EXHIBIT 10.12
XXXXXXXX.XXX, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
August 6, 1999
TABLE OF CONTENTS
Page
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1. Purchase and Sale of Preferred Stock.................................................. 1
1.1 Sale and Issuance of Series C Preferred Stock................................... 1
1.2 Closing; Delivery............................................................... 2
2. Representations and Warranties of the Company......................................... 2
2.1 Organization, Good Standing and Qualification................................... 2
2.2 Capitalization.................................................................. 2
2.3 Subsidiaries.................................................................... 3
2.4 Authorization................................................................... 3
2.5 Valid Issuance of Securities.................................................... 4
2.6 Governmental Consents........................................................... 4
2.7 Litigation...................................................................... 4
2.8 Intellectual Property........................................................... 5
2.9 Compliance with Other Instruments............................................... 5
2.10 Agreements; Action.............................................................. 5
2.11 Due Diligence................................................................... 6
2.12 No Conflict of Interest......................................................... 6
2.13 Rights of Registration and Voting Rights........................................ 7
2.14 Title to Property and Assets.................................................... 7
2.15 Financial Statements............................................................ 7
2.16 Changes......................................................................... 8
2.17 Employee Benefit Plans.......................................................... 8
2.18 Tax Returns and Payments........................................................ 9
2.19 Insurance....................................................................... 9
2.20 Labor Agreements and Actions.................................................... 9
2.21 Confidential Information and Invention Assignment Agreements.................... 9
2.22 Permits......................................................................... 9
2.23 Corporate Documents............................................................. 9
2.24 Liabilities..................................................................... 10
2.25 Qualified Small Business Stock.................................................. 10
3. Representations and Warranties of the Purchasers...................................... 10
3.1 Authorization................................................................... 10
3.2 Purchase Entirely for Own Account............................................... 10
3.3 Disclosure of Information....................................................... 10
3.4 Restricted Securities........................................................... 11
3.5 No Public Market................................................................ 11
3.6 Legends......................................................................... 11
3.7 Accredited Investor............................................................. 12
3.8 Foreign Investors............................................................... 12
4. Conditions of the Purchasers' Obligations at Closing.................................... 12
4.1 Representations and Warranties.................................................... 12
4.2 Performance....................................................................... 12
4.3 Compliance Certificate............................................................ 12
4.4 Qualifications.................................................................... 12
4.5 Opinion of Company Counsel........................................................ 12
4.6 Board of Directors................................................................ 12
4.7 Investors' Rights Agreement....................................................... 13
4.8 Restated Certificate.............................................................. 13
4.9 Voting Agreement.................................................................. 13
4.10 Co-Sale Agreement................................................................. 13
4.11 Proceedings and Documents......................................................... 13
5. Conditions of the Company's Obligations at Closing...................................... 13
5.1 Representations and Warranties.................................................... 13
5.2 Performance....................................................................... 13
5.3 Qualifications.................................................................... 13
6. Miscellaneous........................................................................... 14
6.1 Survival of Warranties............................................................ 14
6.2 Transfer; Successors and Assigns.................................................. 14
6.3 Governing Law..................................................................... 14
6.4 Counterparts...................................................................... 14
6.5 Titles and Subtitles.............................................................. 14
6.6 Notices........................................................................... 14
6.7 Finder's Fee...................................................................... 14
6.8 Fees and Expenses................................................................. 15
6.9 Attorney's Fees................................................................... 15
6.10 Amendments and Waivers............................................................ 15
6.11 Severability...................................................................... 15
6.12 Delays or Omissions............................................................... 15
6.13 Entire Agreement.................................................................. 16
6.14 Confidentiality................................................................... 16
6.15 Exculpation Among Purchasers...................................................... 16
6.16 Waiver of Conflicts............................................................... 16
XXXXXXXX.XXX, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
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This Series C Preferred Stock Purchase Agreement (the "Agreement") is made
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as of the 6/th/ day of August, 1999 by and between Xxxxxxxx.xxx, 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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Recitals
A. The Company previously sold a net total of 1,861,897 shares (after
giving effect to certain rescinded purchases) of Series C Preferred Stock, par
value $0.001 per share (the "Series C Preferred Stock") pursuant to a Series C
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Stock Purchase Agreement (the "Original Purchase Agreement") dated as of April
30, 1999 by and among the Company and the individuals and entities set forth on
Exhibit A thereto (the "Original Purchasers").
