
Company or its employees, and none is pending or, to the best of the Company's
knowledge, threatened, (j) there has been no change, except in the ordinary
course of business, in the material contingent obligations of the Company
(including any contingent obligation of the Company regarding any director,
shareholder or key employee or officer of the Company) by way of guaranty,
endorsement, indemnity, warranty or otherwise, (k) there have been no loans made
by the Company to any of its employees, officers or directors other than travel
advances and other advances made in the ordinary course of business, (1) there
has been no waiver by the Company of a valuable right or of a material debt
owing to it, (m) there has not been any satisfaction or discharge of any lien,
claims or encumbrance or any payment of any obligation by the Company, except
in the ordinary course of business and which is not material to the assets,
properties, financial condition, operating results or business of the Company,
and (n) there has been no other event or condition of any character pertaining
to and materially adversely affecting the assets or business of the Company.
3.8 MATERIAL CONTRACTS AND COMMITMENTS. All of the contracts,
mortgages, indentures, agreements, instruments and transactions to which the
Company is a party or by which it is bound (including purchase orders t the
Company or placed by the Company) which involve obligations of, or payments to,
the Company in excess of fifty thousand dollars ($50,000) and all agreements
between the Company and its officers, directors, consultants, employees,
shareholders and lenders are set forth on the list attached as EXHIBIT C (the
"CONTRACTS"), copies of which have been made available to counsel to the
Purchaser. All of the Contracts are valid, binding and in full force and effect
in all material respects and enforceable by the Company in accordance with their
respective terms in all material respect, subject to the effect of applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights and rules
or laws concerning equitable remedies. The Company is not in material default
under any of such Contracts to
5
the best of the Company's knowledge, no other party to any of the Contracts is
in material default under such Contracts.
3.9 TITLE TO PROPERTIES AND ASSETS, LIENS, ETC. Other than property and
assets leased by the Company, the Company owns and has good and marketable title
to its tangible and intangible property and assets, including the properties and
assets reflected in the Financial Statements, free and clear of all liens,
mortgages, loans, pledges, charges or encumbrances except liens for current
taxes, and such encumbrances and liens which arise in the ordinary course of
business and do not materially impair the Company's ownership or use of such
property or assets. With respect to the property and assets leased by the
Company, the Company is in compliance with such leases and, to the best of the
Company's knowledge, holds valid leasehold interests free and clear of any
liens, claims or encumbrances. The Company's tangible assets are in good
operating condition, ordinary wear and tear excepted.
3.10 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The
Company is not (a) in violation or default of any term of its Articles or
Bylaws; (b) in violation or default in any material respect of any mortgage,
indebtedness, indenture, contract, agreement, instrument, judgment, order or
decree applicable to the Company; or (c) to the best of the Company's knowledge,
in violation or default of any statute, rule or regulation applicable to the
Company where such violation or default would have a material adverse effect on
the Company. The execution and delivery of this Agreement, the Registration
Rights Agreement, the Note and the Voting Agreement, performance of and
compliance with this Agreement, the Registration Rights Agreement, the Note and
the Voting Agreement, and the issuance and sale of the Series A Shares, the
Note, the Conversion Shares and the Common Stock issuable upon conversion of the
Series A Shares and the Conversion Shares will not (i) result in any such
violation, or (ii) be in conflict with or constitute a default under any of the
foregoing, or (iii) result in the creation of any mortgage, pledge, lien,
encumbrance of charge upon any of the properties or assets of the Company
pursuant to any of the foregoing.
3.11 LITIGATION, ETC. There is no action, proceeding or investigation
pending against the Company or its officers, directors or shareholders, or to
the Company's knowledge, against employees or consultants of the Company (or, to
the Company's knowledge, any basis therefor or threat thereof): (1) which might
result, either individually or in the aggregate, in (a) any material adverse
change in the business, prospects, conditions, affairs or operations of the
Company (financial or otherwise) or in any of its properties or assets, (b) any
change in the current equity ownership of the Company, (c) any material
impairment of the right or ability of the Company to carry on its business as
now conducted or as proposed to be conducted, or (d) any material liability on
the part of the Company; or (2) which questions the validity of this Agreement,
the Registration Rights Agreement, the Note or the Voting Agreement, or
any action taken or to be taken in connection with such agreements, including in
each
6
case, without limitation, actions pending or threatened involving the prior
employment of any of the Company's employees, the Company's use in connection
with the its business of any information or techniques allegedly proprietary to
any of its former employees, or their obligations under any agreements with
prior employers. The Company is not a party to or subject t the provisions of
any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality. There is no action, suit, proceeding or
investigation by the Company currently pending or which the Company currently
intends to initiate.
3.12 EMPLOYEES. Each officer, employee and consultant of the Company has
executed an agreement regarding proprietary information substantially in the
form of the Nondisclosure Agreement and Proprietary Rights Assignment attached
as EXHIBIT E. The Company is not aware that any of its employees or consultants
are in violation of such agreements and will use its best efforts to prevent any
such violation that will have a materially adverse effect on the Company's
business. The Company is not aware that any of its employees or consultants is
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
with the Company's business as conducted or as proposed to be conducted or that
would prevent any such employee or consultant from assigning inventions to the
Company. Neither the execution nor delivery of this Agreement, the Registration
Rights Agreement, the Note or the Voting Agreement, nor the carrying on of the
Company's business as proposed will, to 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 or consultants is now obligated. The Company does not believe
that it is or will be necessary for the Company to utilize any inventions of any
of its employees or consultants (or people it currently intends to hire) made
prior to their employment or engagement by the Company or its predecessors.
3.13 REGISTRATION RIGHTS. Except as set forth in the Registration Rights
Agreement, the Company is not under any contractual obligation to register (as
defined in Section 1 of the Registration Rights Agreement), including piggyback
registration rights, any of its currently outstanding securities or any of its
securities which may be issued in the future.
3.14 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization of
or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with: (a) the valid execution and
delivery of this Agreement, the Registration Rights Agreement, the Note or the
Voting Agreement or the consummation of the transactions contemplated by this
Agreement, the Registration Rights Agreement, the Note or the Voting Agreement;
or (b) the offer, sale, exchange or issuance of the Series A Shares, the Note,
the Conversion Shares or shares of Common Stock issuable upon conversion of the
Series A Shares or Conversion Shares
7
except the filing of the Articles with the California Secretary of State and,
if required, filings or qualifications under the California Corporate
Securities Law of 1968, as amended, or other applicable blue sky laws
(collectively, "BLUE SKY LAWS"), which filings or qualifications, if
required, will have been timely filed or obtained after the sale of the
Series A Shares.
3.15 OFFERING. In reliance on the representations and warranties of the
Purchaser in Section 5, (i) the offer and sale of the Series A Shares and the
Note, and (ii) the issuance of the Conversion Shares and the shares of Common
Stock issuable upon conversion of the Series A Shares and Conversion Shares,
will not result in a violation of the requirements of Section 5 of the
Securities Act of 1933, as amended (the "SECURITIES ACT"), or the qualification
or registration requirements of the Blue Sky Laws, subject to the applicable
filings under the Blue Sky Laws.
