EXHIBIT 10.24
iOWN HOLDINGS, INC.
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
This agreement (this "Agreement") is made effective as of November 30,
1999, between iOwn Holdings, Inc., a Delaware corporation (the "Company"), and
the entities listed on Exhibit A hereto (each an "Investor," and collectively,
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the "Investors").
SECTION 1.
Authorization and Sale of Series E Preferred Stock
1.1. Authorization of Series E Preferred Stock. The Company has
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authorized the sale and issuance hereunder of up to 13,666,667 shares of its
Series E Preferred Stock (the "Series E Preferred"), having the rights,
preferences, privileges and restrictions set forth in the Company's Amended and
Restated Certificate of Incorporation in the form attached hereto as Exhibit B
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(the "Restated Certificate"). The Company shall adopt and file with the
Secretary of State of the State of Delaware on or before the Initial Closing the
Restated Certificate. The shares of Series E Preferred to be sold hereunder are
collectively referred to as the "Shares."
1.2. Sale of Series E Preferred. Subject to the terms and conditions
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hereof, on the Closing Date (as defined below) the Company will issue and sell
to each Investor, and each Investor will purchase severally, and not jointly, at
a purchase price of $3.00 per Share from the Company, the number of Shares
specified opposite the name of each such Investor on Exhibit A.
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SECTION 2.
Closing Date; Delivery
2.1. Closing Date. The closing of the purchase and sale of the Shares
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hereunder (the "Initial Closing") shall be held at the offices of Xxxxxxx Coie
LLP, 000 Xxxxxxxxxxxx Xxxxx, Xxxxx 000, Xxxxx Xxxx, Xxxxxxxxxx 00000-0000 on
December 6, 1999, or at such other time and place upon which the Company and the
Investors shall agree (the date of the Initial Closing is hereinafter referred
to as the "Closing Date").
2.2. Delivery. At the Initial Closing, the Company will deliver to each
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Investor a certificate or certificates representing the number of Shares set
forth opposite such Investor's name on Exhibit A hereto, as appropriate, against
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payment of the purchase price therefor, by check or wire transfer payable to the
Company.
2.3. Subsequent Closing. The Company shall have the right, at any time
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on or prior to December 6, 1999, to sell additional shares of Series E Preferred
up to the fully authorized 13,666,667 of Series E Preferred to one or more
additional investors (the "Additional Investors") as determined by the Company
at the price and on the terms set forth herein; provided, however, that any
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Additional Investor shall be required to execute a signature page to, and become
a party to, this Agreement. Thereafter, any such Additional Investor shall be
considered an "Investor" for purposes of this Agreement and shall be added to
Exhibit A hereof, and any shares of Series E Preferred so acquired by such
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Additional Investor shall be considered
"Shares" for purposes of this Agreement and all other agreements contemplated
hereby. The conditions to the subsequent closing shall be the same as the
conditions to the Closing and shall not be waived unless consented to by a
majority in interest of the Series E Preferred, provided that there shall be no
Opinion of Counsel or Compliance Certificate pursuant to Sections 5.5 and 5.11,
respectively, in any subsequent closing.
SECTION 3.
Representations and Warranties of the Company
Except as set forth on Exhibit C attached hereto (the "Disclosure
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Schedule"), the Company hereby represents and warrants to each of the Investors
as of the date hereof as follows:
3.1. Organization and Standing; Certificate and Bylaws. The Company is a
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corporation duly organized and validly existing under, and by virtue of, the
laws of the State of Delaware and is in good standing under such laws. The
Company has all requisite corporate power to own and operate its properties and
assets, and to carry on its business as presently conducted. The Company is
qualified to do business as a foreign corporation in any jurisdiction in which
failure to qualify would have a material adverse effect on the Company's
business, properties, operations, prospects or condition (financial or
otherwise). Attached hereto as Exhibit D are true and complete copies of its
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Bylaws in effect as of the date hereof.
3.2. Corporate Power. The Company has all requisite legal and corporate
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power to execute and deliver this Agreement and the Fifth Amended and Restated
Investor Rights Agreement of even date herewith, by and among the Company, the
holders of the Company's Series A Preferred Stock, the holders of the Company's
Series B Preferred Stock, the holders of the Company's Series C Preferred Stock,
the holders of the Company's Series D or Series DD Preferred Stock and the
Investors, the form of which is attached hereto as Exhibit E (the "Rights
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Agreement"), the Fifth Amended and Restated Voting Agreement of even date
herewith, by and among the Company, Xxxxxx X. Xxxx, the holders of the Company's
Series A Preferred Stock, the holders of the Company's Series B Preferred Stock,
the holders of the Company's Series C Preferred Stock, the holders of the
Company's Series D or Series DD Preferred Stock and the Investors, the form of
which is attached hereto as Exhibit F (the "Voting Agreement"), and the Fifth
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Amended and Restated Right of First Refusal and Co-Sale Agreement of even date
herewith, by and among the Company, Xxxxxx X. Xxxx, the holders of the Company's
Series A Preferred Stock, the holders of the Company's Series B Preferred Stock,
the holders of the Company's Series C Preferred Stock, the holders of the
Company's Series D or Series DD Preferred Stock and the Investors, the form of
which is attached hereto as Exhibit G (the "Co-Sale Agreement"), to sell and
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issue the Shares hereunder, to issue the Common Stock issuable upon conversion
of the Shares and to carry out and perform its obligations under the terms of
this Agreement and the transactions contemplated hereby. The Rights Agreement,
the Voting Agreement and the Co-Sale Agreement shall be referred to,
collectively, as the "Ancillary Agreements."
