STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of the 30th day
of May, 1997 by and between ONTRO, INC., a California corporation (the
"Company"), and XXXX AND XXXXXXXX XXXXX TRUST, X.X. Xx Xxxxxxx, Trustee
("Xxxxx" or "Purchaser").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF COMMON STOCK. Subject to the terms and
conditions of this Agreement, Purchaser agrees, to acquire at the Closing and
the Company agrees to sell and issue to Purchaser Two Hundred Twenty Two
Thousand Two Hundred Twenty Two (222,222) shares of the Company's Common Stock
(the "Common Stock") for the purchase price of Two Dollars and 25/100 ($2.25)
per share for a total purchase price of Four Hundred Ninety Nine Thousand Nine
Hundred Ninety Nine and 50/100 Dollars ($499,999.50). Subject to the terms and
conditions of this Agreement, Purchaser agrees to acquire at the Closing and the
Company agrees to issue at the Closing the number of shares of Common Stock set
forth above.
1.2 CLOSING. The purchase and sale of the Common Stock shall take
place at the offices of the Company, at 10:00 a.m., on or before May 30, 1997,
or at such other time and place as the Company and Purchaser mutually agree
upon, verbally or in writing (which time and place are designated as the
"Closing"). At the Closing the Company shall deliver to Purchaser a certificate
representing the Common Stock which Purchaser is purchasing against delivery to
the Company by Purchaser of the purchase price by confirmed wire transfer or
certified funds. The Certificate(s) shall be in the name of Purchaser, or
otherwise as he shall direct the Company in writing.
2. REPRESENTATIONS AND WARRANTIES OF PURCHASER. This Agreement is made
with Purchaser in reliance upon the following representation and warranties to
the Company by the Purchaser:
2.1 AUTHORIZATION. This Agreement constitutes Purchaser's valid
and legally binding obligation, enforceable in accordance with its terms.
2.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Common Stock to be
received by Purchaser will be acquired for investment for Purchaser's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that Purchaser has no present intention of
selling, granting any participation in, or otherwise distributing the same. By
executing this Agreement, Purchaser further represents Purchaser does not 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 Common Stock.
2.3 DISCLOSURE OF INFORMATION. Purchaser has received all the
information it considers necessary or appropriate for deciding whether to
acquire the Common Stock, including but not limited to the Company's audited
financial statements dated December 31, 1996; a draft of the Company's
unaudited financial statements dated March 31, 1997; and a draft of the
Company's proposed prospectus as part of a Form SB-2 Registration Statement.
Purchaser further represents has had an opportunity to ask questions and receive
answers for the Company regarding the Company, its business and the terms and
conditions of the offering of the Common Stock.
2.4 DEVELOPMENT STAGE COMPANY. The undersigned recognizes the
Company is a development stage Company, that it has an accumulated deficit and a
working capital deficit, has not generated any revenue from operations and is
not expected to generate any revenue from operations for some time and perhaps
for years, and that proposed development expenditures are expected to result in
substantial and increasing losses over at least the next year, and possibly much
longer. The undersigned recognizes investment in the Company involves
substantial risk, and the undersigned should not purchase the Common Stock
unless it can afford the complete loss of its investment. The undersigned has
taken full cognizance of and understands all of the risk factors related to the
receipt of the Common Stock.
2.5 CONFIDENTIALITY. Purchaser hereby represents, warrants and
covenants he shall maintain in confidence, and shall not use or disclose without
the prior written consent of the Company, any information identified as
confidential that is furnished to Purchaser by the Company whether or not it was
furnished in connection with this Agreement. This obligation of confidentiality
shall not apply, however, to any information (a) in the public domain through no
unauthorized act or failure to act by Purchaser, or (b) lawfully disclosed to
Purchaser by a third party who possessed such information without any obligation
of confidentiality. Purchaser further covenants he shall return to the Company
all tangible materials containing such information upon request by the Company.
2.6 INVESTMENT EXPERIENCE. Purchaser is an investor in securities
of companies in the development stage and acknowledges he is able to fend for
himself, can bear the economic risk and complete loss of his investment and has
such knowledge and experience in financial or business matters that Purchaser is
capable of evaluating the merits and risks of the investment in the Common
Stock.