3.16 PATENTS, TRADEMARKS, ETC. The Company owns and possesses all right,
title and interest in or is appropriately licensed under all patents, patent
applications, licenses, trademarks, service marks, trade names, brand names,
inventions, copyrights, trade secrets, information, proprietary rights and
processes necessary for the operation of its business and with respect to its
products and services as now offered or conducted and as proposed to be offered
or conducted, respectively, and with no infringement of or conflict with the
rights of others respecting any of such rights, products or services. The
Company has not granted any options, licenses or agreements transferring or
conveying any of the Company's ownership rights with respect to any such rights,
except for the licenses granted and identified in EXHIBIT C. The Company is not
obligated or under any liability whatsoever to make any payments by way of
royalties, fees or otherwise to any owner or licensor of, or other claimant to,
any patent, trademark, trade name, copyright or other intangible asset, with
respect to the use thereof or in connection with the conduct of its business, or
otherwise, except as specified in EXHIBIT C. The Company has paid all
annuities, maintenance, filing and issue fees due or owing with respect to all
patents, trademarks, service marks, trade names and brand names and all pending
applications and registrations therefor. The Company has not received any
communications notifying it of the existence of any third party's rights with
respect to which such third party asserts the Company is required to obtain a
license, or any communications alleging that it has violated or, by conducting
its business as proposed, 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, nor is the Company aware of any basis for the
foregoing. The Company represents that its current products and services are
covered by the Company's issued patents and pending applications. The Company
is not aware of any proprietary rights of third parties which have previously,
are currently, or in the future will or may be infringed by the Company's
existing or planned products or services. The Company is not aware of any past,
present or future potential infringers of the Company's proprietary rights of
whom the Company or its counsel have been or are aware, whom the Company has not
pursued, but whom the Company should have pursued in the exercise of reasonable
and prudent business judgment.
8
3.17 TAXES. The Company has filed all tax returns and reports that are
required to have been filed with appropriate federal, state, county and local
governmental agencies or instrumentalities. To the best of the Company's
knowledge, such returns and reports are true and correct in all material
respects. The Company has paid all taxes and other assessments when due.
3.18 OUTSTANDING INDEBTEDNESS. Except as disclosed in the Financial
Statements, the Company has no indebtedness for borrowed money which it has
directly or indirectly created, incurred, assumed or guaranteed, or with respect
to which it has otherwise become liable, directly or indirectly. The Company
has no material liability or obligation in excess of $10,000, absolute or
contingent, which is not shown or provided for in the Financial Statements,
except obligations under purchase orders, sales contracts, equipment leases or
similar obligations incurred in the ordinary course of business.
3.19 CERTAIN TRANSACTIONS. The Company is not indebted, directly or
indirectly, to any of its officers, directors or shareholders, or to their
spouses or children, in any amount whatsoever; and none of said officers,
directors or, to the best of the Company's knowledge, shareholders, or any
member of their immediate families, are indebted to the Company or 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. No
such officer, director or shareholder, or any member of their immediate
families, is, directly or indirectly, interested in any material contract with
the Company. The Company is not guarantor or indemnitor of any indebtedness of
any other person, firm or corporation.
3.20 EMPLOYEE BENEFIT PLANS. The Company does not have any "employee
benefit plan" as defined in the Employee Retirement Income Security Act of 1974,
as amended.
3.21 REAL PROPERTY HOLDING CORPORATION. Company is not a "real
property holding corporation" within the meaning of Section 897(c)(2) of the
United States Internal Revenue Code of 1986, as amended.
3.22 INSURANCE. The Company maintains in full force and effect policies
of fire and casualty insurance, with insurers that, to the Company's knowledge,
are financially sound and reputable, with respect to its assets or properties
which are of a character customarily insured by entities engaging in the same or
a similar business similarly situated, sufficient in amount (subject to
reasonable deductibles) to allow it to replace any of such assets or properties
which might be damaged or destroyed.
3.23 VOTING AGREEMENTS. Except for the Voting Agreement in the form
attached hereto as EXHIBIT I, the Company is not a party or subject to any
agreement or understanding, and, to the Company's knowledge, there is no
agreement or
9
understanding between any persons and/or entities, which affects or relates to
the voting or giving of written consents with respect to any security or by a
director of the Company.
3.24 DISCLOSURE. No representation or warranty by the Company in this
Agreement, or any document or certificate furnished or to be furnished by the
Company to the Purchaser, when taken together, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements made in such documents, in the light of
the circumstances under which they were made, not misleading.
3.25 BEST KNOWLEDGE. As used in this Section 3, the term "TO THE BEST OF
THE COMPANY'S KNOWLEDGE" shall mean actual knowledge of the Company's officers
and directors, and knowledge that an officer or director should be expected to
have through the exercise of reasonable care in the conduct of a company's
business, including reasonable inquiry.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDER
The Selling Shareholder represents and warrants to the Purchaser that,
except as set forth on a Schedule of Exceptions attached as EXHIBIT F, which
exceptions shall be deemed to be representations and warranties as if made under
this Agreement:
4.1 TITLE. The Selling Shareholder owns and holds good and valid title
to the Common Shares free and clear of any liens, security interests,
restrictions, options or encumbrances other than (i) restrictions on transfer
under applicable securities laws and (ii) restrictions on transfer imposed by or
otherwise in favor of the Company, if any, described on EXHIBIT F. The Selling
Shareholder has not granted any options of any sort with respect to the Common
Shares or any right to acquire the Common Shares other than as contemplated
under this Agreement.
4.2 AUTHORITY.
(a) The Selling Shareholder has the full and unrestricted right,
power, capacity and authority to enter into, execute and deliver this Agreement
and the Voting Agreement, and as of the First Closing will have the full
unrestricted right, power and capacity and authority, to transfer and deliver
good and valid title to the Common Shares free and clear of any liens, security
interests, restrictions, options, or encumbrances (other than restrictions on
transfer under applicable securities laws or any community property interest in
the Common Shares, and to transfer and deliver the Common Shares.
10
(b) This Agreement and the Voting Agreement are valid and
binding obligations of the Selling Shareholder enforceable in accordance with
their terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and rules or laws concerning
equitable remedies.
4.3 VALID TRANSFER. Upon the payment by the Purchaser of the purchase
price for the Common Shares in accordance with the terms of this Agreement, and
the delivery to the Purchaser of the certificates for the Common Shares (in form
appropriate for transfer), the Purchaser will have obtained good and valid title
to the Common Shares, free and clear of any liens, security interests,
restrictions, options or encumbrances (other than restrictions on transfer under
applicable securities laws and this Agreement).