3.3. Subsidiaries. The Company has one subsidiary or affiliated company,
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iOwn, Inc., a California corporation which is a wholly-owned subsidiary of the
Company. The Company does not otherwise own or control any other corporation,
association or business entity.
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3.4. Capitalization. The authorized capital stock of the Company will,
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upon the Closing Date, consist solely of (a) 150,000,000 shares of Common Stock,
7,419,859 of which are issued and outstanding prior to the Initial Closing, and
(b) 123,964,068 shares of Preferred Stock of which (i) 2,492,900 are designated
as Series A Preferred Stock, all of which are issued and outstanding as of the
Closing Date, (ii) 2,492,900 are designated as Series A-1 Preferred Stock, none
of which are issued and outstanding as of the Closing Date, (iii) 12,170,924
are designated as Series B Preferred Stock, 11,951,764 of which are issued and
outstanding as of the Closing Date, (iv) 12,170,924 are designated as Series B-1
Preferred Stock, none of which are issued and outstanding as of the Closing
Date, (v) 17,740,000 are designated as Series C Preferred Stock, 17,740,000 of
which are issued and outstanding as of the Closing Date, (vi) 17,740,000 are
designated as Series C-1 Preferred Stock, none of which are issued and
outstanding as of the Closing Date, (vii) 11,000,000 are designated as Series D
Preferred Stock, 7,820,643 of which are issued and outstanding prior to the
Closing Date, (viii) 11,000,000 are designated as Series D-1 Preferred Stock,
none of which are issued and outstanding as of the Closing Date, (ix) 5,200,000
are designated as Series DD Preferred Stock, none of which are issued and
outstanding prior to the Closing Date, (x) 5,200,000 are designated Series DD-1
Preferred Stock, none of which are issued and outstanding as of the Closing
Date, (xi) 11,666,667 are designated as Series E Preferred Stock, none of which
are issued and outstanding prior to the Closing Date, (xii) 11,666,667 are
designated Series X-0 Xxxxxxxxx Xxxxx, xxxx of which are issued and outstanding
prior to the Closing Date, (xiii) 711,543 are designated as Series EE Preferred
Stock, none of which are issued and outstanding as of the Closing Date, and
(xiv) 711,543 are designated as Series EE-1 Preferred Stock, none of which are
issued and outstanding as of the Closing Date. All such issued and outstanding
shares have been duly authorized and validly issued, and are fully paid and
nonassessable and were issued in compliance with applicable federal and state
securities laws. The Company has reserved an aggregate of 123,964,068 shares of
Common Stock for issuance upon conversion of the Preferred Stock and 12,580,533
shares of its Common Stock for issuance to officers, directors, employees, sales
representatives and consultants of the Company pursuant to the Company's 1999
Stock Option Plan. As of the Closing Date, the Company has reserved authorized
but unissued shares of Common Stock in an amount that would be sufficient to
effect the conversion of all outstanding shares of Preferred Stock as of such
date. The Series E Preferred Stock, Series E-1 Preferred Stock, Series EE
Preferred Stock and Series EE-1 Preferred Stock shall have the rights,
preferences, privileges and restrictions set forth in the Restated Certificate.
Except as referenced herein, in the Rights Agreement or in the Disclosure
Schedule, there are no options, warrants, conversion privileges or other rights
presently outstanding to purchase or otherwise acquire any authorized but
unissued shares of the capital stock or other securities of the Company, nor any
agreements or understandings with respect thereto. Except for the Voting
Agreement, the Company is not a party or subject to any agreement or
understanding and, to the Company's knowledge, there is no agreement or
understanding between any persons and/or entities, which affects or relates to
the voting or giving of consents with respect to any security of the Company.
3.5. Authorization. All corporate action on the part of the Company, its
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officers, directors and shareholders necessary for the authorization, execution,
delivery and performance of this Agreement and the Ancillary Agreements by the
Company; and the authorization, sale, issuance and delivery of the Shares (and
the Common Stock issuable upon conversion of the Shares) and the performance of
the Company's obligations hereunder and thereunder has been
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taken prior to the Initial Closing. This Agreement and the Ancillary Agreements,
have been duly executed and delivered by the Company, and constitute the valid
and legally binding obligations of the Company, enforceable against the Company
in accordance with their respective terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing equitable remedies.
