EXHIBIT 10.18
PREVIEW SYSTEMS, INC.
SERIES F PREFERRED STOCK PURCHASE AGREEMENT
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This Series F Preferred Stock Purchase Agreement (the "Agreement") is made
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as of the 15th day of September 1998 by and among Preview Systems, Inc., a
Delaware corporation (the "Company"), and the investors listed on Exhibit A
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attached hereto (each a "Purchaser" and together the "Purchasers").
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The parties hereby agree as follows:
1. Purchase and Sale of Preferred Stock.
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1.1 Sale and Issuance of Series F 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 B (the "Restated Certificate").
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(b) Subject to the terms and conditions of this Agreement, each
Purchaser agrees to purchase from the Company at the Closing and the Company
agrees to sell and issue to each Purchaser at the Closing that number of shares
of Series F Preferred Stock set forth opposite each such Purchaser's name on
Exhibit A attached hereto at a purchase price of $2.50 per share. The shares of
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Series F Preferred Stock issued to the Purchaser pursuant to this Agreement
shall be hereinafter referred to as the "Stock."
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1.2 Closing; Delivery.
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(a) The Initial Closing. The initial purchase and sale of the
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Stock will take place at the offices of Venture Law Group, 0000 Xxxx Xxxx Xxxx,
Xxxxx Xxxx, Xxxxxxxxxx, at 10:00 a.m. Pacific Time, on September 15, 1998 or at
such other time and place as the Company and Purchasers who have agreed to
purchase a majority of the Stock at the Initial Closing listed on Exhibit A
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mutually agree upon (which time and place are referred to in this Agreement as
the "Initial Closing"). The Initial Closing, and each Additional Closing under
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this Agreement shall constitute a Closing as referred to in this Agreement.
(b) Additional Closing(s)
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(i) Conditions of Additional Closing(s). At any time and
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from time to time during the 45-day period immediately following the Initial
Closing (the "Additional Closing Period"), the Company may, at one or more
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additional closings (each an "Additional Closing"), without obtaining the
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signature, consent or permission of any of the Purchasers, offer and sell to
other investors ("Additional Purchasers") shares of the Company's Series F
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Preferred Stock at a price of $2.50 per share. Additional Purchasers may include
persons or entities who are already Purchasers under this Agreement.
(ii) Amendments. The Company and the Additional Purchasers
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purchasing Series F Stock at each Additional Closing will execute counterpart
signature pages to this Agreement, the Rights Agreement (as defined in Section
2.2(d)), and the Co-Sale Agreement (as defined in Section 2.2(d)), and such
Additional Purchasers will, upon delivery to the Company of such signature
pages, become parties to, and be bound by, this Agreement, the Rights Agreement
and the Co-Sale Agreement, each to the same extent as if they had been
Purchasers at the Initial Closing. Immediately after each Additional Closing,
Exhibit A to this Agreement will be amended to list the Additional Purchasers
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purchasing shares of Series F Stock hereunder at each such Additional Closing.
(iii) Status of New Purchasers. Upon the completion of each
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Additional Closing as provided in this Section 2, each Additional Purchaser will
be deemed to be an "Purchaser" for all purposes of this Agreement and an
"Investor" for all purposes under the Rights Agreement and Co-Sale Agreement.
2. Representations and Warranties of the Company. The Company hereby
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represents and warrants to each Purchaser that, except as set forth on a
Schedule of Exceptions attached hereto as Exhibit C, which exceptions shall be
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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) 10,510,000 shares of Preferred Stock, of which 3,200,000
shares have been designated Series F Preferred Stock, none of which are issued
and outstanding immediately prior to the Closing, 2,300,000 shares have been
designated Series E Preferred Stock, 1,675,811 of which are issued and
outstanding, 602,802 shares have been designated Series D Preferred Stock,
598,802 of which are issued and outstanding, 2,550,860 shares have been
designated Series C Preferred Stock, 2,500,000 of which are issued and
outstanding, 705,000 shares have been designated Series B Preferred Stock, all
of which are issued and outstanding, and 1,147,000 Shares of Series A Preferred
Stock, all of which are issued and outstanding. In addition, there are
outstanding warrants to purchase an aggregate of 50,860 shares of Series C
Preferred Stock and 434,473 shares of Series E Preferred Stock. The rights,
privileges and preferences of the Preferred Stock are as stated in the Restated
Certificate.