4.4 CONFLICTS. Selling Shareholder's compliance with its obligations
under this Agreement will not violate, conflict with or constitute a breach of
any agreement, arrangement, commitment or understanding to which the Selling
Shareholder is a party or by which the Selling Shareholder is bound.
4.5 CONSENTS. No consent, approval or authorization of, or designation,
declaration or filing with, any governmental authority or agency is required on
the part of the Selling Shareholder in connection with the valid execution and
delivery of this Agreement or the Voting Agreement or the offer and sale of the
Common Shares, except such consents, approvals or authorizations as will have
been obtained or made and will be effective within the time required by law.
4.6 DISCLOSURE. No representation or warranty by the Selling
Shareholder in this Agreement, or any document or certificate furnished or to be
furnished to the Purchaser, when taken together, contains or will contain any
untrue statement of a material fact or omits or will omit to state a maternal
fact necessary to make the statements made in such documents, in the light of
the circumstances under which they were made, not misleading. To the Selling
Shareholder's knowledge without having conducted any special inquiry, no
representation or warranty by the Company in this Agreement, or any document or
certificate furnished or to be furnished to the Purchaser, when taken together,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements made in such
documents, in the light of the circumstances under which they were made, not
misleading.
11
SECTION 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company with respect to the
purchase of the Series A Shares and the issuance of the Note, and the Purchaser
represents and warrants to the Selling Shareholder with respect to the purchase
of the Common Shares, as follows:
5.1 EXPERIENCE. The Purchaser or its trustor is capable or evaluating
the merits and risks of its investment in the Company and has the capacity to
protect its own interests in connection with such investment.
5.2 INVESTMENT. The Purchaser is acquiring the Shares, the Note, the
Conversion Shares and the underlying Common Stock for investment for its
trustor's trust account and not with the view to, or for resale in connection
with, any distribution of such shares. The Purchaser and its trustor understand
that the Shares, the Note, the Conversion Shares and the underlying Common Stock
have not been, and will not be, registered under the Securities Act by reason of
a specific exemption from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of such Purchaser's representations as
expressed in this Agreement.
5.3 RESTRICTED SECURITIES. The Purchaser and its trustor understand
that the Shares, the Note, the Conversion Shares and the underlying Common Stock
must be held indefinitely unless subsequently registered under the Securities
Act or unless an exemption from such registration is available.
5.4 NO PUBLIC MARKET. The Purchaser and its trustor understand 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
the Company's securities.
5.5 ACCESS TO DATA. The Purchaser's trustor has had an opportunity to
discuss the Company's business, management and financial affairs with its
management and the opportunity to review the Company's facilities and business
plan. The Purchaser's trustor has also had an opportunity to ask questions of
officers of the Company, which questions were answered to its satisfaction.
5.6 AUTHORIZATION. The Purchaser is a national bank chartered under
federal authority and is in good standing under such laws. The Purchaser's
trustor is a corporation duly incorporated and existing under, and by virtue of,
the laws of the State of California, and is in good standing under such laws.
The Purchaser has now, or will have at the Closing Dates, all requisite legal
and corporate power to enter into this Agreement, the Registration Rights
Agreement and the Voting Agreement, and has
12
or will have taken prior to the First Closing all corporate action on the part
of the Purchaser necessary to authorize, execute and deliver this Agreement, the
Registration Rights Agreement and the Voting Agreement, and to purchase the
Common Shares, and has or will have taken prior to the Second Closing all such
corporate action necessary to purchase the Shares and the Note, and to carry out
and perform its obligations under the terms of this Agreement, the Registration
Rights Agreement and the Voting Agreement. This Agreement, the Registration
Rights Agreement and the Voting Agreement are each valid and binding obligations
of the Purchaser enforceable in accordance with their terms, except as the
indemnification provisions of Section 3.7 of the Registration Rights Agreement
may be limited by principles of public policy, and subject to the effect of
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and rules or laws concerning equitable remedies.
5.7 GOVERNMENT CONSENTS, ETC. No consent, approval or authorization of
or designation, declaration or filing with any governmental authority on the
part of the Purchaser is required in connection with the valid execution and
delivery of this Agreement, the Registration Rights Agreement or the Voting
Agreement, or the offer, sale or issuance of the Shares or the Note, or the
consummation of any other transactions contemplated by this Agreement.
SECTION 6
CLOSING CONDITIONS
6.1 CONDITIONS TO FIRST CLOSING OF PURCHASER. The obligation of the
Purchaser to purchase the Common Shares at the First Closing is subject to the
fulfillment to its satisfaction, on or prior to the First Closing, of the
following conditions, any of which may be waived in accordance with the
provisions of subsection 9.4:
(a) REPRESENTATIONS AND WARRANTIES CORRECT. The representations
and warranties made by the Company in Section 3 shall be true and correct when
made, and shall be true and corrects in all material respects on the First
Closing Date with the same force and effect as if they had been made on and as
of the First Closing Date. The Company shall have performed in all material
respects all obligations and conditions in this Agreement required to be
performed or observed by it on or prior to the First Closing Date. The
representations and warranties made by the Selling Shareholder in Section 4
shall be true and correct when made, and shall be true and correct in all
material respects on the First Closing Data with the same force
and effect as if they had been made on and as of the First Closing Date. The
Selling, Shareholder shall have performed in all material respects all
obligations and conditions in this Agreement required to be performed or
observed by it on or prior to the first Closing.
13
(b) CONSENTS AND WAIVERS. The Company and the Selling
Shareholder shall have obtained in a timely fashion any and all consents,
permits and waivers necessary or appropriate on their respective parts for the
consummation of the transactions contemplated by this Agreement.
(c) EMPLOYEE AGREEMENTS. At or prior to the First Closing, each
employee and consultant of the Company who has not already entered into a
Proprietary Information, Inventions and Ethics Agreement in the form attached as
EXHIBIT E shall have entered into such agreement.
(d) COMPLIANCE CERTIFICATE. The Company shall have delivered a
certificate, executed by the President of the Company, dated as of the First
Closing Date, certifying to the fulfillment of the Company's conditions
specified in Sections 6.1(a), (b) and (c). The Selling Shareholder shall have
delivered a certificate, executed by the Selling Shareholder, dated as of the
First Closing Date, certifying to the fulfillment of the Selling Shareholder's
conditions specified in Sections 6.1(a) and (b).
(e) OPINION OF COMPANY'S COUNSEL. Xxxxxxxxx, Xxxx & Xxxxxxx, A
Partnership including Professional Corporations, counsel to the Company, shall
have delivered an opinion addressed to the Purchaser, dated as of the First
Closing Date, substantially the same in form and content as that attached as
EXHIBIT G1.
(f) BLUE SKY AND OTHER REGULATIONS. At or prior to the First
Closing, the Selling Shareholder shall have obtained all necessary Blue Sky law
permits and qualifications, or have the availability of exemptions, required by
California for the offer and sale of the Common Shares. At or prior to the
First Closing, the sale of the Common Shares by the Selling Shareholder shall be
legally permitted by all laws and regulations to which the Selling Shareholder
and the Company are subject.