3.6. Validity of Shares. The Shares have been duly authorized and, when
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issued, sold and delivered in compliance with the provisions of this Agreement,
will be duly and validly issued and will be fully paid and nonassessable and
free and clear of all liens and encumbrances, the Series E-1 Preferred Stock,
Series EE Preferred Stock and Series EE-1 Preferred Stock issuable upon special
mandatory conversion of the Shares has been duly authorized and validly reserved
and, when issued and delivered in compliance with the provisions of the Restated
Certificate, will be duly and validly issued and will be fully paid and
nonassessable and free and clear of all liens and encumbrances, and the Common
Stock issuable upon conversion of the Shares or the Series E-1 Preferred Stock,
Series EE Preferred Stock and Series EE-1 Preferred Stock has been duly
authorized and validly reserved and, when issued and delivered in compliance
with the provisions of the Restated Certificate, will be duly and validly issued
and will be fully paid and nonassessable and free and clear of all liens and
encumbrances and restrictions on transfer other than as set forth in this
Agreement and the Ancillary Agreements; provided, however, that the Shares and
the Series E-1 Preferred Stock, Series EE Preferred Stock and Series EE-1
Preferred Stock issuable upon special mandatory conversion of the Shares (and
the Common Stock issuable upon conversion of the Shares or the Series E-1
Preferred Stock, Series EE Preferred Stock and Series EE-1 Preferred Stock) may
be subject to restrictions on transfer under state and/or federal securities
laws and will be issued in compliance with all applicable federal and state
laws. Except as set forth herein or in the Rights Agreement, there are no
outstanding rights of first refusal or preemptive rights applicable to the
Shares or the Series E-1 Preferred Stock, Series EE Preferred Stock and Series
EE-1 Preferred Stock.
3.7. Title to Properties and Assets; Liens, etc. The Company has good
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and marketable title to all its properties and assets, and is in compliance with
the lease of all material properties leased by it, in each case subject to no
mortgage, pledge, lien, lease, encumbrance or charge, other than the lien of
current taxes not yet due and payable. The Company is not in default under or in
breach of any provision of its leases, and the Company holds valid leasehold
interests in the properties which it leases. The Company's material properties
and assets are in good condition and repair, ordinary wear and tear excepted, in
all material respects.
3.8. Material Contracts and Commitments. The Disclosure Schedule sets
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forth a list of all agreements, contracts, indebtedness, liabilities and other
obligations to which the Company is a party or by which it or its assets are
bound that (a) involve in excess of $50,000 aggregating similar agreements or
obligations to the same party; (b) involve any Affiliate (as defined below) of
the Company, any consultants or employees of the Company or, to the Company's
knowledge, any members of the immediate family of the foregoing; or (c) obligate
the Company to share, license or develop any product. Copies of such agreements
and contracts and documentation evidencing such liabilities and other
obligations have been made available by the Company to the Investors or their
counsel. Except as expressly contemplated by this Agreement or as set forth on
the Disclosure Schedule, the Company is not a party to any written
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or oral: (i) pension, profit sharing, stock option, employee stock purchase or
other plan or arrangement providing for deferred or other compensation to
employees or any other employee benefit plan or arrangement, or any contract
with any labor union, or any severance agreements; (ii) contract for the
employment of any officer, individual employee or other Person on a full-time,
part-time, consulting or other basis providing annual compensation in excess of
$100,000 or contract relating to loans to officers, directors or affiliates;
(iii) contract under which it has advanced or loaned any other Person amounts in
the aggregate exceeding $15,000; or (iv) contract or agreement prohibiting it
from freely engaging in any business or competing anywhere in the world. Solely
for purposes of this Section 3.8: (i) "Affiliate" means, with respect to any
specified Person (as defined below), any other Person which, directly or
indirectly, controls, is under common control with, or is owned or controlled
by, such specified Person, (ii) "control" means, with respect to any specified
Person, either (x) the beneficial ownership of 10 percent or more of any class
of equity securities or (y) the power to direct the management or policies of
the specified Person through the ownership of voting securities, by contract,
voting agreement or otherwise, (iii) the terms "controlling", "control with" and
"controlled by", etc. shall have meanings correlative to the foregoing and (iv)
the officers, directors and 10% shareholders of any specified Person shall be
deemed to be Affiliates of the Company. "Person" means any individual,
corporation, general or limited partnership, joint venture, association, limited
liability company, joint stock company, trust, business trust, bank, trust
company, estate (including any beneficiaries thereof), unincorporated
organization, cooperative, association or government or branch, agency or
political subdivision thereof.
3.9. Patents, Trademarks, etc. To the knowledge of the Company, and
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except as set forth in the Disclosure Schedule, the Company has exclusive title
to its tradename and trademark - iOwn -- and sufficient title and ownership of
all patents, trademarks, service marks, trade names, copyrights, trade secrets,
proprietary rights and processes necessary for its business as now conducted,
without 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, the proprietary or intellectual property
rights 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 interests of the
Company or that would conflict with the Company's business. Neither the
execution nor delivery of this Agreement or the Ancillary Agreements, nor, to
the Company's knowledge, the carrying on of the Company's business by the
employees of the Company, will conflict with or result in a breach of the terms,
conditions, or provisions of, or constitute a default under, any contract,
covenant, or instrument under which any of such employees is now obligated. The
Company is not aware of any violation or infringement by a third party of any of
the Company's patents, licenses, trademarks, service marks, trade names,
copyrights, trade secrets or other proprietary rights.