(b) 21,120,000 shares of Common Stock, 5,349,502 shares of which
are issued and outstanding immediately prior to the Closing. All of the
outstanding shares of Common Stock have been duly authorized, fully paid and are
nonassessable and issued in
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compliance with all applicable federal and state securities laws. The Company
has reserved 10,510,000 shares of Common Stock for issuance upon conversion of
the Preferred Stock.
(c) There are outstanding options to purchase 2,142,024 Shares of
Common Stock issued pursuant to subsequently terminated stock plans (the "Old
Plans"). Under a new 1998 Stock Option Plan (the "New Plan" and, collectively
with the Old Plans, the "Plans"), the Company has reserved 2,700,000 shares of
Common Stock for issuance to officers, directors, employees and consultants of
the Company. Of such reserved shares of Common Stock under the New Plan, the
Company has granted options to purchase 1,334,570 shares of Common Stock and
1,365,430 shares of such reserved shares of Common Stock remain available for
issuance to officers, directors, employees and consultants. The Company has
granted options to acquire 70,000 shares of Common Stock and warrants to acquire
349,310 shares of Common Stock outside the Plans.
(d) Except for outstanding options and warrants as set forth in
the preceding paragraphs of this Section 2.2, there are no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal or similar rights) or agreements, orally or in writing, for the purchase
or acquisition from the Company of any shares of its capital stock, as defined
below (other than as set forth in the First Amended and Restated Rights
Agreement in the form attached hereto as Exhibit D the ("Rights Agreement")).
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(e) All issued and outstanding shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock and Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable and free of any preemptive
or similar rights contained in the Certificate of Incorporation or bylaws of the
Company. All outstanding shares of the Company's Common Stock and the Stock
issued or to be issued under the Agreement have been or will be issued in
compliance with applicable state and federal securities laws. The Common Stock
issuable upon conversion of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock and Series F Preferred Stock has been duly and validly reserved and, when
issued in accordance with the Company's Certificate of Incorporation, will be
validly issued, fully paid and nonassessable.
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,
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its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement, the Rights Agreement, the Amended and
First Amended and Restated Co-Sale Agreement in the form attached hereto as
Exhibit E (the "Co-Sale Agreement", and collectively with this Agreement and the
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Rights Agreement, the "Agreements") by the Company, the performance of all
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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 (together, the "Securities") has been taken or will be taken prior
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to the Closing, and the Agreements, when executed and delivered by the Company,
shall constitute valid and legally
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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' 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 Rights Agreement may be limited by applicable
federal or state securities laws.
2.5 Valid Issuance of Securities. The Stock that is being issued to
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the Purchasers 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, the Rights Agreement and
applicable state and federal securities laws. Based in part upon the
representations of the Purchasers 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 Stock 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, the 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 Section 25102(f)
of the California Corporate Securities Law of 1968, as amended, and the rules
promulgated thereunder, other applicable state securities laws and Regulation D
of the Securities Act of 1933, as amended (the "Securities Act").
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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 that questions the validity of
the Agreements or the right of the Company to enter into them, or to consummate
the transactions contemplated hereby or thereby, or that might result, either
individually or in the aggregate, in any material adverse changes in the assets,
condition or affairs of the Company, financially or otherwise, or any change in
the current equity ownership of the Company, 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. The Company owns or possesses sufficient
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legal rights to all patents, trademarks, service marks, tradenames, copyrights,
trade secrets, licenses, information and proprietary rights and processes
necessary for its business as now conducted with no known infringement of or
conflict with the rights of others. The Company
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has not received any communications alleging that the Company has 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 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, which have not been fully assigned to 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, 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) The Company has avoided every condition, and has not
performed any act, the occurrence of which would result in the Company's loss of
any right granted under any license, distribution agreement or other agreement.
2.10 Agreements; Action.
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(a) There are no agreements, understandings or proposed
transactions between the Company and any of its officers, directors, affiliates,
or any affiliate thereof.
(b) Except for agreements explicitly contemplated by the
Agreements, there are no 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) the license of any patent, copyright, trade secret or other
proprietary right to or from the Company or any of its subsidiaries, or (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.
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(c) 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 products in the ordinary course of business.
(d) 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.
(e) The Company has not engaged in the past three months in any
discussion (i) with any representative of any corporation or corporations
regarding the merger of the Company with or into any such corporation or
corporations, (ii) with any 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
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.
2.11 Disclosure. No representation or warranty of the Company
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contained in this Agreement and the exhibits attached hereto or any certificate
furnished or to be furnished to Purchasers at the Closing, when read together,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made.
