EXHIBIT 10.2
TENFOLD CORPORATION
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
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This Series B Preferred Stock Purchase Agreement (the "Agreement") is made
as of the 24th day of November, 1997 by and between TenFold Corporation, a
Delaware corporation (the "Company") and Winter Harbor, L.L.C., a Delaware
limited liability company. (the "Purchaser").
The parties hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED STOCK.
1.1 Sale and Issuance of Series B Preferred Stock.
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(a) The Company shall adopt and file with the Secretary of State
of the State of Delaware on or before the Closing (as defined below) the Second
Amended and Restated Certificate of Incorporation in the form attached hereto as
Exhibit A (the "Restated Certificate").
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(b) Subject to the terms and conditions of this Agreement, the
Purchaser agrees to purchase at the Closing and the Company agrees to sell and
issue to the Purchaser at the Closing 3,340,330 shares of Series B Convertible
Preferred Stock for the aggregate purchase price of $7,014,693.00. The shares of
Series B Convertible Preferred Stock issued to the Purchaser pursuant to this
agreement shall hereinafter be referred to as the "Stock."
1.2 Closing; Delivery.
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(a) The purchase and sale of the Stock shall take place at the
offices of the Company's counsel at 10 a.m. Eastern Standard Time, on November
24, 1997, or at such other time and place as the Company and the Purchaser
mutually agree upon, orally or in writing (which time and place are designated
as the "Closing"). At the Closing the Company shall deliver to the Purchaser a
certificate registered in the name of the Purchaser representing the Series B
Convertible Preferred Stock being purchased thereby against payment of the
purchase price therefor. The Company and the Purchaser shall take such
additional actions and execute and deliver such additional agreements and other
instruments and documents as necessary or appropriate to effect the transactions
contemplated by this Agreement in accordance with its terms. If at the Closing
any of the conditions specified in Section 4 shall not have been fulfilled, the
Purchaser shall, at its election, be relieved of all of its obligations under
this Agreement without thereby waiving any other rights it may have by reason of
such failure or such non-fulfillment.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The Company
hereby represents, warrants and covenants to the Purchaser that, except as set
forth on the Schedule of Exceptions dated November 24, 1997, previously
delivered to the Purchaser (the "Schedule of Exceptions"), which exceptions
shall be deemed to be representations and warranties as if made hereunder:
2.1 Organization, Good Standing and Qualification. The Company is a
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corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure so to qualify would have a material adverse
effect on its business or properties.
2.2 Capitalization. The authorized capital of the Company consists,
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or will consist, immediately prior to the Closing, of:
(a) Six Million Two Hundred Sixty-one Thousand One Hundred
Twenty-nine (6,261,129) shares of Preferred Stock, of which Two Million Nine
Hundred Twenty Thousand Seven Hundred Ninety-nine (2,920,799) shares have been
designated Series A Convertible Preferred Stock, all of which are issued and
outstanding and Three Million Three Hundred Forty Thousand Three Hundred Thirty
(3,340,330) shares have been designated Series B Convertible Preferred Stock,
none of which are issued or outstanding. The rights, privileges and preferences
of the Preferred Stock are as stated in the Restated Certificate. All of the
outstanding shares of Preferred Stock have been duly authorized and fully paid,
are nonassessable and were issued in compliance with all applicable Federal and
state securities laws.
(b) Fourty-four (44,000,000) shares of Common Stock, Twenty-three
Million Five Hundred Sixty-three Thousand Seven Hundred Four (23,563,704) shares
of which are issued and outstanding. All of the outstanding shares of Common
Stock have been duly authorized, fully paid and are nonassessable and issued in
compliance with all applicable Federal and state securities laws. The Company
has reserved Two Million Nine Hundred Twenty Thousand Seven Hundred Ninety Nine
(2,920,799) shares of Common Stock for issuance upon conversion of the Series A
Convertible Preferred Stock and Three Million, Three Hundred Forty Thousand
Three Hundred Thirty (3,340,330) shares of Common Stock for issuance upon
conversion of the Series B Convertible Preferred Stock.