3.10. Compliance with Other Instruments. The Company is not in violation
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of any term of the Restated Certificate or Bylaws, or in any material respect of
any term or provision of any mortgage, indenture, contract, agreement,
instrument, judgment or decree, and to its knowledge is not in violation of any
order, statute, rule or regulation applicable to the Company (the "Laws"). The
business and operations of the Company have been and are being conducted
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in material compliance with all applicable Laws. The execution, delivery and
performance of and compliance with this Agreement and the Ancillary Agreements
and the issuance of the Shares (and the Common Stock issuable upon conversion of
the Shares), have not (i) resulted and will not result in any violation of, or
conflict with, or constitute a default under any of the foregoing, (ii) resulted
and will not result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Company, (iii) resulted
and will not result in the breach of or constitute a default under any material
contact, agreement or instrument to which the Company is a party or by which it
is bound that is listed on the Disclosure Schedule ("Material Contracts") (iv)
given or gives any person rights to terminate any Material Contracts or
agreements of the Company or, to its knowledge, otherwise to exercise rights
against the Company or (v) violated and will not violate any order, writ,
judgment, injunction, decree, statute, rule or regulation of any court, tribunal
or governmental entity applicable to or the Company or any of its assets or
businesses.
3.11. Litigation, etc. There are no actions, suits, proceedings or
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investigations pending or, to the Company's knowledge, threatened against the
Company or its properties, assets or business before any court or governmental
agency, which, either in any case or in the aggregate, might result in any
material adverse change in the business, prospects, financial condition,
affairs, operations or equity ownership of the Company or any of its properties
or assets, or in any material impairment of the right or ability of the Company
to carry on its business as now conducted, or in any material liability on the
part of the Company, and none which questions the validity of this Agreement or
the Ancillary Agreements or any action taken or to be taken in connection
herewith. There is no action, suit, proceeding, or investigation by the Company
currently pending or that the Company intends to initiate.
3.12. Employees. To the Company's knowledge, no employee of the Company
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is or will be in violation of any judgment, decree or order of any court or
administrative agency, or any term of any employment contract or any other
contract (including without limitation any covenant not to compete) or agreement
relating to the relationship of any such employee with the Company or any other
party because of the nature of the business conducted by the Company or to the
utilization by the employee of such employee's reasonable efforts with respect
to such business. Except as set forth in the Disclosure Schedule, the Company
is not a party to or bound by any currently effective employment contract,
deferred compensation agreement, bonus plan, incentive plan, profit sharing
plan, retirement agreement, or other written employee compensation agreement.
The Company does not have any collective bargaining agreements covering any of
its employees. To the Company's knowledge, the Company is not using any
inventions of any of its employees, consultants or officers made before their
employment by the Company. To the Company's knowledge, no employee, consultant
or officer has taken, removed, or made use of any proprietary documentation,
manuals, products, materials, or any other tangible items from the employee's
previous employers relating to the Company's business. To the Company's
knowledge, no officer or key employee of the Company currently intends to
terminate his or her employment with the Company. The Company is not a party to
any Plan, as defined in the Employee Retirement Income Security Act of 1974.
3.13. Insurance. The Company has in full force and effect fire, casualty
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and comprehensive general liability insurance policies with recognized insurers
with such coverages
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as are sufficient in amount to allow replacement of the tangible properties of
the Company that might be damaged or destroyed and the Company has not received
any notice of cancellation with respect to, and does not have any pending claims
under, such policies.
3.14. Registration Rights. Except as contemplated by the Rights
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Agreement, the Company is not under any obligation to register any of its
presently outstanding securities or any of its securities that may hereafter be
issued.
3.15. Governmental Consents, etc. No consent, approval, order or
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authorization of or designation, declaration or filing with any local, state or
federal governmental authority of the United States on the part of the Company
is required in connection with the valid execution, delivery and performance of
this Agreement, or the offer, sale or issuance of the Shares (and the Preferred
Stock or Common Stock issuable upon conversion of the Shares), or the
consummation of any other transaction contemplated hereby, except (a) filing of
the Restated Certificate in the office of the Secretary of State of the State of
Delaware, and (b) qualification (or taking such action as may be necessary to
secure an exemption from qualification, if available) under the Securities laws
of the State of Delaware, the California Corporate Securities Law and other
applicable Blue Sky laws, of the offer and sale of the Shares (and the Common
Stock issuable upon conversion of the Shares), which filing and qualification,
if required, will be accomplished in a timely manner prior to or promptly
following completion of the Initial Closing.
3.16. Offering. Assuming the accuracy of the Investor representations in
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Section 4 hereof, the offer, sale and issuance of the Shares to be issued in
conformity with the terms of this Agreement (and the issuance of the Preferred
Stock or Common Stock to be issued upon conversion of the Shares) constitute
transactions exempt from the registration requirements of Section 5 of the
Securities Act of 1933, as amended (the "Securities Act"), and will have been
registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws. Neither the Company nor any agent on its behalf has
solicited or will solicit any offers to sell or has offered to sell or will
offer to sell all or any part of the Shares to any person or persons so as to
bring the sale of such Shares by the Company within the registration provisions
of the Securities Act.