6.2 CONDITIONS TO SECOND CLOSING OF PURCHASER. The obligation of the
Purchaser to purchase the Series A Shares and the Note at the Second Closing is
subject to the fulfillment to its satisfaction, on or prior to the Second
Closing, of the following conditions, any of which may be waived in accordance
with the provisions of subsection 9.4:
(a) REPRESENTATIONS AND WARRANTIES CORRECT. The representations
and warranties made by the Company in Section 3 shall be true and correct when
made, and shall be true and correct in all material respects on the Second
Closing Date with the same force and effect as if they had been made on and as
of the Second Closing Date. The Company shall have performed in all material
respects all obligations and conditions in this Agreement required to be
performed or observed by it on or prior to the Second Closing.
(b) CONSENTS AND WAIVERS. At or prior to the Second Closing,
the Company shall have obtained in a timely fashion any and all consents,
permits and
14
waivers necessary or appropriate on its part or the consummation to the
transactions contemplated by this Agreement.
(c) ARTICLES; BYLAWS. At or prior to the Second Closing, (i)
the Articles shall have been filed with the Secretary of State of the state of
California and (ii) the Bylaws shall have been amended to authorize specifically
a variable number of authorized directors, ranging between 5 and 9 directors,
with the initial authorized number of directors, effective as of the Second
Closing, having been established as 5 directors.
(d) EMPLOYEE AGREEMENTS. At or prior to the Second Closing,
each employee and consultant of the Company who has not already entered into a
Proprietary Information, Inventions and Ethics Agreement in the form attached as
EXHIBIT E shall have entered into such agreement.
(e) COMPLIANCE CERTIFICATE. The Company shall have delivered a
certificate, executed by the President of the Company, dated as of the Second
Closing Date, certifying to the fulfillment of the Company's conditions
specified in Sections 6.2(a), (b), (c), (d), (i), (j) and (k).
(f) CONSUMMATION OF FIRST CLOSING. The First Closing and the
related transactions which are scheduled to occur at or prior to the First
Closing shall have been consummated according to the terms and conditions of
this Agreement.
(g) REGISTRATION RIGHTS AGREEMENT. At or prior to the Second
Closing, the Company and the Purchaser shall have executed the Registration
Rights Agreement.
(h) OPINION OF COMPANY'S COUNSEL. Xxxxxxxxx, Wise & Xxxxxxx, A
Partnership including Professional Corporations, counsel to the Company, shall
have delivered an opinion addressed to the Purchaser, dated as of the Second
Closing Date, substantially the same in form and content as that attached as
EXHIBIT G2.
(i) BLUE SKY AND OTHER REGULATIONS. At or prior to the Second
Closing, the Company shall have obtained all necessary Blue Sky law permits and
qualifications, or have the availability of exemptions, required by California
for the offer and sale of the Series A Shares, the issuance of the Note, the
Conversion Shares and the Common Stock issuable upon conversion of the Series A
Shares and Conversion Shares. At or prior to the Second Closing the Company
shall have obtained a permit from the California Department of Corporations for
the Note.
(j) REDEMPTION OF COMMON STOCK. Effective as of the Second
Closing, the Company shall have redeemed from its shareholders at a price of
$3.00 per share a total of 2,000,000 shares of its Common Stock (which the
Company currently contemplates will include approximately 163,126 vested shares
issuable upon
15
exercise of outstanding options) in compliance with the requirements of the
California Corporations Code and other applicable laws and regulations.
(k) BOARD OF DIRECTORS REPRESENTATION. The initial nominees of
the Purchaser to serve as directors of the Company, identified in a letter
delivered by the Purchaser to the Company at or prior to the First Closing,
shall have been elected to the Company's Board of Directors effective as of the
Second Closing.
(1) OPTION AGREEMENTS. At or prior to the Second Closing, the
Selling Shareholder and each of the Company's shareholders and optionees who is
participating in the Redemption shall have executed and delivered an agreement
in the form attached as EXHIBIT H-1 or EXHIBIT H-2, respectively ("Option
Agreement"), under which such shareholders and optionees agree to sell all of
their shares in the Company to the Purchaser upon the terms and conditions in
the Option Agreements.
(m) VOTING AGREEMENT. At or prior to the Second Closing, a
Voting Agreement in the form of EXHIBIT I attached hereto shall have been
entered into by the Company, the Purchaser, and such shareholders of the
Company, if any, as the Company and the Purchaser may agree.
6.3 CONDITIONS TO FIRST CLOSING OF SELLING SHAREHOLDER. The Selling
Shareholder's obligation to sell and issue the Common Shares at the First
Closing is subject to the fulfillment to the satisfaction of the Selling
Shareholder on or prior to the First Closing Date of the following conditions,
any of which may be waived by the Selling Shareholder in accordance with the
provisions of subsection 9.4:
(a) REPRESENTATIONS. The representations made by the Company in
Section 3 and the representations made by the Purchaser in Section 5 shall be
true and correct when made, and shall be true and correct on the First Closing
Date.
(b) CONSENTS AND WAIVERS. The Purchaser and the Company shall
have obtained in a timely fashion any and all consents, permits and waivers
necessary or appropriate on their respective parts for the consummation of the
sale of the Common Shares by the Selling Shareholder to the Purchaser.
(c) COMPLIANCE CERTIFICATE. The Purchaser shall have delivered
a certificate, executed by the Purchaser, dated at the First Closing Date,
certifying to the fulfillment of the Purchaser's conditions specified in
Sections 6.3(a) and (b). The Company shall have delivered a certificate,
executed by the President of the Company, dated at the First Closing Date,
certifying to the fulfillment of the Company's conditions specified in Sections
6.3(a) and (b).
6.4 CONDITIONS TO SECOND CLOSING OF COMPANY. The Company's obligation
to sell and issue the Series A Shares and the Note at the Second Closing is
subject to the fulfillment to the satisfaction of the Company on or prior to the
Second Closing of the
16
following conditions, any of which may be waived by the Company in accordance
with the provisions of subsection 9.4:
(a) REPRESENTATIONS. The representations made by the Purchaser
in Section 5 shall be true and correct when made, and shall be true and correct
on the Second Closing Date.
(b) OTHER CONDITIONS. The condition set forth in Section
6.2(c)(i), (g), (i), (j) and (m) shall have been fulfilled on or prior to the
Second Closing Date.
(c) CONSENTS AND WAIVERS. The Purchaser shall have obtained in
a timely fashion any and all consents, permits and waivers necessary or
appropriate on their respective parts for the consummation of the transactions
contemplated by this Agreement on or prior to the Second Closing Date.
(d) COMPLIANCE CERTIFICATE. The Purchaser shall have delivered
a certificate, executed by the Purchaser, dated as of the Second Closing Date,
certifying to the fulfillment of the Purchaser's conditions specified in
Sections 6.4(a) and (c).