(c) The Company has reserved Eight Million (8,000,000) shares of
Common Stock for issuance to officers, directors, employees and consultants of
the Company pursuant to its 1993 Flexible Stock Incentive Plan duly adopted by
the Board of Directors and approved by the Company's stockholders (the "Stock
Plan"). Of such reserved shares of Common Stock, options for the purchase of
494,000 shares were exercised, options to purchase 3,519,000 are outstanding,
options for the purchase of 737,000 shares have been approved for grant by the
Board of Directors subject to regulatory approval by the State of California and
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3,250,000 shares of Common Stock remain available for issuance to officers,
directors, employees and consultants pursuant to the Stock Plan.
(d) Except as set forth in the Schedule of Exceptions, described in
this Section 2.2 or provided in this Agreement, (i) no subscription, warrant,
option, convertible security or other right (contingent or otherwise) to
purchase or acquire any shares of capital stock of the Company is authorized or
outstanding, (ii) the Company has no obligation (contingent or otherwise) to
issue any subscription, warrant, option, convertible security or other such
right or to issue or distribute to holders of any shares of its capital stock
any evidences of indebtedness or assets of the Company, and (iii) the Company
has no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any shares of its capital stock or any interest therein or to pay any
dividend or make any other distribution in respect thereof.
(e) The Company shall adopt and file with the Secretary of State of
the State of Delaware on or before the Closing the Restated Certificate in the
form attached hereto as Exhibit A.
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(f) Included in the Schedule of Exceptions is a true and complete list
of the stockholders of the Company, showing the number of shares of Common Stock
or Preferred Stock held by each stockholder as of the date of this Agreement.
Except as provided in this Agreement and in the Schedule of Exceptions, there
are no agreements, written or oral, between the Company and any holder of its
capital stock, or, to the best of the Company's knowledge, among any holders of
its capital stock, relating to the acquisition (including without limitation
rights of first refusal or preemptive rights), disposition, registration under
the Securities Act, or voting of the capital stock of the Company.
2.3 Subsidiaries. The Company does not currently own or control,
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directly or indirectly, any interest in any other corporation, association, or
other business entity.
2.4 Authorization. All corporate action on the part of the Company, its
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officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement, the Amended and Restated Investor's Rights
Agreement, in the form attached hereto as Exhibit B (the "Investors'
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Rights Agreement"), Amended and Restated Voting Agreement in the form attached
hereto as Exhibit C (the "Voting Agreement") and the Amended and Restated Co-
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Sale Agreement in the form attached hereto as Exhibit D ( the "Co-Sale
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Agreement"), the Indemnity Agreement between the Company and the director
nominated by Winter Harbor in the form attached hereto as Exhibit E (the
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"Indemnity Agreement" and with this Agreement, the Investors' Rights Agreement,
the Voting Agreement, and the Co-Sale Agreement, collectively, the
"Agreements"), the performance of all obligations of the Company hereunder and
thereunder and the authorization, issuance and delivery of the Stock and the
Common Stock issuable upon conversion of the Stock has been taken or will be
taken prior to the Closing, and the Agreements, when executed and delivered by
the Company, shall constitute valid and legally binding obligations of the
Company, enforceable against the Company in accordance with their terms except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and other laws of general application affecting
enforcement of creditors'
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rights generally, as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, or (ii) to the
extent the indemnification provisions contained in the Investor's Rights
Agreement may be limited by applicable federal or state securities laws.