3.17. Disclosure. No statement by the Company contained in this
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Agreement, any Ancillary Agreement, or any exhibit, attachment or schedule, or
in any certificate furnished or to be furnished to the Investors pursuant hereto
or written information otherwise provided to the Investors, contains or will
contain any untrue statement of a material fact or omits or will omit 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.
3.18. Brokers or Finders. Except as otherwise disclosed in the Disclosure
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Schedule, the Company has not incurred, and will not incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
3.19. Environmental Laws. To the Company's knowledge, the Company is not
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in violation of any applicable statute, law or regulation relating to the
environment or occupational
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health and safety, and to its knowledge, no material expenditures are or will be
required in order to comply with any such existing statute, law or regulation.
No Hazardous Materials (as defined below) are used or have been used, stored, or
disposed of by the Company or, to the Company's knowledge by any other person or
entity on any property owned, leased or used by the Company. For purposes of the
preceding sentence, "Hazardous Materials" shall mean (a) materials which are
listed or otherwise defined as "hazardous" or "toxic" under any applicable
local, federal and/or foreign laws and regulations that govern the existence
and/or remedy of contamination on property, the protection of the environment
from contamination, the control of hazardous wastes, or other activities
involving hazardous substances, including building materials or (b) any
petroleum products or nuclear materials.
3.20. Liabilities. Except as set forth in the Disclosure Schedule, the
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Company has not entered into any agreements involving, individually or in the
aggregate, in excess of $50,000 (written or verbal) with any third parties,
including employees and consultants.
3.21. Financial Statements; Undisclosed Liabilities. The Company has
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delivered to each Investor an audited Balance Sheet, Income Statement and
Statement of Cash Flows (collectively, the "Financial Statements") dated
December 31, 1998 (the "Statement Date"). The Company has also delivered an
unaudited Balance Sheet, Statement of Income and Statement of Cash Flows,
reviewed by Price Waterhouse, for the six months ending June 30, 1999 and an
unaudited Balance Sheet, Statement of Income and Statement of Cash Flows for the
eight months ending August 31, 1999 (the "Interim Financial Statements"). The
Financial Statements and the Interim Financial Statements are complete and
correct in all material respects, have been prepared in accordance with
generally accepted accounting principles consistently applied and present fairly
the financial condition of the Company as of the Statement Date and the results
of operations and cash flows of the Company for the period then ended; provided,
however, that the Interim Financial Statements are subject to normal recurring
year-end audit adjustments and do not contain footnotes required under generally
accepted accounting principles. Since the date of the Financial Statements,
there have been no material changes in the Company's accounting policies.
3.22. Changes. Since the Statement Date, there has not been:
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(a) any damage, destruction or loss, whether or not covered by
insurance, materially adversely affecting the properties or tangible assets 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 (as such business is presently conducted);
(d) any sale, assignment or transfer by the Company of any patents,
trademarks, copyrights, trade secrets or other intangible assets;
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(e) any resignation or termination of employment of any key officer of
the Company or any change in officer compensation except in the ordinary course
of business and consistent with past practice;
(g) any loans or guarantees made by the Company to or for the benefit
of its employees, shareholders, officers, or directors, or any members of their
immediate families, other than in amounts immaterial to the Company's operating
results or financial condition and other than travel advances and other advances
made in the ordinary course of its business;
(h) any declaration, setting aside, or payment of any dividend or
other distribution of the Company's assets in respect of 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;
(i) any incurrence of any material indebtedness;
(j) any changes in the assets, liabilities, financial condition or
operating results of the Company other than that reflected in the Financial
Statements or Interim Financial Statements that, either individually or in the
aggregate, would have a material, adverse effect on the Company's business,
prospects, properties, financial condition or results of operations; or
(k) any commitment, obligation, understanding or other arrangement,
contingent or otherwise, to effect, directly or indirectly, any of the
foregoing.
3.23. Proprietary Information Agreement. All officers, employees of and
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consultants to the Company with access to proprietary information of the Company
have executed and delivered to the Company a Proprietary Information Agreement
in substantially the form attached as Exhibit H hereto, and the Company is not
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aware of any material breach thereof by any such persons.
3.24. Taxes. The Company has never had any tax deficiency proposed or
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assessed against it and has not executed any waiver of any statute of
limitations on the assessment or collection of any tax or governmental charge.
The Company has timely filed all tax returns, submitting true and complete
information; has paid all taxes when due (other than those that are being
contested in good faith); and has received no notice of audit. Except as set
forth on the Disclosure Schedule, no federal or state income tax returns of the
Company has ever been audited. Proper and accurate amounts have been withheld
by the Company from its employees for all periods in compliance with the tax,
social security and any employment withholding provisions of applicable federal
and state laws. The Company has made all withholdings or collections for all
taxes, including, without limitation, all employee income tax withholding,
social security and unemployment taxes.