(e) CONSUMMATION OF FIRST CLOSING. The First Closing and the
related transactions which are scheduled to occur at or prior to the First
Closing shall have been consummated according to the terms and conditions of
this Agreement.
SECTION 7
AFFIRMATIVE COVENANTS OF THE COMPANY
The Company covenants and agrees as follows:
7.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. The Company will
deliver to the Purchaser:
(a) as soon as practicable after the end of each fiscal year of
the Company and in any event within 120 days after such fiscal year, an audited
balance sheet of the Company as at the end of such year and audited income
statement and cash flow statement of the Company for such year, certified
(without qualification as to scope) by a "big five" accounting firm selected by
the Company, and prepared in accordance with generally accepted accounting
principles consistently applied;
(b) as soon as practicable after the end of each quarter (except
the last quarter of the fiscal year), and in any event within 45 days after such
quarter, an unaudited balance sheet of the Company as at the end of such quarter
and unaudited income statement and cash flow statement of the Company for such
quarter and for the period of the fiscal year then ended, together with a
statement setting forth in
17
comparative form the figures for the corresponding date and periods of the
previous fiscal year and the figures for the corresponding date and periods
previously delivered to the Purchaser under Section 7.1(c);
(c) as soon as practicable, but in any event forty-five (45)
days prior to the end of each fiscal year, a budget and business plan for the
next fiscal year, prepared on a monthly basis, including balance sheets and
sources and applications of funds statements for such months and, as soon as
prepared, any other budgets or revised budgets prepared by the Company;
(d) within 30 days of their review of the Company's Board of
Directors, any material revision of projected financial statements provided
under Section 7.1(c);
(e) promptly after receipt by the Company, a copy of each
management letter issued by the Company's accountants and any other letter
issued by the Company's accountants which expresses concern as to the adequacy
of the Company's systems of internal accounting control;
(f) together with the financial statements delivered pursuant to
Sections 7.1(a) and (b), a written statement from the Company's President
whether, to the best of his knowledge, any default by the Company of any
material obligation under any material contract, instrument or agreement of the
Company, where such default would have a material adverse effect on the
Company's business as a whole (an "EVENT OF DEFAULT"), or condition or event
which with notice or lapse of time would constitute as Event of Default, has
occurred and is continuing and, if any has occurred and is continuing, a
description of the same;
(g) with reasonable promptness, such other notices, information
and data with respect to the Company as the Company delivers to the holders of
its Common Stock, and other information and data as the Purchaser may from time
to time reasonably request.
The foregoing financial statements shall be prepared on a consolidated and
consolidating basis if the Company then has any subsidiaries. The financial
statements delivered pursuant to Section 7.1(b) above shall be accompanied by a
certificate of the chief financial officer of the Company stating that such
statements have been prepared on a basis consistent with the presentation of the
audited financial statements of the Company and fairly present the financial
condition of the company at the date thereof and for the period covered thereby,
subject only to a nonrecurring year-end audit adjustments which in the aggregate
will not be materially adverse.
7.2 RULE 144A INFORMATION. The Company will provide the Purchaser, any
transferees of the Purchaser, and any prospective purchaser of the Shares who is
a
18
"qualified institutional buyer" (as defined in Rule 144A promulgated under the
Securities Act) the information required by Rule 144A.
7.3 INSPECTION. The Company shall permit the Purchaser, or any
authorized representative of the Purchaser, to visit and inspect the properties
of the Company and its subsidiaries, including their respective corporate and
financial records, and to discuss the business and finances of the Company and
its subsidiaries with their respective employees, officers and directors (and
the Company's accountants) during normal business hours following reasonable
notice to the President of the Company and as often as may be reasonably
requested.
7.4 TERMINATION OF COVENANTS. The covenants set forth in Sections 7.1,
7.2 and 7.3 shall terminate and be of no further force or effect at such time as
the Company is required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended.
7.5 KEY-MAN INSURANCE. The Company shall use best efforts to acquire
and maintain in force until cancelled or modified with the written consent of
the Purchaser or its transferees, holding two thirds or more of the outstanding
Common Stock issued or issuable upon conversion of the Shares and Conversion
Shares, a policy of key-man insurance naming the Company as owner and
beneficiary on the lives of Xxxx Xxxx and Xxxxxx Xxxxxx in the amount of
$500,000 each.
7.6 PROPRIETARY RIGHTS AGREEMENTS. The Company shall require each
person who becomes an employee or consultant of the Company in the future to
execute an agreement regarding proprietary information substantially in the form
of the Proprietary Information, Inventions and Ethics Agreement attached as
EXHIBIT E.
7.7 LIMITATIONS ON TRANSFER OF INTELLECTUAL PROPERTY.
(a) Without the prior written consent of the Purchaser, which
consent shall not be unreasonably withheld, the Company will not: (i) divide or
assign any ownership rights in any of its existing patents or pending
applications, or (ii) extend or assign any of its existing patents or pending
applications in the name of any third party.
(b) The Company has determined that it is not in the Company's
business interest to, and agrees that it will not, license, transfer, utilize,
directly or indirectly, or otherwise authorize the use of the Company's present
and future anticopy technologies for direct or indirect application to any
Broadcast or Cable signal as defined below.
(c) "Broadcast or Cable Signal" means a video program
transmitted to home video consumers for reception in the form of an
electromagnetic wave, electrical signal or optical wave, whether by means of
cable, satellite transmission or otherwise,
19
but excludes any video program for which the video consumer pays a separate
charge for each program service (commonly referred to as pay-per view).
7.8 EQUITY METHOD OF ACCOUNTING. If the Purchaser desires at some date
to account for its investment in the Company pursuant to the equity method, the
Company shall promptly furnish to the Purchaser and its independent auditors all
information reasonably available to the Company which Purchaser and its
independent auditors deem to be required by generally accepted accounting
principles to enable the Purchaser to account for its investment in the Company
pursuant to the equity method. To the extent reasonably requested by the
Purchaser, the Company shall, and shall cause its employees, independent public
accountants and other representatives to provide information, to the extent
reasonably available, regarding the Company to, and otherwise cooperate with,
the Purchaser so as to enable the Purchaser to prepare financial statements in
accordance with accounting principles generally accepted in the United States
and to comply with its reporting requirements and other disclosure obligations
under applicable United States securities laws and regulations.
7.9 OPTION AGREEMENTS. The Company will use its best efforts to cause
the Purchaser to achieve the benefits of the Purchaser's rights under Option
Agreements. The Company will carry out and perform all express or implied
responsibilities of the Company referred to in the Option Agreements promptly
and in good faith.
SECTION 8
OTHER COVENANTS OF THE COMPANY AND PURCHASER
(Defined terms used in this Section 8 are defined in Section 8.6)
8.1 THE RIGHT OF FIRST REFUSAL.
(a) THE RIGHT. Prior to any sale or issuance by the Company
of any Equity Securities, the Company shall give the Purchaser the first
right to purchase all or part of the Purchaser's Pro Rata Share of such
Equity securities on the same terms as the Company is willing to sell such
Equity Securities to Potential investors.