2.7 ADVICE OF PROFESSIONALS. The undersigned has carefully
considered and has been advised by the Company to have any material provided by
anyone regarding the Company, including but not limited to this Stock Purchase
Agreement, related documents and the acquisition of the Common Stock reviewed by
independent legal counsel prior to acquisition, and to discuss with professional
tax and financial advisers the suitability of Purchaser's acquisition of the
Common Stock for Purchaser's particular tax and financial situation, and he has
determined the Common Stock is a suitable investment. The Company specifically
disclaims any representations regarding the legal, tax, or financial
consequences of the purchase, other than the representation this is a high risk
transaction.
2.8 FINANCIAL STATUS. All information which the undersigned has
provided to the Company concerning the undersigned and his financial position is
correct as of the date set forth therein, and if there should be any change in
such information prior to Purchaser's acceptance as a shareholder of the
Company, the undersigned will immediately provide such information to the
Company and will promptly send confirmation of such information to the Company.
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2.9 AUTHORITY. If this Stock Purchase Agreement is executed and
delivered on behalf of a partnership, corporation, trust, estate or other
entity, (i) the undersigned's execution, delivery and performance of and under
this Stock Purchase Agreement, and all documents ancillary hereto, and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized, and the undersigned is duly authorized (a) to execute and deliver
this Stock Purchase Agreement and all other instruments executed and delivered
on behalf of such partnership, corporation, trust, estate or other entity, in
connection with the issuance in its name of the Common Stock; and (b) to acquire
and hold the Common Stock, (ii) such entity has not been formed for the specific
purpose of acquiring the Common Stock; and (iii) when executed and delivered by
the Company, will constitute such partnership's, corporation's, trust's,
estate's or other entity's legal, valid and binding obligation enforceable
against it in accordance with its terms.
2.10 RESTRICTED SECURITIES. Purchaser understands the shares of
Common Stock he is acquiring are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act of 1933, as amended (the "Securities Act"), only in certain
limited circumstances. In this connection Purchaser represents he is familiar
with Securities and Exchange Commission ("SEC") Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the
Securities Act.
2.11 FURTHER LIMITATIONS ON DISPOSITION. Without in any way
limiting the representations set forth above, Purchaser further agrees not to
make any disposition of all or any portion of the Common Stock unless and until:
(a) There is then in effect a registration statement under
the Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or
(b) (i) Purchaser shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition and (ii)
Purchaser shall have the furnished the Company with an opinion of counsel in a
form satisfactory to Company and its counsel in their sole discretion, that such
disposition will not require registration of such shares under the Securities
Act.
2.12 LEGENDS. It is understood that the certificates evidencing the
Common Stock may bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE
144 OF SUCH ACT."
(b) Any legend required by the laws of the State of
California or other jurisdiction, including any legend required by the
California Department of Corporations and section 417 and 418 of the California
Corporations Code.
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2.13 ACCREDITED INVESTOR. Purchaser is an accredited investor as
defined in Code of Federal Regulations Section 230.501(a)(Regulation D), as
amended, under the Securities Act.
2.14 REMOVAL OF LEGENDS; FURTHER COVENANTS.
(a) Any legend endorsed on a certificate pursuant to
Section 2.12(a) hereof shall be removed (i) if the Common Stock represented by
such certificate shall have been effectively registered under the Securities Act
or otherwise lawfully sold in a public transaction, (ii) if the Common Stock may
be transferred in compliance with Rule 144(k) promulgated under the Securities
Act, or (iii) if Purchaser shall have provided the Company with an opinion of
counsel, in form and substance acceptable to the Company and its counsel in
their sole discretion from attorneys reasonably acceptable to the Company and
its counsel, stating a public sale, transfer or assignment of the Common Stock
may be made without registration.
(b) Any legend endorsed upon a certificate pursuant to
Section 2.12(a) hereof shall be removed if the Company receives an order of the
appropriate state authority authorizing such removal or if Purchaser provides
the Company with an opinion of counsel, in form and substance acceptable to the
Company and its counsel in their sole discretion and from attorneys reasonably
acceptable to the Company and its counsel, stating that such state legend may be
removed.
(c) Purchaser further covenants that Purchaser will not
transfer the Common Stock, in violation of the Securities Act, the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), or the rules of the
Commission promulgated thereunder, including Rule 144 under the Securities Act.
Further, Purchaser agrees, prior to the closing of the Company's initial public
offering, Purchaser will not transfer any of the Common Stock in a public
offering without the Company's prior consent, even if Purchaser is otherwise
permitted to transfer them pursuant to Rule 144(k).