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3.25. Other Relationships. Except as set forth on the Disclosure
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Schedule, to the best knowledge of the Company (a) no officer of the Company,
nor any of its affiliates, has any interest (other than as non-controlling
holders of securities of a publicly-traded company), either directly or
indirectly, in any Person (whether as an employee, officer, director,
shareholder, agent, independent contractor, security holder, creditor,
consultant or otherwise) that presently (i) provides any services or designs,
produces or sells any products or product lines, or engages in any activity
which is the same, or competitive with any activity or business in which the
Company is now engaged, (ii) is a supplier of, customer of, creditor of, or has
an existing contractual relationship with, the Company, or (iii) has any direct,
or indirect interest in any asset or property used by the Company or any
property, real or personal, tangible or intangible, that is necessary or
desirable for the conduct of the business of the Company; and (b) no current or
former stockholder, director, officer or employee of the Company, nor any of its
affiliates, is at present, or since the inception of the Company has been,
directly or indirectly through his affiliation with any other Person, a party to
any transaction (other than as an employee) with the Company providing for the
furnishing of services by, or rental of real or personal property from, or
otherwise requiring cash payments to any such Person.
3.26. Investment Company Act. The Company is not, and immediately after
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the Closing Date will not be, an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Company Act.
3.27. 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. Except as set forth in the
Disclosure Schedule, 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.
3.28. Permits. The Company and each of its subsidiaries has all
-------
franchises, permits, licenses and any similar authority necessary for the
conduct of business, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company. Except
as set forth in the Disclosure Schedule, the Company is not in default in any
material respect under any of such franchises, permits, licenses or other
similar authority.
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3.29. Corporate Documents. A copy of the Restated Certificate and Bylaws
-------------------
of the Company have been provided to counsel for the Investors. The minute
books of the Company contain 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. The Restated Certificate and Bylaws and the minute books are
true, correct and complete and, with respect to the Restated Certificate and
Bylaws, contain all amendments through the date hereof.
3.30. Small Business Investment Company Applicant. The Company's tangible
-------------------------------------------
net worth (including its Affiliates) is not in excess of $18 million, and the
Company's average net income after Federal income taxes (excluding any carry-
over losses) for the preceding 2 completed fiscal years is not in excess of $6
million. The Company has heretofore furnished to each Investor that is an SBIC
Holder (as defined below) the following completed forms, which are true and
correct in all material respects: Size Status Declaration on SBA Form 480,
Assurance of Compliance on SBA Form 652D and Portfolio Financing Report on SBA
Form 1031 (the "SBA Forms"). As of the Closing Date, the Company is not a
"relender" or "reinvestor" as defined in Section 107.720 of Title 13 of the Code
of Federal Regulations." "SBIC Holder" means that the Investor is a Small
Business Investment Company regulated pursuant to Section 121.301(c)(1) of Title
13 of the Code of Federal Regulations (an "SBIC").
SECTION 4.
Representations, Warranties and Covenants of the Investors
Each of the Investors hereby represents, warrants and covenants, severally
and not jointly, to the Company with respect to its individual purchase of the
Shares as follows:
4.1. Accredited Investor. The Investor is an accredited investor as
-------------------
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
4.2. Foreign Investor. If the Investor is not a United States person (as
----------------
defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as
amended), such Investor 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 Shares or any use of this Agreement, including
(i) the legal requirements within its jurisdiction for the purchase of the
Shares, (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 Shares. Such Investor's
subscription and payment for and continued beneficial ownership of the Shares,
will not violate any applicable securities or other laws of the Investor's
jurisdiction.
4.3. Experience; Risk. The Investor has such knowledge and experience in
----------------
financial and business matters that such Investor is capable of evaluating the
merits and risks of the purchase of the Shares pursuant to this Agreement and of
protecting the Investor's interests in connection therewith. The Investor's
financial condition is such that it has the ability to bear the
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economic risk of the investment, including complete loss of the investment. The
Investor is experienced in evaluating and investing in new companies such as the
Company.
4.4. Investment. The Investor is acquiring the Shares for investment for
----------
its own account, not as a nominee or agent, and not with a view to, or for
resale in connection with, any distribution thereof; and the Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. The Investor understands that the Shares to be purchased
have not been 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 such Investor's representations as expressed herein.
4.5. Restricted Securities; Rule 144. The Investor understands that the
-------------------------------
Shares and the shares of Common Stock issuable upon conversion of the Shares,
will be "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 the Shares may be
resold without registration under the Securities Act only in certain limited
circumstances. The Investor acknowledges that the Shares must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. The Investor is aware of the
provisions of Rule 144 promulgated under the Securities Act which permit limited
resale of shares purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things, the existence of a public
market for the shares, the availability of certain current public information
about the Company, the resale occurring not less than one year after a party has
purchased and paid for the security to be sold, the sale being effected through
a "broker's transaction" or in transactions directly with a "market maker" (as
provided by Rule 144(f)) and the number of shares being sold during any three-
month period not exceeding specified limitations.
4.6. No Public Market. The Investor understands that no public market
----------------
now exists for any of the securities issued by the Company and that there is no
assurance that a public market will ever exist for the Shares.