2.5 Valid Issuance of Securities. The Series B Convertible Preferred
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Stock that is being issued to Purchaser hereunder, when issued, sold and
delivered in accordance with the terms hereof for the consideration expressed
herein, will be duly and validly issued, fully paid and nonassessable and free
of restrictions on transfer other than restrictions on transfer under this
Agreement, Section 1.14 of the Investors' Rights Agreement, and applicable state
and Federal securities laws. Based in part upon the representations of the
Purchaser in this Agreement and subject to the provisions of Section 2.6 below,
the Stock will be issued in compliance with all applicable federal and state
securities laws. The Common Stock issuable upon conversion of the Series B
Preferred Stock purchased hereunder has been duly and validly reserved for
issuance, and upon issuance in accordance with the terms of the Restated
Certificate, shall be duly and validly issued, fully paid and nonassessable and
free of restrictions on transfer other than restrictions on transfer under this
Agreement, Section 1.14 of the Investors' Rights Agreement and applicable
Federal and state securities laws and will be issued in compliance with all
applicable federal and state securities laws.
2.6 Governmental Consents. No consent, approval, order or
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authorization of, or registration, qualification, designation, declaration or
filing with, any Federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for filings pursuant to applicable state
securities laws and Regulation D of the Securities Act of 1933, as amended (the
"Securities Act").
2.7 Litigation. There is no action, suit, proceeding or
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investigation pending or, to the Company's knowledge, currently threatened
against the Company or any of its subsidiaries, nor is the Company aware that
there is any basis for the foregoing. Neither the Company nor any of its
subsidiaries is a party or subject to 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 or any of its subsidiaries currently pending or which the Company or any
of its subsidiaries intends to initiate.
2.8 Patents and Trademarks. To its knowledge, the Company owns or
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possesses sufficient legal rights to all patents, trademarks, service marks,
tradenames, copyrights, trade secrets, licenses, information and proprietary
rights and processes (collectively, the "Intellectual Property Rights")
necessary for its business as now conducted and as proposed to be conducted. To
its knowledge, the Company has not violated or, by conducting its business as
proposed, would violate any of the patents, trademarks, service marks,
tradenames, copyrights, trade secrets or other proprietary rights or processes
of any other person or entity. The Company is not aware that any of its
employees 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 such employee's best efforts to promote the interest of the Company
or that would conflict with the Company's business as proposed to be conducted.
Neither the execution or delivery of this
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Agreement, nor the carrying on of the Company's business by the employees of the
Company, nor the conduct of the Company's business as proposed, will, to the
best of the Company's knowledge, conflict with or result in a breach of the
terms, conditions, or provisions of, or constitute a default under, any
contract, covenant or instrument under which any such employee is now obligated.
The Company does not believe it is or will be necessary to use any inventions of
any of its employees (or persons it currently intends to hire) made prior to
their employment by the Company.
2.9 Compliance with Other Instruments.
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(a) The Company is not in violation or default of any provisions
of its Restated Certificate or Bylaws or of any instrument, judgment, order,
writ, decree or contract to which it is a party or by which it is bound or, to
its knowledge, of any provision of federal or state statute, rule or regulation
applicable to the Company. The execution, delivery and performance of the
Agreements and the consummation of the transactions contemplated hereby or
thereby will not result in any such violation or be in conflict with or
constitute, with or without the passage of time and giving of notice, either a
default under any such provision, instrument, judgment, order, writ, decree or
contract or an event which results in the creation of any lien, charge or
encumbrance upon any assets of the Company.
(b) To its knowledge, the Company has avoided every condition,
and has not performed any act, the occurrence of which would result in the
Company's loss of any Intellectual Property Right the loss of which would
reasonably be expected to have or does have a material adverse effect upon the
business, prospects, financial condition or results of operation of the Company.
2.10 Agreements; Action. The Schedule of Exceptions sets forth a list
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of all material agreements or commitments of any nature to which the Company is
a party or by which it is bound, including without limitation:
(a) Agreements, understandings or proposed transactions between
the Company and any of its officers, directors, affiliates, or any affiliate
thereof.