(b) NOTICE. Prior to any sale or issuance by the Company of
any Equity Securities, the Company shall notify the Purchaser, in writing, of
its intention to sell and issue such securities, setting forth the general
terms under which it proposes to make such sale. The Purchaser shall have
twenty (20) days after the date of delivery of such notice (the "Right Notice
Date") to notify the Company in writing that it elects to purchase all or a
portion of the Equity Securities offered to it. The Purchaser shall be
entitled to apportion its Pro Rata Share of the Equity Securities to be
purchased among Purchaser, Purchaser's trustor and Purchaser's trustor's
parent corporation, provided that the Purchaser notifies the Company of such
allocation, and provided that
20
such allocation does not result in or create the potential of the Company being
unable to claim an exemption from the registration provisions of the Securities
Act or the qualification provisions of the Blue Sky Laws.
(c) FAILURE TO NOTIFY. If, within twenty (20) days after the
Right Notice Date, the Purchaser does not notify the Company that it desires
to purchase all or a portion of the Purchaser's Pro Rata Share of the Equity
Securities offered to the Purchaser in such notice upon the terms and
conditions set forth in such notice, then the Company may, during a period of
ninety (90) days following the end of such twenty (20) day period, sell and
issue such Equity Securities respecting which the Purchaser's option was not
exercised at a price and upon terms and conditions no more favorable in any
material respect to other purchasers than those set forth in the notice to
the Purchaser. In the event that the Company has not sold such Equity
Securities to other purchasers within said ninety (90) day period, the
Company shall not thereafter issue or sell any Equity Securities without
first offering such securities to the Purchaser in the manner provided above.
(d) PAYMENT. If the Purchaser gives the Company notice that it
desires to purchase all or part of the Equity Securities offered by the Company,
then such purchase will be pursuant to the terms and conditions agreed to by the
other purchasers of such Equity Securities and payment for such Equity
Securities shall be made against delivery of the securities at the executive
offices of the Company at the time of the scheduled closing of the purchase with
such other purchasers or, if later, at 2:00 p.m. California time on the later to
occur of the following dates: (a) the third business day following the
expiration or earlier termination of all applicable waiting periods imposed on
such purchase and sale by the HSR Act, the CFIUS Act or other applicable law,
and (b) such other date as the Company and the Purchaser may agree. The Company
shall take all such action (except registration under the Securities Act) as may
reasonably be required by any regulatory authority in connection with the
exercise by the Purchaser of the right to purchase Equity Securities as set
forth in this Section 8.1
(e) REDUCED OFFERING. Notwithstanding any other provision of
this Section 8.1, the Purchaser will have no obligation to purchase any Equity
Securities unless other purchasers are purchasing all of the Equity Securities
covered by the Company's notice to the Purchaser under Section 8.1(b) (the
"Offered Equity Securities"), other than the Purchaser's Pro Rata Share. If
less than all of the Offered Equity Securities are sold by the Company, the
Purchaser will be entitled to purchase at any closing a lesser amount of such
Equity Securities than the amount of which the Purchaser had notified the
Company previously, such lesser amount being not less than the same percentage
portion of the smaller offering than the portion of which the Purchaser notified
the Company with respect to the larger offering.
21
(f) LIMITATION.
(i) The right of first refusal contained in this Section
8.1 shall not apply to the issuance by the Company on or after the First Closing
Date of shares of the Company's Common Stock and/or Preferred Stock as follows:
(A) up to 1,750,000 shares of Common Stock issued
or issuable after the First Closing Date to employees, officers, directors and
consultants either directly or pursuant to stock options or stock purchase plans
or agreements approved by the Company's Board of Directors, or upon the issuance
of options or warrants to purchase such shares. The number of shares set forth
in this Section 8.1(f)(i)(a), however, (1) may be increased with the unanimous
approval of the Company's Board of Directors, (2) shall be adjusted for stock
dividends, splits, recapitalizations and the like, and (3) shall be net of
repurchases.
(B) `the Series A Shares issued pursuant to this
Agreement, the Conversion Shares, and the shares of Common Stock issued upon
conversion of such Series A Shares and Conversion Shares.
(C) shares of Common Stock issued or issuable upon
a stock dividend, stock split, recapitalization or the like.
(D) shares of Common Stock and/or Preferred Stock
issued pursuant to the acquisition of another corporation by the Company by
merger, purchase of all or substantially all of the assets, or other
reorganization.
(E) shares issued by the Company in an initial
public offering. (The Purchaser's right of first refusal shall apply to any
public or other offering by the Company of equity Securities following the
Company's Public Offering.)
(ii) Notwithstanding subsections (D) and (E) of Section
8.1(f)(i) and Section 8.1(g), the Purchaser's right of first refusal shall apply
to any acquisition or any public offering described in such subsections in the
event such transaction, if completed, would reduce the Purchaser's Pro Rata
Share below 25%.
(g) TERMINATION. The right of first refusal contained in this
Section 8 shall terminate upon (i) shareholder approval of any merger or
consolidation of the Company with any other corporation in which more than 50%
of the voting control of the Company is transferred to a third party or third
parties, provided that, if such merger or consolidation is not consummated, the
right of first refusal shall be deemed restored and reinstated to full force and
effect and (ii) at such time, if any, as the Purchaser's Pro Rata Share is
reduced to less than 25%, unless Section 8.1(f)(ii) is applicable and the
Purchaser increases its Pro Rata Share to at least 25% by exercising its right
of first refusal in compliance with Section 8.1.
22
8.2 STANDSTILL.
(a) Notwithstanding the provisions of Section 8.1, following the
Second Closing and prior to a Public Offering, the Purchaser shall not directly
or indirectly acquire, hold or transfer to the Purchaser's trustor or any other
person or entity controlling, controlled by or affiliated with Purchaser's
trustor, beneficial ownership of Voting Stock (except, in any case, by way of
stock dividends or other rights or distributions or offerings made or made
available to holders of any class or series of Voting Stock generally or upon
the exercise of such rights) without the written consent of the Company, if the
effect of such acquisition, holding or transfer would be to increase the
percentage of the Total Current Voting Power of the Company represented by the
Voting Stock then owned collectively by the Purchaser, the Purchaser's trustor
or any other person or entity controlling, controlled by or affiliated with the
Purchaser's trustor, to more than 49% of the total Current Voting Power of the
Company
(b) The Purchaser shall not be deemed to have violated its
covenant under Section 8.2(a)by virtue of any increase in the aggregate
percentage of the Total Current Voting Power of the Company represented by
Voting Stock owned by the Purchaser, the Purchaser's trustor or any other person
or entity controlling, controlled by or affiliated with the Purchaser's trustor
or which the Purchaser or any such persons has a right to acquire if such
increase is the result of a recapitalization of the Company, any invalidation of
the limitations set forth in the Articles or the Voting Agreement on the voting
power of the Company's Series A Preferred Stock or the Note (so long as
Purchaser, the Purchaser's trustor or such trustor's parent corporation is not
responsible for such invalidation), a repurchase of securities by the Company or
any other action taken by the Company or its affiliates.