2.12 No Conflict of Interest. The Company is not indebted, directly
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or indirectly, to any of its officers or directors or to their respective
spouses or children, in any amount whatsoever other than in connection with
expenses or advances of expenses incurred in the ordinary course of business or
relocation expenses of employees. 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, indebted to the Company (other than in
connection with purchases of the Company's stock) 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, 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 company 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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2.13 Rights of Registration and Voting Rights. Except as contemplated
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in the 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, no stockholders of the Company have entered into any
agreements with respect to the voting of capital shares of the Company.
2.14 Private Placement. Subject in part to the truth and accuracy of
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the Purchasers' representations set forth in this Agreement, the offer, sale and
issuance of the Securities as contemplated by this Agreement are 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.
2.15 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.
2.16 Financial Statements. The Company has made available to each
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Purchaser its unaudited income statement for the period commencing January 1,
1997 and ending December 31, 1997, its unaudited income statement for the period
commencing January 1, 1998 and ending June 30, 1998, and its unaudited balance
sheet as of June 30, 1998 (collectively, the "Financial Statements"). The
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Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated, except that the unaudited Financial Statements do not contain any
footnotes required by generally accepted accounting principles. The Financial
Statements fairly present the financial condition and operating results of the
Company as of the dates, and for the periods, indicated therein. Except as set
forth in the Financial Statements, the Company has no material liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to June 30, 1998 and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected in the
Financial Statements, which, in both cases, individually or in the aggregate are
not material to the financial condition or operating results of the Company.
Except as disclosed in the Financial Statements, the Company is not a guarantor
or indemnity of any indebtedness of any other person, firm or corporation. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.
2.17 Changes. Since June 30, 1998, 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;
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(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 material
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 material properties or
assets, except liens for taxes not yet due or payable;
(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;
(l) 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;
(m) to the best of the Company's knowledge, any other event or
condition of any character that might materially and adversely affect the
business, properties, prospects or financial condition of the Company (as such
business is presently conducted and as it is proposed to be conducted); or
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(n) any arrangement or commitment by the Company to do any of the
things described in this Section 2.17.
2.18 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.
2.19 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.
2.20 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.
2.21 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.
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.
2.22 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 or forms delivered to the counsel for the Purchasers. The Company,
after reasonable investigation, 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
Purchasers 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.
2.23 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
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conducted. The Company is not in default in any material respect under any of
such franchises, permits, licenses or other similar authority.
2.24 Corporate Documents. The Restated Certificate and Bylaws of the
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Company are in the form provided to counsel for the Purchasers. The copy of the
minute books of the Company provided to the Purchasers' 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.
2.25 Qualified Small Business Stock. The Company represents and
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warrants to the Purchasers that, to the best of its knowledge, the Stock should
qualify as "Qualified Small Business Stock" as defined in Section 1202(c) of the
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Internal Revenue Code of 1986, as amended as of the date hereof.
2.26 Intellectual Property and Products. The Company represents and
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warrants to the Purchasers that, at such time as Dynasoft Publishing Corporation
("Dynasoft") transferred pursuant to the Stock Purchase Agreement (the
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"Agreement"), dated October 1996, those assets described on Exhibit A to the
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Agreement (the "Assets"), Dynasoft owned all right, title and interest in, or
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had the right to use, all worldwide industrial and intellectual property rights,
including, without limitation, patent applications, patents, patent rights,
trademark applications, trademarks, service marks, trade names, service xxxx
applications, trade dress, moral rights, copyright applications, copyrights,
licenses, inventions, trade secrets, know-how, customer lists, proprietary
processes and formulae, software source and object code, algorithms,
architecture, structure, display screens, layouts, development tools, all
documentation and media constituting, describing or relating to the above,
without limitation, manuals, memoranda and records and other intellectual
property and proprietary rights used in or reasonably necessary to the conduct
of its business as presently conducted and the business of the development,
production, marketing, licensing and sale of commercial products using such
intellectual property and proprietary rights ("Dynasoft Intellectual Property").