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B. Pursuant to Section 1.2(c) of the Original Purchase Agreement, the
Company had until June 30, 1999 to sell the remaining authorized shares of
Series C Preferred Stock.
C. The Company and a majority of the Original Purchasers (excluding such
Original Purchasers who rescinded their purchase) have agreed to amend such
Section 1.2(c) in order to allow the Company and the Purchasers to enter into
this Agreement.
Agreement
The parties hereby agree as follows:
1. Purchase and Sale of Preferred Stock.
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1.1 Sale and Issuance of Series C 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 Third
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 at the Closing and the Company agrees to sell and
issue to each Purchaser at the Closing that number of shares of Series C
Preferred Stock set forth opposite each such Purchaser's name on Exhibit A
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attached hereto at a purchase price of $1.90 per share. The shares of Series C
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 purchase and sale of the Stock shall take place at the
offices of Venture Law Group, 0000 Xxxxxxxx Xxxxx, Xxxxxxxx, Xxxxxxxxxx, at
10:00 a.m., on August 6, 1999, or at such other time and place as the Company
and the Purchasers mutually agree upon, orally or in writing (which time and
place are designated as the "Closing").
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(b) At the Closing, the Company shall deliver to each Purchaser
a certificate representing the Stock being purchased thereby against payment of
the purchase price therefor by check payable to the Company, by wire transfer to
the Company's bank account or by cancellation of indebtedness, or any
combination thereof.
(c) If the full number of the authorized shares of Series C
Preferred Stock of the Company is not sold at the Closing, the Company shall
have the right, at any time prior to August 24, 1999, to sell an additional
135,000 shares of Series C Preferred Stock to one additional purchasers as
determined by the Company at the price and on the terms set forth herein,
provided that any such additional purchaser shall be required to execute an
Addendum Agreement substantially in the form attached hereto as Exhibit G. The
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parties hereto agree that any additional purchaser so acquiring shares of Series
C Preferred Stock shall be considered a "Purchaser" for purposes of this
Agreement and an "Investor" for purposes of each of the Amended and Restated
Investors' Rights Agreement of event date herewith by and among the Company and
the Investors listed on Exhibit A thereto (the "Investors' Rights Agreement"),
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the Amended and Restated Right of First Refusal and Co-Sale Agreement of even
date herewith by and among the Company and the Investors listed on Exhibit A
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thereto (the "Co-Sale Agreement") and the Amended and Restated Voting Agreement
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of event date herewith by and among the Company and the Investors listed on
Exhibit A thereto (the "Voting Agreement") and any Series C Preferred Stock so
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acquired by such additional purchaser shall be considered "Stock" for purposes
of this Agreement and all other agreements contemplated hereby and shall be
considered "Registrable Securities" for all purposes, and each such additional
purchaser shall be considered a "Holder" for all purposes, of the Investors'
Rights 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, prospects or financial condition. 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:
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(a) 25,000,000 shares of Preferred Stock: of which 5,000,000
shares have been designated Series A Preferred Stock, 4,983,787 shares of which
are issued and outstanding immediately prior to the Closing; of which 4,000,000
shares have been designated Series B Preferred Stock, 3,259,194 shares of which
are issued and outstanding immediately prior to the Closing; of which 4,000,000
shares have been designated Series B-1 Preferred Stock, none of which are issued
and outstanding immediately prior to the Closing; of which 6,000,000 shares have
been designated Series C Preferred Stock, 1,861,897 shares of which are issued
and outstanding immediately prior to Closing; and of which 6,000,000 shares have
been designated Series C-1 Preferred Stock, none of which are issued and
outstanding immediately prior to Closing. 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, fully paid and
are nonassessable and have been issued in compliance with all applicable federal
and state securities laws.
(b) Twenty-Four Million (24,000,000) shares of Common Stock, Five
Million Seven Hundred Forty-Four Thousand Two Hundred and Fifty (5,744,250)
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 have been issued in compliance with all
applicable federal and state securities laws.