(b) Agreements, understandings, instruments, contracts or
proposed transactions to which the Company or any of its subsidiaries is a party
or by which it is bound that involve (i) obligations (contingent or otherwise)
of, or payments to, the Company or any of its subsidiaries in excess of,
$50,000, (ii) any agreement relating to the Intellectual Property Rights (iii)
the grant of rights to manufacture, produce, assemble, license, market, or sell
its products to any other person or affect the Company's exclusive right to
develop, manufacture, assemble, distribute, market or sell its products and (iv)
all employment and consulting agreements.
2.11 Absence of Liabilities; Other Agreements
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(a) Neither the Company nor any of its subsidiaries has (i) declared
or paid any dividends, or authorized or made any distribution upon or with
respect to any class or series of its capital stock, (ii) incurred any
indebtedness for money borrowed or incurred any other liabilities individually
in excess of $50,000 or in excess of $100,000 in the aggregate, (iii) made any
loans or advances to any person, other than ordinary advances for travel
expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets or
rights, other than the sale of its inventory in the ordinary course of business.
(b) The Company is not a party to and is not bound by any contract,
agreement or instrument, or subject to any restriction under its Restated
Certificate or Bylaws, that adversely affects its business as now conducted or
as proposed to be conducted, its properties or its financial condition.
(c) The Company has not engaged in the past three (3) months in any
discussion (i) with any representative of any corporation or corporations
regarding the merger of the Company with or into any such corporation or
corporations, (ii) with any representative of any corporation, partnership,
association or other business entity or any individual regarding the sale,
conveyance or disposition of all or substantially all of the assets of the
Company or a transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of the Company would be disposed of, or
(iii) regarding any other form of liquidation, dissolution or winding up of the
Company.
2.12 Disclosure. The Company has fully provided the Purchaser with all the
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information which such Purchaser has requested for deciding whether to acquire
the Stock. To the Company's knowledge, no representation or warranty of the
Company contained in this Agreement and the exhibits attached hereto, any
certificate furnished or to be furnished to the Purchaser at the Closing (when
read together) contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein or
therein not misleading in light of the circumstances under which they were made.
2.13 No Conflict of Interest. The Company is not indebted, directly or
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indirectly, to any of its officers or directors or to their respective spouses
or children, in any amount whatsoever other than in connection with expenses or
advances of expenses incurred in the ordinary course of business or relocation
expenses of employees. None of the Company's officers or directors, or any
members of their immediate families, are, directly or indirectly, indebted to
the Company (other than in connection with purchases of the Company's stock) or,
to the best of the Company's knowledge, have any direct or indirect ownership
interest in any firm or corporation with which the Company is affiliated or with
which the Company has a business relationship, or any firm or corporation which
competes with the Company except that officers, directors and/or stockholders of
the Company may own stock in (but not exceeding two percent of the outstanding
capital stock of) any publicly traded companies that may compete with the
Company. To the best of the Company's knowledge, none of the Company's officers
or directors or any members of their immediate families are, directly or
indirectly, interested in any material contract with the Company. The Company is
not a guarantor or indemnitor of any indebtedness of any other person, firm or
corporation.
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2.14 Rights of Registration and Voting Rights. Except as contemplated
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in the Investors' Rights Agreement the Company has not granted or agreed to
grant any registration rights, including piggyback rights, to any person or
entity. To the Company's knowledge, except as contemplated in the Voting
Agreement and the First Amended and Restated Voting Agreement dated March 4,
1997, among and between the Company, Xxxxxxx X. Xxxxxx, the Xxxxxx Children's
Trust and Xxxx X. Xxxxxxx, no stockholders of the Company have entered into any
agreements with respect to the voting of capital shares of the Company.
2.15 Private Placement. Subject in part to the truth and accuracy of
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the Purchaser's representations set forth in this Agreement, the offer sale and
issuance of the Stock as contemplated by this Agreement is exempt from the
registration requirements of the Securities Act, and neither the Company nor any
authorized agent acting on its behalf will take any action hereafter that would
cause the loss of such exemption.