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The Company represents and warrants to the Purchasers that all Dynasoft
Intellectual Property developed by Xxxx Xxxxxx and Dynasoft's employees was
developed by such persons in the course of Dynasoft's business and not by them
in their individual capacity and such individuals do not have any interest in or
rights to any Dynasoft Intellectual Property. The Company represents and
warrants to the Purchasers that all Dynasoft Intellectual Property developed by
Xxxxxx prior to the incorporation of Dynasoft was properly assigned by Xxxxxx at
the time of, or following, the incorporation and neither Xxxxxx nor any other
party has any interest in or rights to any Dynasoft Intellectual Property. The
Company represents and warrants to the Purchasers that during the period in
which Xxxxxx was developing the Dynasoft Intellectual Property, he was either
not employed by any third party or involved in any consulting relationship with
any third party or, if such an employment or consulting relationship did exist,
the nature of Hirsch's employment was not related in any way to the Dynasoft
Intellectual Property. The Company represents and warrants to the
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Purchasers that Xxxxxx and Dynasoft were not aware, and are not presently aware,
of any infringement of any Dynasoft Intellectual Property by any third party.
The Company represents and warrants to the Purchasers that neither Xxxxxx nor
Dynasoft have received any written or oral claim or notice of infringement or
potential infringement of the intellectual property of any other person which
could be expected to have a material adverse effect on Dynasoft's or Preview's
business.
3. Representations and Warranties of the Purchasers. Each Purchaser
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hereby severally 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 Rights
Agreement may be limited by applicable federal or state securities laws.
3.2 Purchase Entirely for Own Account. This Agreement is made with
---------------------------------
the Purchaser in reliance upon the Purchaser's representation to the Company,
which by the Purchaser's execution of this Agreement, the Purchaser hereby
confirms, that the Securities to be acquired by the Purchaser will be acquired
for investment for the 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 the
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
Securities. The Purchaser represents that it has full power and authority to
enter into this Agreement. The Purchaser has not been formed for the specific
purpose of acquiring the Securities.
3.3 Disclosure of Information. 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. The Purchaser
understands that such discussions, as well as the written information issued by
the Company, were intended to describe the aspects of the Company's business
which it believes to be material.
3.4 Restricted Securities. The Purchaser understands that the
---------------------
Securities 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 which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Purchaser's representations as
expressed herein. The Purchaser understands that the Securities are "restricted
securities" under applicable U.S. federal and state securities laws and that,
pursuant to these laws, the Purchaser must hold the Securities indefinitely
unless they are registered with the Securities and Exchange Commission and
qualified by state authorities, or an exemption from such registration and
qualification requirements is available. The Purchaser acknowledges that the
Company has
-11-
no obligation to register or qualify the Securities for resale except as set
forth in the Rights Agreement. The Purchaser further acknowledges that if an
exemption from registration or qualification is available, it may be conditioned
on various requirements including, but not limited to, the time and manner of
sale, the holding period for the Securities, and on requirements relating to the
Company which are outside of the Purchaser's control, and which the Company is
under no obligation and may not be able to satisfy.
3.5 No Public Market. The Purchaser understands that no public
----------------
market now exists for any of the securities issued by the Company, and that the
Company has made no assurances that a public market will ever exist for the
Securities.
3.6 Legends. The Purchaser understands that the Securities, and any
-------
securities issued in respect of or exchange for the Securities, 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 IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933."
(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE
COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY
OF THE COMPANY."
(c) 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
-------------------
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
3.8 Foreign Investors. If the Purchaser is not a United States
-----------------
person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986,
as amended), such Purchaser hereby represents that it has satisfied itself as to
the full observance of the laws of its jurisdiction in connection with any
invitation to subscribe for the Stock or any use of this Agreement, including
(i) the legal requirements within its jurisdiction for the purchase of the
Stock, (ii) any foreign exchange restrictions applicable to such purchase, (iii)
any governmental or other consents that may need to be obtained, and (iv) the
income tax and other tax consequences, if any, that may be relevant to the
purchase, holding, redemption, sale, or transfer of the Stock. Such Purchaser's
subscription and payment for and continued beneficial ownership
-12-
of the Stock, will not violate any applicable securities or other laws of the
Purchaser's jurisdiction.
4. Conditions of the Purchasers' Obligations at Closing. The obligations
----------------------------------------------------
of each 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:
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 it on or before
the Closing.
4.3 Compliance Certificate. The Chief Executive Officer of the
----------------------
Company shall deliver to the Purchasers 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 Purchasers shall have received
--------------------------
from Venture Law Group, counsel for the Company, an opinion, dated as of the
Closing, in substantially the form of Exhibit F.
---------
4.6 Board of Directors. As of the Closing, the Board of Directors of
------------------
the Company shall be comprised of Xxxxx Xxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx
Xxxxxxxx, Xxxxxx X. Xxxxx, Xxxxxxx Xxxxxxxxx, R. Xxxxxxx Xxxxxx, and Xxxxx
Xxxxxx.