(c) The Company has reserved 3,360,000 shares of Common Stock for
issuance to officers, directors, employees and consultants of the Company
pursuant to its 1998 Stock Option Plan duly adopted by the Board of Directors
and approved by the Company stockholders (the "Stock Plan"). Of such reserved
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shares of Common Stock, options to purchase 2,093,312 shares have been granted
and are currently outstanding, 456,250 shares of Common Stock have been issued
upon exercise of options granted thereunder and 810,438 shares of Common Stock
remain available for issuance to officers, directors, employees and consultants
pursuant to the Stock Plan.
(d) Except for (i) outstanding options issued pursuant to the
Stock Plan and (ii) outstanding warrants to purchase 41,053 shares of Series C
Preferred Stock, 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.
2.3 Subsidiaries. The Company does not currently own or control,
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directly or indirectly, any interest in any other Person (as defined in Section
2.10).
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 Amended and Restated Investors'
Rights Agreement, in the form attached hereto as Exhibit D, the Amended and
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Restated Voting Agreement, in the form attached hereto as Exhibit F, and the
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Amended and Restated Right of First Refusal and Co-Sale Agreement in the form
attached hereto as Exhibit G, (collectively with this Agreement, the
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"Agreements"), the performance of all obligations of the Company hereunder and
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thereunder and the authorization,
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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 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
Investors' 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 Investors' 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
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, 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 (collectively, a "Suit") pending or, to the Company's knowledge,
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currently threatened against the Company or any of its subsidiaries that
questions the validity or enforceability 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. For the purposes of this Section 2.7, "Suit" shall include but
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not be limited to any action, suit, proceeding or investigation pending or, to
the Company's knowledge, currently threatened against the Company involving the
prior employment of any of the Company's current employees, such employees use
in connection with the Company's business of any information or techniques
proprietary to any of such employees' former employers, such employees'
obligations under any agreements with prior employers, or negotiations by the
Company with potential investors in the Company or its proposed business.
Neither the Company nor any of its subsidiaries is a party or subject to the
provisions of any
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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 Intellectual Property. 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 necessary for its business without any conflict with, or
infringement of, the rights of others. The Company has not received any
communications alleging that the Company has violated or, by conducting its
business, 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. Neither the execution or
delivery of the Agreements, 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 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.
---------------------------------
(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 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
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which the Company is a party or by which it is bound that involve (i)
obligations (contingent or otherwise) of, or payments to, the Company 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 affiliates, 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.
(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 $200,000 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.
(d) The Company has not engaged in the past one (1) year in any
discussion (i) with any representative of any corporation, corporations,
partnership, association or other business entity or any individual
(collectively, "Person") regarding the merger of the Company with or into any
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such Person, (ii) with any representative of any Person 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, sale, dissolution or winding up
of the Company.
2.11 Due Diligence. The Company has fully provided the Purchasers
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with all the information that the Purchasers have requested for deciding whether
to acquire the Stock including certain of the Company's projections describing
its proposed business (collectively, the "Business Plan"). To the Company's
-------------
knowledge (after reasonable investigation), no representation or warranty of the
Company contained in this Agreement and the exhibits attached hereto, any
certificate furnished or to be furnished to Purchasers at the Closing contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made. To the
extent the Business Plan was prepared by management of the Company, the Business
Plan and the financial and other projections contained in the Business Plan were
prepared in good faith; however, the Company does not warrant that it will
achieve such projections.
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 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 Person with which the Company is affiliated or with which the
Company has a business
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relationship, or any Person 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 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. The Schedule of Exceptions lists all material transactions with
the Company's affiliates.
2.13 Rights of Registration and Voting Rights. Except as
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contemplated 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, no stockholders of the Company have entered into any
agreements among themselves with respect to the voting of capital shares of the
Company.
2.14 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 its knowledge, holds a valid leasehold
interest free of any liens, claims or encumbrances.
2.15 Financial Statements. The Company has made available to each
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Purchaser its audited financial statements (including balance sheet, income
statement and statement of cash flows) as of December 31, 1998 and for the
fiscal year ended December 31, 1998 and its unaudited financial statements
(including balance sheet, income statement and statement of cash flows) as of
June 30, 1999 and for the six-month period ended June 30, 1999 (collectively,
the "Financial Statements"). The Financial Statements have been prepared in
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accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated, except that the unaudited Financial
Statements may not contain all 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, subject to normal year-end audit adjustments.