2.16 Title to Property and Assets. The Company owns its property and
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assets free and clear of all mortgages, liens, loans and encumbrances, except
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 it leases, the Company is in
compliance with such leases and, to the best of its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances.
2.17 Employee Benefit Plans. The Company does not have any Employee
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Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
2.18 Tax Returns and Payments. The Company has filed all tax returns
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and reports as required by law. These returns and reports are true and correct
in all material respects. The Company has paid all taxes and other assessments
due.
2.19 Insurance. The Company has in full force and effect fire and
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casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed. The Company maintains valid policies of
workers compensation insurance.
2.20 Labor Agreements and Actions. The Company is not bound by or
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subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees. The employment of each
officer and employee of the Company is terminable at the will of the Company.
To its
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knowledge, the Company has complied in all material respects with all applicable
state and federal equal employment opportunity laws and with other laws related
to employment.
2.21 Proprietary Information and Inventions Agreements. Each
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employee, consultant and officer of the Company has executed an agreement with
the Company regarding confidentiality and proprietary information substantially
in the form attached as Exhibit H. The Company, after reasonable investigation,
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is not aware that any of its employees or consultants is in violation thereof,
and the Company will use its best efforts to prevent any such violation. All
consultants to or vendors of the Company with access to confidential information
of the Company are parties to a written agreement substantially in the form or
forms provided to counsel for the Purchaser under which, among other things,
each such consultant or vendor is obligated to maintain the confidentiality of
confidential information of the Company. The Company, after reasonable
investigation, is not aware that any of its consultants or vendors are in
violation thereof, and the Company will use its best efforts to prevent any such
violation.
2.22 Permits. The Company and each of its subsidiaries has all
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franchises, permits, licenses and any similar authority necessary for the
conduct of its business as now being conducted by it, the lack of which could
materially and adversely affect the business, properties, prospects, or
financial condition of the Company and believes that it can obtain, without
undue burden or expense, any similar authority for the conduct of its business
as planned to be conducted. The Company is not in default in any material
respect under any of such franchises, permits, licenses or other similar
authority.
2.23 Corporate Documents. The Restated Certificate and Bylaws of the
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Company are in the form provided to counsel for the Purchaser. The copy of the
minute books of the Company provided to Purchaser' counsel contains minutes of
all meetings of directors and stockholders and all actions by written consent
without a meeting by the directors and stockholders since the date of
incorporation and reflects all actions by the directors (and any committee of
directors) and stockholders with respect to all transactions referred to in such
minutes accurately in all material respects.
2.24 Real Property Holding Corporation. The Company is not a United
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States real property holding corporation within the meaning of Internal Revenue
Code Section 897(c)(2) and Section 1.897-2(c) of the Regulations promulgated
thereunder.
2.25 Financial Statements. The Company has made available to the
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Purchaser its unaudited financial statements (including balance sheet and income
statement) as of, and for the nine months ended, September 30, 1997
(collectively, the "Financial Statements"). The Financial Statements fairly
present the financial condition and operating results of the Company as of the
dates, and for the periods, indicated therein, and have been prepared in
accordance with generally accepted accounting principles consistently applied,
except that the Financial Statements have been prepared for the internal use of
management and may not be in accordance with generally accepted accounting
principles because of the absence of footnotes and are subject to normal year-
end audit adjustments which in the aggregate will not be material. Except as
set forth in the Financial Statements, the Company has no material liabilities,
contingent or
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otherwise, other than (i) liabilities paid or incurred in the ordinary course of
business subsequent to September 30, 1997 and (ii) obligations under contracts
and commitments incurred in the ordinary course of business, which, in both
cases, individually or in the aggregate are not material to the financial
condition or operating results of the Company.