4.7 Rights Agreement. The Company and each Purchaser shall have
----------------
executed and delivered the Rights Agreement in substantially the form attached
as Exhibit D.
---------
4.8 Co-Sale Agreement. The Company, each Purchaser, Xxxx Xxxxxx,
-----------------
Xxxxxxx Xxxxxxxxx, Xxxxxxx Xxxxxxxx and Xxxxx Xxxxxxx shall have executed and
delivered the Co-Sale Agreement in substantially the form attached as Exhibit E.
---------
4.9 Restated Certificate. The Company shall have filed the Restated
--------------------
Certificate with the Secretary of State of Delaware on or prior to the Closing,
which shall continue to be in full force and effect as of the Closing.
-13-
5. Conditions of the Company's Obligations at Closing. The obligations
--------------------------------------------------
of the Company to each 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 each 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 Purchasers on or prior to the Closing
shall have been performed or complied with in all material respects.
5.3 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.
6. Affirmative Covenants of the Company.
------------------------------------
The Company hereby covenants and agrees as follows:
6.1 Financial Information. The Company will mail the following
---------------------
reports to each Purchaser for so long as such Purchaser is a holder of any Stock
purchased by such person pursuant to this Agreement (or Common Stock issued upon
conversion of the Stock):
(a) As soon as practicable after the end of each fiscal year, and
in any event within 90 days thereafter, consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of income and consolidated statements of stockholders'
equity and cash flows of the Company and its subsidiaries, if any, for such
year, prepared in accordance with generally accepted accounting principles and
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail and audited by the Company's independent
public accountants.
(b) As soon as practicable after the end of each fiscal quarter,
and in any event within 45 days thereafter, unaudited consolidated balance
sheets of the Company and its subsidiaries, if any, as of the end of such fiscal
quarter, and unaudited consolidated statements of income and consolidated
statements of stockholders' equity and cash flows of the Company and its
subsidiaries, if any, for such quarter, prepared in accordance with generally
accepted accounting principles and setting forth in each case in comparative
form the figures for the comparable quarter in the previous fiscal year.
(c) Contemporaneously with delivery to holders of Common Stock, a
copy of each report, proxy statement or other document of the Company delivered
to holders of the Company's Common Stock.
-14-
6.2 Additional Information. As long as a Purchaser (together with
----------------------
any affiliate of such Purchaser) holds not less than 200,000 shares of Stock (or
an equivalent number of shares consisting of the Stock or Common Stock issued
upon conversion of the Stock, or a combination thereof), as adjusted for
recapitalizations, stock splits, stock dividends and the like, the Company will
mail the following reports to such Purchaser:
(a) As soon as practicable after the end of each fiscal month,
and in any event within 30 days thereafter, an unaudited consolidated balance
sheet of the Company as of the end of such month, and unaudited consolidated
statements of income and unaudited consolidated statements of cash flow for such
month and for the current fiscal year to date (collectively, the "Financial
---------
Statements"). Such Financial Statements shall be prepared in accordance with
----------
generally accepted accounting principles consistently applied (other than
accompanying notes and subject to year-end adjustments), all in reasonable
detail and all shall include both actual and forecast financial information and
all shall be compared against the operating plan of the Company.
(b) As soon as practicable, but at least 30 days prior to the end
of each fiscal year, a budget and operating plan for the next fiscal year,
including balance sheets and sources and applications of funds statements and,
as soon as prepared, any other budgets, revised budgets, operating plan or
revised operating plan prepared by the Company.
(c) The Company will permit such Purchaser and any of its
partners, officers or employees, or any outside representatives designated by
such Purchaser and reasonably satisfactory to the Company, to visit and inspect
at such Purchaser's expense any of the properties of the Company or its
subsidiaries (if any), including their books and records, and to discuss their
affairs, finances, and accounts with their officers, lawyers and accountants,
all to such reasonable extent and at such reasonable times and intervals as such
Purchaser may reasonably request; provided, however, that the Company shall not
be obligated to provide any information that it reasonably considers to be a
trade secret or to contain confidential information.