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, 1999 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.
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2.16 Changes. Since December 31, 1998, there has not been:
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(a) 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;
(b) any waiver or compromise by the Company of a valuable right
or of a material debt owed to it;
(c) 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;
(d) any material change to a material contract or agreement by
which the Company or any of its assets is bound or subject;
(e) any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder;
(f) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(g) any resignation or termination of employment of any officer
or key employee of the Company; and the Company, is not aware of any impending
resignation or termination of employment of any such officer or key employee;
(h) any mortgage, pledge, transfer or grant 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;
(i) any loans or guarantees made by the Company to or for the
benefit of its employees, officers, stockholders or directors, or any members of
their immediate families, other than travel advances and other advances made in
the ordinary course of its business;
(j) 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;
(k) to 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; or
(l) any arrangement or commitment by the Company to do any of
the things described in this Section 2.16.
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.
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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. The Company has no notice of any proposed tax deficiency which may be
asserted which would materially and adversely affect the business, properties,
prospects or financial condition of the Company.
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.
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, 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 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 Confidential Information and Invention Assignment Agreements.
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Each 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 made available to the counsel for the
Purchasers. The Company 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.
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, the lack of which could materially and adversely affect
the business, properties, prospects, or financial condition of the Company and
it believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as presently 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 made available to counsel for the Purchasers. The copy
of the minute books of the Company made available 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.
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2.24 Liabilities. Except for those liabilities set forth on
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Schedule 2.24 to the Schedule of Exceptions and except as otherwise disclosed
hereunder, the Company has no debts, commitments, obligations and other
liabilities of any nature whatsoever individually in excess of $25,000 and in
the aggregate in excess of $50,000.
2.25 Qualified Small Business Stock. The Stock qualifies as
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"Qualified Small Business Stock" as defined in Section 1202(c) of the Internal
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Revenue Code of 1986, as amended as of the date hereof.
2.26 Year 2000. The Company's products are designed to be used prior
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to, during and after calendar year 2000 A.D., and all of the Company's products
which are material to the Company's business will record, store, process and
calculate any information dependent on or relating to such dates in the same
manner and with the same functionality, data integrity and performance as the
products record, store, process and calculate and present calendar dates on or
before December 31, 1999, or calculate any information dependent on or relating
to such dates (collectively, "Year 2000 Compliant"). To the best of the
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Company's knowledge, all of the Company's internal computer systems, including,
without limitation, its accounting systems, are Year 2000 Compliant.
3. Representations and Warranties of the Purchasers. Each Purchaser
------------------------------------------------
hereby, severally and not jointly and severally, represents and warrants to the
Company that:
3.1 Authorization. Such Purchaser has full power and authority to
-------------
enter into this Agreement. The Agreements to which such Purchaser is a party,
when executed and delivered by 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
---------------------------------
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 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
-10-
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 Business Plan and any other written information
delivered by the Company to the Purchaser, were intended to describe the aspects
of the Company's business which it believes to be material. The foregoing,
however, does not limit or modify the representations and warranties of the
Company, as modified by the Schedule of Exceptions attached as Exhibit C in
---------
Section 2 of this Agreement or the right of the Purchasers to rely thereon.
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 no obligation to register or qualify the Securities for resale
except as set forth in the Investors' 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 DISTRIBUTION 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) Any legend set forth in the other Agreements.
(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.
-11-
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, to the best of its
knowledge, 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. To the best of its knowledge, such Purchaser's
subscription and payment for 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 President 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 E.
---------
4.6 Board of Directors. Immediately following the Closing, the Board
------------------
shall be comprised of Xxxxxx Xxxxxx, Xxxxxx Xxxxx, Xxxxx Xxxxxxxx, Xxxxxxx Xxxxx
and Xxxxxx X. Xxxxxx.
-12-
4.7 Investors' Rights Agreement'. The Company, each Purchaser,
---------------------------
Xxxxxx Xxxxxx, Xxxx Xxxxxx and the requisite majority of the holders of the
Company's outstanding Series B and Series C Preferred Stock shall have executed
and delivered the Amended and Restated Investors' Rights Agreement in
substantially the form attached as Exhibit D.
---------
4.8 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.