2.26 Changes. Since September 30, 1997 there has not been:
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(a) any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not
been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties,
prospects, or financial condition of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(c) any waiver or compromise by the Company of a valuable right or of
a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or encumbrance
or payment of any obligation by the Company, except in the ordinary course of
business and that is not material to the business, properties, prospects or
financial condition of the Company (as such business is presently conducted and
as it is proposed to be conducted);
(e) any material change to a material contract or agreement by which
the Company or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or agreement
with any employee, officer, director or stockholder;
(g) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(h) any resignation or termination of employment of any officer or key
employee of the Company; and the Company, to the best of its knowledge, does not
know of any impending resignation or termination of employment of any such
officer or key employee;
(i) receipt of notice that there has been a loss of, or order
cancellation by, any major customer of the Company;
(j) any mortgage, pledge, transfer of a security interest in, or lien,
created by the Company, with respect to any of its properties or assets, except
liens for taxes not yet due or payable;
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(k) any loans or guarantees made by the Company to or for the
benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(1) any declaration, setting aside or payment or other
distribution in respect to any of the Company's capital stock, or any direct or
indirect redemption, purchase, or other acquisition of any of such stock by the
Company; or
(m) any arrangement or commitment by the Company to do anything
described in this Section 2.26.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. The Purchaser hereby
represents and warrants to the Company that:
3.1 Authorization. The Agreements, when executed and delivered by
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the Purchaser will constitute valid and legally binding obligations of the
Purchaser, enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and any other laws of general application affecting enforcement of
creditors' rights generally, and as limited by laws relating to the availability
of a specific performance, injunctive relief, or other equitable remedies, or
(b) to the extent the indemnification provisions contained in the Investors'
Rights Agreement may be limited by applicable federal or state securities laws.
3.2 Purchase Entirely for Own Account. This Agreement is made with
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the Purchaser in reliance upon Purchaser's representation to the Company, which
by Purchaser's execution of this Agreement, the Purchaser hereby confirms, that
the Stock (or Common Stock issuable upon conversion thereof) to be acquired by
will be acquired for investment for Purchaser's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and that Purchaser has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, the Purchaser further represents that the Purchaser does not
presently have any-contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third
person, with respect to any of the Stock (or the Common Stock issuable upon
conversion thereof). The Purchaser represents that it has full power and
authority to enter into this Agreement.
3.3 Disclosure of Information. Without in any way limiting the
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representations and warranties of the Company set forth herein, the Purchaser
has had an opportunity to discuss the Company's business, management, financial
affairs and the terms and conditions of the offering of the Stock with the
Company's management and has had an opportunity to review the Company's
facilities.
3.4 Restricted Securities. The Purchaser understands that the Stock
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(and the Common Stock issuable upon conversion thereof) has not been, and
subject to the Purchasers rights under the Investors' Rights Agreement will not
be, registered under the Securities Act, by
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reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of Purchaser's representations as
expressed herein. The Purchaser understands that the Stock (and the Common Stock
issuable upon conversion thereof) are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired from the
Company in a transaction not involving a public offering and that under such
laws and applicable regulations such Stock (and the Common Stock issuable upon
conversion thereof) may be resold without registration under the Securities Act
only in certain limited circumstances. The Purchaser acknowledges that the Stock
(and the Common Stock issuable upon conversion thereof) must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. The Purchaser is aware of the
provisions of Rule 144 promulgated under the Securities Act which permit limited
resale of shares purchased in a private placement subject to the satisfaction of
certain conditions, including a requirement that the securities be held prior to
resale for the applicable holding periods specified in the rule, the existence
of a public market for the shares, and, in some cases, the availability of
certain current public information about the Company, compliance with the manner
of sale requirements of the rule, and the number of shares being sold during any
three-month period not exceeding specified limitations.
3.5 No Public Market. The Purchaser understands that no public
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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
Stock or the underlying Common Stock.
3.6 Legends. The Purchaser understands that the Stock (and the
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Common Stock issuable upon conversion thereof), and any securities issued in
respect thereof or exchange therefor, may bear one or all of the following
legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933."