4.7. Access to Data. The Investor has had an opportunity to discuss the
--------------
Company's business, management and financial affairs with the Company's
management and the opportunity to review the Company's facilities and has
received all information requested from the Company regarding the investment in
the Company, but the Company acknowledges that this Section 4.7 shall not
relieve the Company for any liability arising in connection with a breach of any
of its representations or warranties in Article 3.
4.8. Authorization. The Investor represents that it has all requisite
-------------
corporate power and authority to enter into and perform the Investor's
obligations under this Agreement and the Ancillary Agreements, and this
Agreement, the Rights Agreement, the Voting Agreement and the Co-Sale Agreement
when executed and delivered by the Investor will constitute valid and binding
obligations of the Investor, enforceable in accordance with their respective
terms, subject to the laws of general application relating to bankruptcy,
insolvency and the relief of debtors, rules of law governing specific
performance, injunctive relief or other equitable remedies.
-12-
4.9. Government Consents. No consent, approval or authorization of or
-------------------
designation, declaration or filing with any local, state, federal or foreign
governmental authority on the part of the Investor is required in connection
with the valid execution and delivery of this Agreement by the Investor, and the
consummation by the Investor of the transactions contemplated hereby.
4.10. Further Limitations on Disposition. Without in any way limiting the
----------------------------------
presentations set forth above, the Investor further agrees not to make any
disposition of all or any portion of the Shares 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) The Investor shall have notified the Company of the proposed
disposition and shall have furnished the Company with a statement of the
proposed disposition, and if reasonably requested by the Company, such Investor
shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
under the Securities Act.
4.11. Legends. It is understood that each certificate representing the
-------
Shares (and the shares of Common Stock issuable upon conversion of the Shares)
and any securities issued in respect thereof under applicable state securities
laws shall bear the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE 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, IF REASONABLY REQUESTED BY
THE CORPORATION, AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933."
(b) "THE SALE, TRANSFER OR ASSIGNMENT OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY
AND THE REGISTERED HOLDER OR HIS PREDECESSOR IN INTEREST. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY."
(c) Any legend required to be placed thereon by the California
Commissioner of Corporations or any other applicable state securities laws.
4.12. SBIC Holder. CIBC Wood Gundy represents and warrants that it is
-----------
an SBIC Holder, that it is a wholly owned subsidiary of a bank listed in
Schedule I to the Canadian Bank Act, that all of CIBC Wood Gundy's voting shares
are owned by such bank listed in
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Schedule I to the Canadian Bank Act, and that CIBC Wood Gundy is purchasing the
Shares as a principal.
SECTION 5.
Conditions to Initial Closing of Investor
Each Investor's obligation to purchase the Shares at the Initial Closing
is, at the option of the each of the Investors individually, subject to the
fulfillment on or prior to the Closing Date of the following conditions:
5.1. Execution of Documents. The Company and the Investors shall have
----------------------
duly authorized, executed and delivered copies of this Agreement, each Ancillary
Agreement and each other agreement, document or instrument related hereto or
thereto required in connection with the consummation of the transactions
contemplated hereby. This Agreement, each Ancillary Agreement and each other
related agreement, document or instrument shall be in full force and effect on
the Closing Date.
5.2. Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by the Company in Section 3 hereof shall be true and correct
when made, and shall be true and correct on the Closing Date with the same force
and effect as if they had been made on and as of said date.
5.3. Covenants. All covenants, agreements and conditions contained in
---------
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects.
5.4. Good Standing. The Company shall have obtained a good standing
--------------
certificate from the State of California and from each other state where it is
qualified to do business and shall have provided copies to special counsel to
the Investors on or prior to the Closing Date.
5.5. Opinion of Company's Counsel. The Investors shall have received
----------------------------
from Xxxxxxx Coie LLP, counsel to the Company, an opinion addressed to the
Investors, dated the Closing Date, substantially in the form of Exhibit I
---------
hereto.
5.6. Blue Sky. The Company shall have obtained all necessary Blue Sky
--------
law permits and qualifications, or secured an exemption therefrom, required by
any state for the offer and sale of the Shares and the Common Stock issuable
upon conversion of the Shares.
5.7. Restated Certificate of Incorporation. The Restated Certificate
-------------------------------------
shall have been filed with, and approved by, the Secretary of State of the State
of Delaware.
5.8. Reservation of Common Stock. The shares of the Common Stock
---------------------------
issuable upon conversion of the Shares shall have been duly authorized and
reserved for issuance upon such conversion.
5.9. Board of Directors. The Bylaws of the Company shall reflect that
------------------
the size of the Board of Directors shall be nine (9) members. At the Closing,
ABN AMRO shall be entitled
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to appoint one member to the Board of Directors on behalf of the Series E
Preferred Investors. The holders of the Company's Common and Preferred Stock,
voting together as a single class, shall be entitled to appoint one member to
the Board of Directors. Immediately prior to the Initial Closing, the Board of
Directors shall be comprised of Xxx Xxx, Xxxxx Xxxx, Xxxxx Xxxxxxx, Xxxxx Xxxx,
Xxxxx Xxxx, Xxxxxx Xxxx, and Xxxxxxx Xxxxxx.