(c) The Purchaser shall notify the Company of the acquisition by
Purchaser, Purchaser's trustor and each other person or entity controlling,
controlled by and affiliated with Purchaser's trustor of additional securities
of the Company promptly after each such acquisition. All such acquisitions
shall comply with applicable federal and state securities laws and the
provisions of this Agreement.
8.3 SUBSEQUENT ACQUISITION OF CAPITAL STOCK. The Company understands
that from time to time the Purchaser may seek to acquire additional shares of
the Company's capital stock from the Company's shareholders or, if a market for
the Company's securities exists, in open-market transactions. So long as the
standstill provisions of Section 8.2 are in full force and effect, the Company
agrees that it shall not take any action, or permit any subsidiary to take any
action, to interfere with any acquisition by the Purchaser of securities of the
Company or any attempt by the Purchaser to acquire securities of the Company as
are permitted to be owned by the Purchaser pursuant to this Agreement,
consistent with the provisions of Section 8.2
23
including, without limitation, the bringing of any legal action in connection
with any such acquisition or attempted acquisition.
8.4 PUBLIC OFFERINGS. The Company shall not register any of its
securities in a public offering of securities within two (2) years following the
Second Closing Date. In addition, the Company shall not register, at any time,
any of its securities in an initial public offering unless the reasonably
anticipated aggregate proceeds of such an offering would be at least $10
million. In the event that a majority of the Company's authorized directors in
good faith approves and authorizes the Company to register its securities
pursuant to a Public Offering, then the Purchaser may, in its sole discretion,
offer to purchase all the Voting Stock of the Company which it does not
currently own pursuant to the terms and conditions of the Option Agreements
attached as EXHIBITS H1 AND H2. In the event Purchaser does not offer to
purchase such Voting Stock, then Purchaser agrees that it will not vote its
shares or take any other action to block or prevent the Company from undertaking
the public offering and will provide reasonable cooperation to the Company to
effect the offering; provided, however, that Purchaser shall have no obligation
to waive or modify any right or benefit to which it is entitled pursuant to this
Agreement, the Articles, the Registration Rights Agreement, the Voting Agreement
or the Note.
8.5 EXCLUSIVITY. Except as set forth on a schedule attached as EXHIBIT
J, the Company shall not prior to the Second Closing Date (nor will it permit
any of its officers, directors, agents, representatives or affiliates to)
directly or indirectly take any of the following actions with any party other
than the Purchaser and its designees: (a) solicit, encourage, initiate or
participate in any negotiations, inquiries or discussions with respect to, any
offer or proposal to acquire any equity interest in the Company, any assets of
the Company, or any license to the Company's technology whether by merger,
purchase of shares, purchase of assets, tender offer or otherwise; (b) disclose
any information not customarily disclosed to any person concerning its business
and properties or afford to any person or entity access to its properties, books
or records, except in the ordinary course of business; (c) enter into or execute
any stock purchase agreement, investment agreement, license agreement, plan or
reorganization, merger agreement, or other agreement calling for the acquisition
of any equity interests in the Company, any assets of the Company, or any
license to the Company's technology; (d) make or authorize any public statement,
recommendation or solicitation with respect to any tender offer, merger,
purchase of assets or any offer or proposal relating to the foregoing other than
with respect to the Purchaser's investment in the Company and the Redemption; or
(e) except as otherwise permitted by the foregoing, assist or cooperate with any
person (other than employees with respect to equity incentive arrangements) to
make any proposal to purchase all or any part of the capital stock or assets of
the Company, other than inventory or assets in the ordinary course of business.
In the event the Company shall receive any offer or proposal, directly or
indirectly, of the type referred to in clause (a) or (c) above, or any request
for disclosure or access pursuant to clause (b) above, it shall immediately, and
prior to taking any action in response thereto, inform the Purchase as to all
material facts
24
concerning any such offer or proposal and will thereafter cooperate with the
Purchaser by continuing to furnish to the Purchaser any additional
information it may at any time request. The Purchaser hereby consents to the
Redemption.
8.6 WAIVER AND ASSIGNMENT OF DIVIDEND RIGHTS. Purchaser hereby waives
and assigns to holders of Common stock other than Purchaser any and all rights
of the Common Shares (and of any subsequently acquired shares of Common Stock of
the Company issued upon conversion of the Series A Shares or Conversion shares)
to participate in any divided distributions lawfully declared by the Company
with respect to its Common Stock, until the earlier of (i) a distribution, or
series of distributions, in an aggregate amount of $1,537,994.40, or (ii) the
closing of a Public Offering. Purchaser shall not, in any manner whosoever,
take any action which would hinder or delay, or otherwise interfere with the
Company's ability to declare any such dividend. Any transferee, successor or
assignee of the Common Shares (and of any subsequently acquired shares of Common
Stock of the Company issued upon conversion of the Series A Shares or Conversion
Shares) shall take such shares subject to this waiver and assignment, and as a
condition precedent to the valid transfer of such shares, shall be bound, and
shall agree in writing to be bound thereby.
8.7 DEFINITIONS.
(a) "CFIUS ACT" shall mean the Exon-Xxxxxx Amendment to the
Omnibus Trade and Competitiveness Act of 1988 and any successor legislation.
(b) The term "EQUITY SECURITIES" shall mean any securities
having voting rights in the election of the Company's Board of Directors not
contingent upon default, or any securities evidencing an ownership interest in
the Company, or any securities convertible into or exercisable or exchangeable
for any shares of the foregoing, or any agreement or commitment to issue any of
the foregoing, or any right to acquire any of the foregoing.
(c) "HSR ACT" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976.
(d) The term "PRO RATA SHARE" shall mean, at any time, the
percentage represented by (i) the sum of all shares of the Company's Common
Stock and the number of votes represented by the Shares and other voting
securities of the Company held by the Purchaser divided by (ii) the sum of
all shares of the Company's Common Stock and the number of votes represented
by the Shares and other voting securities of the Company held by all security
holders of the Company. For purposes of this Agreement, any interest in the
Company held by the Purchaser's trustor or such trustor's parent corporation
shall be included in determining the Purchaser's Pro Rata Share.
25
(e) "PUBLIC OFFERING" shall mean a registration of the Company's
securities pursuant to a firmly underwritten public offering under the
Securities Act the aggregate net proceeds of which are not less than
$10,000,000.
(f) "TOTAL CURRENT VOTING POWER" shall mean the total number of
votes which may be cast in the election of directors of the Company under the
Articles, if all securities entitled to vote in the election of such directors
are present and voted.