(b) Any legend required by the Blue Sky laws of any state to the
extent such laws are applicable to the shares represented by the certificate so
legended.
3.7 Accredited Investor. The Purchaser is an accredited investor as
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defined in Rule 501(a) of Regulation D promulgated under the Act.
4. CONDITIONS OF PURCHASER'S OBLIGATIONS AT CLOSING. The obligations of
the Purchaser to the Company under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
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4.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true and correct in
all material respects on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the date of the
Closing.
4.2 Performance. The Company shall have performed and complied with
-----------
all covenants, agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by the Company on
or before the Closing.
4.3 Compliance Certificate. The President of the Company shall
----------------------
deliver to the Purchaser at the Closing a certificate certifying that the
conditions specified in Sections 4.1 and 4.2 have been fulfilled.
4.4 Qualifications. All authorizations, approvals or permits, if
--------------
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Stock pursuant to this Agreement shall be obtained and effective as of the
Closing.
4.5 Opinion of Company Counsel. The Purchaser shall have received
--------------------------
from Venture Law Group, A Professional Corporation, counsel for the Company, an
opinion, dated as of the Closing, in substantially the form of Exhibit G.
---------
4.6 Board of Directors. As of the Closing, the Board shall be
------------------
increased to five members and be comprised of Xxxxxxx X. Xxxxxx, Xxxx X. Xxxxxxx
and Xxxxxx Xxxxxx with two vacancies. One such vacancy to be filled by a
director to be nominated by Winter Harbor and one such vacancy to be filled by
an individual not affiliated with the Company, each of whom will have entered
into, or will be given the opportunity to enter into upon their appointment to
the Board, an indemnification agreement with the Company in the form attached
hereto as Exhibit E.
---------
4.7 Investors' Rights Agreement. The Company, the Purchaser and the
---------------------------
other parties thereto shall have executed and delivered the Investors' Rights
Agreement in substantially the form attached as Exhibit B.
---------
4.8 Voting Agreement. The Company, the Purchaser and the other
----------------
parties thereto shall have executed and delivered the Voting Agreement in
substantially the form attached as Exhibit C.
---------
4.10 Restated Certificate. The Company shall have filed the Restated
--------------------
Certificate with the Secretary of State of Delaware on or prior to the Closing
Date, which shall continue to be in full force and effect as of the Closing
Date.
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4.11 Co-Sale Agreement. The Company, the Purchaser and the other
-----------------
parties thereto shall have executed and delivered the Co-Sale Agreement in
substantially the form attached hereto as Exhibit D.
---------
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to Purchaser under this Agreement are subject to the fulfillment,
on or before the Closing, of each of the following conditions, unless otherwise
waived:
5.1 Representations and Warranties. The representations and
------------------------------
warranties of the Purchaser contained in Section 3 shall be true and correct in
all material respects on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the Closing.
5.2 Performance. All covenants, agreements and conditions contained
-----------
in this Agreement to be performed by the Purchaser on or prior to the Closing
shall have been performed or complied with in all material respects.
5.3 Investors' Rights Agreement. The Purchaser shall have executed
---------------------------
and delivered the Investors' Rights Agreement in substantially the form attached
as Exhibit B.
---------
5.4 Voting Agreement. The Purchaser shall have executed and
----------------
delivered the Voting Agreement in substantially the form attached as Exhibit C.
---------
5.5 Co-Sale Agreement. The Purchaser shall have executed and
-----------------
delivered the Co-Sale Agreement in substantially the form attached hereto as
Exhibit D.
---------
6. MISCELLANEOUS.
6.1 Survival of Warranties. Unless otherwise set forth in this
----------------------
Agreement, the warranties, representations and covenants of the Company and
Purchaser contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing.