4.9 Voting Agreement. The Company, the Purchasers, Xxxxxx Xxxxxx,
----------------
Xxxx Xxxxxx and the requisite majority of the holders of the Company's
outstanding Series B and Series C Preferred Stock shall have executed and
delivered the Amended and Restated Voting Agreement in substantially the form
attached as Exhibit F.
---------
4.10 Co-Sale Agreement. The Company, each Purchaser, Xxxxxx Xxxxxx,
-----------------
Xxxx Xxxxxx and the requisite majority of the holders of the Company's
outstanding Series B and Series C Preferred Stock shall have executed and
delivered the Amended and Restated Co-Sale Agreement in substantially the form
attached as Exhibit G.
---------
4.11 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchaser's counsel, which shall have received all such
counterpart original and certified or other copies of such documents as it may
reasonably request.
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.
-13-
6. Miscellaneous.
-------------
6.1 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 and the Closing for a period of one (1)
year following 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 (including permitted transferees of any
shares of Stock sold hereunder and any Common Stock issued upon conversion
thereof). 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. Notwithstanding
the foregoing, any Purchaser may transfer its rights set forth in this Agreement
if the transferee is an affiliate, constituent partner or member of such
Purchaser or an entity controlling, controlled by or under common control with
such Purchaser.
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
Washington, without giving effect to principles of conflicts of law.
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 on the signature page or Exhibit A hereto, or as
---------
subsequently modified by written notice, and (a) if to the Company, with a copy
to Xxxxxxx X. Xxxxxxx, Venture Law Group, 0000 Xxxxxxxx Xxxxx, Xxxxxxxx,
Xxxxxxxxxx 00000, fax: (000) 000-0000, or (b) if to the Purchasers, with a copy
to Xxxx X. Nissan, Esq., X'Xxxxxxxx Graev & Karabell, LLP, 00 Xxxxxxxxxxx Xxxxx,
Xxx Xxxx, XX 00000, fax: (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. 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 such liability or
asserted liability) for which such Purchaser or any of its officers, employees,
or
-14-
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.
6.8 Fees and Expenses. The Company shall pay the reasonable fees and
-----------------
expenses of X'Xxxxxxxx Graev & Karabell, LLP, the counsel for the Purchasers,
incurred with respect to this Agreement, the documents referred to herein and
the transactions contemplated hereby and thereby, to the extent such fees and
expenses are equal or less than $15,000 and provided the Company is provided an
itemized invoice with respect to such fees and expenses.
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 and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only 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 sold hereunder that has not previously been sold to the public. Any
amendment or waiver effected in accordance with this Section 6.10 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.
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 party under this Agreement, upon any
breach or default of any other party under this Agreement, shall impair any such
right, power or remedy of such non-breaching or non-defaulting party 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 party of any
breach or default under this Agreement, or any waiver on the part of any party
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
party, shall be cumulative and not alternative.
-15-
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
relating to the subject matter hereof 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 Agreement, the performance of its obligations hereunder or the
ownership of Stock purchased hereunder, except that the parties hereto shall be
entitled to the limited right to disclose, where appropriate for commercially
reasonable purposes and where not detrimental to the Company, general facts
relating to the existence of the transactions contemplated hereby and the
parties involved. The provisions of this Section 6.14 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. Confidential Information does not include information,
knowledge or data which is required to be disclosed by applicable law or proper
legal, governmental or other competent authority (provided that the Company
shall be notified sufficiently in advance of such requirement so that it may
seek a protective order (or equivalent) with respect to such disclosure, which
each party shall fully comply with).
6.15 Exculpation Among Purchasers. Each Purchaser acknowledges that
----------------------------
it is not relying upon any Person, 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 to any other Purchaser for any action heretofore or hereafter taken or
omitted to be taken by any of them in connection with the purchase of the Stock.
6.16 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 page follows]
-16-
The parties have executed this Series C Preferred Stock Purchase Agreement
as of the date first written above.
COMPANY:
XXXXXXXX.XXX, INC.
/s/ Xxxxxx Xxxxxx
____________________________________________
Xxxxxx Xxxxxx, Chief Executive Officer and
Minister of Order and Reason
Address: 0000 X. Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Fax: (000) 000-0000
PURCHASER:
_______________________
By:_________________________________________
Name:_______________________________________
Title:______________________________________
(if applicable)