(g) "VOTING STOCK" shall mean the Common Stock, Preferred
Stock and any other securities of the Company having the ordinary power to
vote in the election of directors of the Company, other than securities
having such power only upon the happening of a contingency which has not yet
occurred.
SECTION 9
MISCELLANEOUS
9.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the internal laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California.
9.2 SURVIVAL. The representations and warranties made in this Agreement
shall survive any investigation made by the Purchaser and the closing of the
transactions contemplated by this Agreement for a period of one year following
the Second Closing. Unless otherwise expressly provided in this Agreement, the
Registration Rights Agreement, the Note or the Voting Agreement, all covenants
and agreements set forth in such instruments and documents shall survive for as
long as the Purchaser owns any shares of capital stock (or securities
convertible into, or exercisable of exchangeable for, such shares of capital
stock) of the Company or any successor of the Company.
9.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided in this
Agreement, the provisions of this Agreement shall inure to the benefit of, and
be finding upon, the successors, assigns, heirs, executors and administrators of
the parties to this Agreement.
9.4 ENTIRE AGREEMENT; REGISTRATION RIGHTS AGREEMENT. This Agreement and
the other documents delivered at the First Closing and Second Closing constitute
the full and entire understanding and agreement between the parties with regard
to the subjects of such documents, and no party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants except
as specifically set forth in such documents. Except as expressly provided in
this Agreement, neither this Agreement nor any of its terms 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.
26
9.5 NOTICES, ETC. All notices and other communications required or
permitted under this Agreement shall be in writing and shall be mailed by
registered or certified mail, postage prepaid, or otherwise delivered by
hand, messenger or facsimile, addressed (a) if to the Purchaser, at the
address or facsimile number set forth on the signature page, or at such other
address as the Purchaser shall have furnished to the Company in writing, with
a copy to Xxxxxx X. Xxxxxxxxx XX, Xxxx & Freidenrich, 000 Xxxxxxxx Xxxxxx, XX
00000, facsimile: (000)000-0000, or (b) if to any other holder of any Common
Stock issued or issuable upon conversion of the Shares or the Note, at such
address or facsimile number 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 who has so
furnished an address to the Company, (c) if to the Company, at the address or
facsimile number set forth on the signature page and addressed to the
attention of the Corporate Secretary, or at such other address as the Company
shall have furnished to the Purchaser and the Selling Shareholder, with a
copy to Xxxxx Xxxxxx, Xxxxxxxxx, Xxxx & Xxxxxxx, 0000 Xxxxxx Xxx, Xxxxx 000,
Xxxx Xxxx, XX 00000, facsimile: (000)000-0000, or (d) if to the Selling
Shareholder, one copy should be sent to its address or facsimile number set
forth on the signature page or at such other address as the Selling
Shareholder shall have furnished to the Purchaser and the Company.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when received.
9.6 DELAYS OR OMISSIONS. Except as expressly provided in this
Agreement, no delay or omission to exercise any right, power or remedy accruing
to any holder of any Shares, the Note, any Common Stock issued or issuable upon
conversion of the Shares or the Note, or upon any breach or default of the
Company or the Selling Shareholder 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 in such breach or default, 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 occurring before or afterwards. 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. All remedies, either
under this Agreement or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
9.7 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
27
SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102, OR
25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS
AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED,
UNLESS THE SALE IS SO EXEMPT.
9.8 EXPENSES. The Company, the Selling Shareholder and the Purchaser
shall each bear its xxx* his expenses incurred on its or is behalf with respect
to this Agreement and the transactions contemplated by this Agreement
9.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
9.10 SEVERABILITY. 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 shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
9.11 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
9.12 FINDER'S FEES AND OTHER FEES.
(a) The Company (i) represents and warrants that it has retained
no finder or broker in connection with the transactions contemplated by this
Agreement and, (ii) agrees to indemnify and to hold the Purchaser and Selling
Shareholder harmless of and from any liability for commission or compensation in
the nature of a finder's fee to any broker or other person or firm (and the
costs and expenses of defending against such liability or asserted liability)
for which the Company, or any of its employees or representatives, are
responsible
(b) The Purchaser (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) agrees to indemnify and to hold the Company and Selling
Shareholder harmless of and from any liability for any commission or
compensation in the nature of a finder's fee to any broker or other person or
firm (and the costs and expenses of defending against such liability or asserted
liability) for which the Purchaser, or any of its employees or representatives,
are responsible.
(c) The Selling Shareholder (i) represents and warrants that it
has retained no finder or broker in connection with the transactions
contemplated by the Agreement and (ii) agrees to indemnify and to hold the
Company and the Purchaser
28
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which the Selling Shareholder, or any of its employees or representatives, are
responsible.
9.13 ATTORNEYS' FEES. In the event any proceeding or lawsuit is brought
by any party in connection with this Agreement or the transactions contemplated
by this Agreement, the prevailing party in such proceeding or lawsuit shall be
entitled to receive its costs and reasonable fees of expert witnesses and
attorneys, including costs and fees on appeal.
9.14 FURTHER ASSURANCES. The parties hereto shall do and perform or
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments or
documents as any other party may reasonably request from time to time in
order to carry out the intent and purposes of this Agreement, the Articles,
the Registration Rights Agreement, the Note and the Voting Agreement and the
consummation of the transactions contemplated hereby and thereby. Neither
the Company nor the Purchaser shall voluntarily undertake any course of
action inconsistent with satisfaction of the requirements applicable to them
set forth in such instruments and documents and each shall promptly do all
such acts and take all such measures as may be appropriate to enable them to
perform as early as practicable the obligations herein and therein required
to be performed by them.
9.15 CONFIDENTIALITY. The Company, the Selling Shareholder and the
Purchaser each agree that they shall make no public announcement of, or
otherwise disclose, the matters set forth in this Agreement, the identity of
the Purchaser's trustor or the direct or indirect beneficial ownership of
Purchaser's trustor except (a) as agreed in writing by the parties, or (b) as
is required by disclosure obligations arising under law.
The foregoing Agreement is executed as of the date first above written.
"COMPANY"
MACROVISION CORPORATION
a California corporation
By: /s/ Xxxxxx X. Xxxx
------------------------------------
Xxxxxx X. Xxxx, President
Address:
000 Xx Xxxxxx Xxxx Xxxx
Xxxxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
29
"PURCHASER"
University National Bank & Trust
Company, Trustee under Trust
Agreement dated May 22, 1991
By: /s/ Illegible
------------------------------------
Title:
---------------------------------
Address:
000 Xxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
30
"SELLING SHAREHOLDER"
/s/ A. Xxxxxx Xxxxxx
---------------------------------------
A. Xxxxxx Xxxxxx
Trustee of the Xxxxxx Family Trust
U/T/D December 18, 1990
Address:
X.X. Xxx 000
00000 Xxxxx Xxxx
Xxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
31