6.2 Transfer; Successors and Assigns. The terms and conditions of
--------------------------------
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
6.3 Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
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6.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
6.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
6.6 Notices. Any notice required or permitted by this Agreement
-------
shall be in writing and shall be deemed sufficient upon delivery, when delivered
personally or by overnight courier or sent by telegram or fax, or forty-eight
(48) hours after being deposited in the U.S. mail, as certified or registered
mail, with postage prepaid, addressed to the party to be notified at such
party's address as set forth below or on Exhibit A hereto, or as subsequently
modified by written notice, and (a) if to the Company, with a copy to:
Xxxxxx X. Xxxxxx, Xx.
Venture Law Group
A Professional Corporation
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or (b) if to the Purchaser, with a copy to:
Xxxxx X. Xxxxx, Xx.
Dow, Xxxxxx & Xxxxxxxxx, PLLC
0000 Xxx Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
6.7 Finder's Fee. Each party represents that it neither is nor will
------------
be obligated for any finder's fee or commission in connection with this
transaction. The Purchaser agree to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Purchaser or any of their officers, employees,
or representatives are responsible. The Company agrees to indemnify and hold
harmless the Purchaser from any liability for any commission or compensation in
the nature of a finder's fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
6.8 Expenses. Each party shall bear its own costs on expenses;
--------
provided, however, that the Company shall pay the reasonable fees of the counsel
for the Purchaser,
-14-
incurred with respect to this Agreement, the documents referred to herein and
the transactions contemplated hereby and thereby, provided such fees do not
exceed Ten Thousand Dollars ($10,000).
6.9 Attorney's Fees. If any action at law or in equity (including
---------------
arbitration) is necessary to enforce or interpret the terms of any of the
Agreements, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
6.10 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended with the written consent of the Company and the holders of at least a
majority of the Common Stock issued or issuable upon conversion of the Stock.
Any amendment or waiver effected in accordance with this Section 6.10 shall be
binding upon the Purchaser and each transferee of the Stock (or the Common Stock
issuable upon conversion thereof), each future holder of all such securities,
and the Company.
6.11 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
6.12 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any holder of any of the Stock, upon any breach or
default of the Company under this Agreement, shall impair any such right, power
or remedy of such holder nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
6.13 Entire Agreement. This Agreement, and the documents referred to
----------------
herein constitute the entire agreement between the parties hereto pertaining to
the subject matter hereof, and any and all other written or oral agreements
existing between the parties hereto are expressly canceled.
6.14 Confidentiality. Each party hereto agrees that, except with the
---------------
prior written permission of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement, discussions or negotiations
relating to this
-15-
Agreement, the performance of its obligations hereunder or the ownership of
Stock purchased hereunder. The provisions of this Section 6.15 shall be in
addition to, and not in substitution for, the provisions of any separate
nondisclosure agreement executed by the parties hereto with respect to the
transactions contemplated hereby.
[Signature Pages Follow]
-16-
The parties have executed this Series B Preferred Stock Purchase Agreement as
of the date first written above.
COMPANY:
TENFOLD CORPORATION
By: /s/ Xxxx X. Xxxxxxx
----------------------
Xxxx X. Xxxxxxx
President
Address: 000 Xxxx Xxxxxxxx Xxxx, Xxx 000
Xxxxxx, XX 00000
SIGNATURE PAGE TO SERIES B PREFERRED STOCK PURCHASE AGREEMENT
-17-
PURCHASER:
WINTER HARBOR, L.L.C.
By: FIRST MEDIA, L.P., Manager
By: FIRST MEDIA CORPORATION,
its sole general partner
By: /s/ Xxxxx X. Xxxxx Xx.
-------------------------
Name: Xxxxx X. Xxxxx Xx.
-------------------------
Title: Secretary
-------------------------
00000 Xxxxxxxx Xxxx
Xxxxxxx, Xxxxxxxx 00000
SIGNATURE PAGE TO SERIES B PREFERRED STOCK PURCHASE AGREEMENT
-18-