6.3 Transfer of Information Rights. The information rights set forth
------------------------------
in Sections 6.1 and 6.2 may be transferred in any nonpublic transfer of the
Stock (or shares of Common Stock issued upon conversion of the Stock), provided
that the Company is given written notice of such transfer, and provided further
that the right to receive the information set forth in Section 6.2 may only be
transferred to a holder of, or affiliated holders who in the aggregate hold, at
least 200,000 shares of Stock (or an equivalent number of shares consisting of
the Stock or Common Stock issued upon conversion of the Stock, as appropriately
adjusted for stock splits and the like). In the event that the Company
reasonably determines that provision of information to a transferee pursuant to
this Section 6.3 would materially adversely affect its proprietary position,
such information may be edited in the manner necessary to avoid such effect.
6.4 Termination of Covenants. The covenants set forth in Sections
------------------------
6.1, 6.2 and 6.3 shall terminate on and be of no further force or effect upon
the earlier of (i) the
-15-
consummation of the Company's sale of its Common Stock in an underwritten public
offering pursuant to an effective registration statement filed under the
Securities Act, or (ii) the registration by the Company of a class of its equity
securities under Section 12(b) or 12(g) of the Exchange Act.
6.5 Directors' Meetings. The Board of Directors shall hold meetings
-------------------
on a monthly basis until the Company achieves profitability or the Board
otherwise agrees.
7. Miscellaneous.
-------------
7.1 Survival of Warranties. Unless otherwise set forth in this
----------------------
Agreement, the warranties, representations and covenants of the Company and the
Purchasers contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement.
7.2 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.
7.3 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.
7.4 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 and the same instrument.
7.5 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.
7.6 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 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, if to the Company, with a copy to Venture Law Group, A Professional
Corporation 0000 Xxxx Xxxx Xxxx, Xxxxx Xxxx, XX 00000, Attn: Xxxxx X. Xxxxxx.
7.7 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. Each Purchaser agrees 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
-16-
such liability or asserted liability) for which each Purchaser or any of its
officers, employees, or representatives is responsible. The Company agrees to
indemnify and hold harmless each 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.
7.8 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.
7.9 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended with the written consent of the Company and the holders of at least two-
thirds of the Common Stock issued or issuable upon conversion of the Stock. Any
amendment or waiver effected in accordance with this Section 7.9 shall be
binding upon the Purchasers and each transferee of the Stock (or the Common
Stock issuable upon conversion thereof), each future holder of all such
securities, and the Company.
7.10 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.
7.11 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.
7.12 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.
7.13 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 THE SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF
-17-
THE CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE
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 THE QUALIFICATION BEING OBTAINED UNLESS
THE SALE IS SO EXEMPT.
7.14 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 Agreement, the performance of its obligations hereunder or the
ownership of Stock purchased hereunder. The provisions of this Section 7.15
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.
7.15 Exculpation Among Purchasers. Each Purchaser acknowledges that
----------------------------
it is not relying upon any person, firm or corporation, other than the Company
and its officers and directors, in making its investment or decision to invest
in the Company. Each Purchaser agrees that no Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
Purchaser shall be liable for any action heretofore or hereafter taken or
omitted to be taken by any of them in connection with the Stock.
7.16 Waiver of Conflicts. Each party to this Agreement acknowledges
-------------------
that Venture Law Group, counsel for the Company, has in the past performed and
may continue to perform legal services for certain of the Purchasers in matters
unrelated to the transactions described in this Agreement, including the
representation of such Purchasers in venture capital financings and other
matters. Accordingly, each party to this Agreement hereby (a) acknowledges that
they have had an opportunity to ask for information relevant to this disclosure;
and (b) gives its informed consent to Venture Law Group's representation of
certain of the Purchasers in such unrelated matters and to Venture Law Group's
representation of the Company in connection with this Agreement and the
transactions contemplated hereby.
[Signature Pages Follow]
-18-
The parties have executed this Series F Preferred Stock Purchase Agreement
as of the date first written above.
COMPANY:
PREVIEW SYSTEMS, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
--------------------------------------------
Name: Xxxxxxx Xxxxxxxxx
------------------------------------------
(print)
Title:President and Chief Executive Officer
-----------------------------------------
Address:
0000 X. Xx Xxxx Xxxx., Xxxxx 000
Xxxxxxxxx, XX 00000
PURCHASERS:
Each Purchaser listed on Exhibit A
-----------------------------------------------
(Print Name of Purchaser)
By: /s/ Each Purchaser listed on Exhibit A
--------------------------------------------
Name: Each Purchaser listed on Exhibit A
------------------------------------------
(print)
Title:________________________________________
Address:
SIGNATURE PAGE TO PURCHASE AGREEMENT