2.15 NO REPRESENTATIONS REGARDING FUTURE RESULTS. It never has been
represented, guaranteed or warranted by any broker, the Company, any of the
officers, directors, shareholders, partners, employees, legal counsel, auditor
or agents of the Company or its advisors, or any other persons, whether
expressly or by implication, that the past performance or experience of the
management of the Company, or of any other person, will in any way indicate the
future results of the ownership of the Common Stock or of the Company's
activities.
2.16 ACKNOWLEDGMENT. The undersigned acknowledges he understands
the meaning and legal consequences of the representations and warranties
contained in this Agreement, and the undersigned hereby agrees the Company and
each officer, director, employee, agent, legal counsel and controlling person
thereof, past, present or future, may rely on each such representation and
warranty.
2.17 NON TRANSFERABILITY. Neither this Stock Purchase Agreement, nor
any of your interests herein, shall be assignable or transferable by the
undersigned in whole or in part except by operation of law.
2.18 NO ADVERTISEMENT. The undersigned is not purchasing the Common
Stock as a result of or subsequent to any advertisement, article, notice or
other communication published in any newspaper, magazine or similar media or
broadcast over television or radio, or presented at any seminar, or any
solicitation of a subscription by a person not previously known to the
undersigned.
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2.19 SURVIVAL. The foregoing representations and warranties shall be
true and accurate as of the date of the acceptance hereof by the Company and
shall survive the execution and delivery of this Stock Purchase Agreement and
the issuance of the Common Stock thereafter.
2.20 INDEMNIFICATION. The undersigned shall indemnify and hold
harmless the Company and/or any of its officers, employees, directors or control
persons of any such entity who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of or
arising from any actual or alleged misrepresentation or misstatement of facts or
omission to represent or state facts made by the undersigned to the Company
concerning itself or its financial position in connection with the offering,
sale or issuance of the Common Stock to the undersigned which is not remedied by
timely notice to the Company as provided above, against losses, liabilities and
expenses for which the Company or any of its respective officers, employees,
agents, directors, legal counsel or control persons of any such entity which
have not otherwise been reimbursed (including attorneys' fees, judgments, fines
and amounts paid in settlement) as actually and reasonably incurred by such
person or entity in connection with such action, suit or proceeding.
2.21 DUE EXECUTION. The undersigned agrees to execute this Stock
Purchase Agreement in full and acknowledges the receipt and acceptance by the
Company of such stock purchase agreement shall be a condition precedent to the
issuance of the Common Stock.
3. CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SHARES OF COMMON
STOCK WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
COMMON STOCK OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF COMMON STOCK IS
EXEMPT FROM QUALIFICATION BY SECTIONS 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
4. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to Purchaser under this Agreement are subject to the fulfillment
on or before the Closing of each of the following conditions by Purchaser:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser contained in Section 2 hereof shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.
4.2 PAYMENT OF PURCHASE PRICE. The purchase price specified in
Section 1.1 shall have been delivered to the Company.
4.3 CALIFORNIA QUALIFICATION. The offer and sale to Purchaser of
the Common Stock shall be exempt from qualification under the California
Corporate Securities Law of 1968, as amended.
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5. MISCELLANEOUS.
5.1 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of Purchaser contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the Closing.
5.2 SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding of the respective
permitted 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 assignees any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
5.3 GOVERNING LAW VENUE. This Agreement shall be governed by
and construed under the laws of the State of California, irrespective of its
choice of law principles. Any action brought in connection with this
Agreement shall only be brought in a court located in San Diego County,
California.
5.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.5 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.
5.6 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or, if sent
by telex or telecopier, upon receipt of the correct answer back, or upon deposit
with the United States Post Office, by registered or certified mail, or upon
deposit with an overnight air courier, in each case postage prepaid and
addressed to the party to be notified at the address indicated for such party on
the signature page hereof, or at such other address as such party may designate
by 10 days' advance written notice to the other parties.
5.7 FINDERS' FEE. Each party represents the other will not be
obligated for any finders' fee or commission in connection with this
transaction. Purchaser agrees to indemnify and hold harmless the Company from
any liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which Purchaser is responsible.
The Company agrees to indemnify and hold harmless Purchaser from any
liability for any commission or compensation in the nature of a finders' 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.
5.8 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 particular instance and wither retroactively or prospectively),
only with the written consent of the Company and Purchaser.
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5.9 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ONTRO, INC.
a California corporation
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------
Xxxxx X. Xxxxxxx, President
PURCHASER:
XXXX AND XXXXXXXX XXXXX TRUST
By: /s/ X. X. Xx Xxxxxxx
-----------------------------
X. X. Xx Xxxxxxx, Trustee
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