5.10. Aggregate Purchase. The Investors shall purchase an aggregate of at
------------------
least 5,000,000 shares of Series E Preferred at the Initial Closing.
5.11. Compliance Certificate. The Company shall have delivered to the
----------------------
Investors a certificate executed by the President of the Company, dated the
Closing Date and certifying to the fulfillment of the conditions specified in
Sections 5.2, 5.4, 5.6, 5.7, 5.8, and 5.9 of this Agreement.
5.12. Authorization. All authorizations, approvals, or permits of any
-------------
governmental authority that are required in connection with the lawful issuance
and sale of the Stock, the conversion of the Stock into common stock and the
issuance of such common stock upon conversion shall have been duly obtained and
shall be effective on and as of the Closing.
SECTION 6.
Conditions to Initial Closing of the Company
The Company's obligation to sell and issue the Shares at the Initial
Closing is, at the option of the Company, subject to the fulfillment of the
following conditions:
6.1. Representations. The representations made by the Investors in
---------------
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing Date with the same force and effect as if they had been
made on and as of said date.
6.2. Ancillary Agreements. The Investors shall have executed and
--------------------
delivered to the Company the Ancillary Agreements.
6.3. Restated Certificate of Incorporation. The Restated Certificate
-------------------------------------
shall have been filed with, and approved by, the Secretary of State of the State
of Delaware.
6.4. Employment Agreement. The Company shall have entered into an
--------------------
employment agreement with Xxxxxx X. Xxxx, on terms and conditions acceptable to
the Investors.
-15-
SECTION 7.
Miscellaneous
7.1. Governing Law. This Agreement shall be governed in all respects by
-------------
the laws of the State of Delaware as applied to contracts made and to be fully
performed entirely within that state between residents of that state.
7.2. Survival. The representations, warranties, covenants and agreements
--------
made herein shall survive any investigation made by any Investor and the closing
of the transactions contemplated hereby.
7.3. Successors and Assigns. Except as otherwise provided herein, the
----------------------
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto;
provided, however, that the rights of the Investors to purchase the Shares shall
not be assignable without the consent of the Company.
7.4. Assignment of Securities and Rights Between Times Mirror Entities.
-----------------------------------------------------------------
Notwithstanding anything to the contrary in this Agreement, The Times Mirror
Company ("Times Mirror"), any affiliates of Times Mirror, any operating unit of
Times Mirror, Eagle New Media Investments, LLC, Liberty Xxxx I and TMCT
Ventures, L.P. (each, a "Times Mirror Entity") may transfer or otherwise convey
to any other Times Mirror Entity any capital stock or securities of the Company
held by such Times Mirror Entity and any such party's rights under this
Agreement and the related agreements without obtaining the signature, consent or
permission of the Company or any Investor, so long as such Time Mirror Entity
receiving such capital stock or securities of the Company is or becomes a
signatory to the this Agreement and the Ancillary Agreements. Upon a transfer
or assignment meeting the above conditions, the Company and the Investors will
be automatically deemed to have approved such transfers and waive all rights of
first refusal, co-sale or participation, if any, and all rights to notice, if
any, in connection with such assignment or transfer.
7.5. Entire Agreement; Amendment. This Agreement and the other documents
---------------------------
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
This Agreement or any term hereof may be amended, waived, discharged or
terminated solely by a written instrument signed by the Company and the holders
of a majority of the Common Stock issued or issuable upon conversion of the
Shares.
7.6. Notices, etc. All notices and other communications required or
------------
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to an Investor, at the address set forth on Exhibit A, hereto,
---------
or at such other address as shall have been furnished to the Company upon not
less than 10 days notice in writing, (b) if to any other holder of the Shares,
at such address as such holder will have furnished to the Company upon not less
than 10 days notice in writing, or (c) if to the Company, at the address set
forth below and addressed to the attention of the President and with a copy to
Xxxxxxx Coie LLP, 000 Xxxxxxxxxxxx Xxxxx, Xxxxx 000, Xxxxx
-00-
Xxxx, Xxxxxxxxxx 00000-0000, Attention: Xxxxx X. Xxxxxxx, III, Esq. or at such
other address as the Company shall have furnished to the Investors upon not less
than 10 days notice in writing.
7.7. Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any holder of any Shares, 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.
7.8. California Corporate Securities Law. THE SALE OF THE SECURITIES
-----------------------------------
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
7.9. Expenses. Upon receipt of documentation therefor at the Closing,
--------
the Company shall pay the reasonable fees and expenses of Xxxxxx, Xxxxxx &
Xxxxxxxxx, incurred with respect to this Agreement, the documents referred to
herein and the transactions contemplated hereby and thereby, in an amount not to
exceed $20,000.
7.10. Severability. In the event that any provision of this Agreement
------------
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
7.11. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
7.12. Waiver of Potential Conflict of Interest. Each party to this
----------------------------------------
Agreement acknowledges that Xxxxxxx Coie LLP, counsel for the Company, may in
the past have performed and may continue to perform legal services for certain
of the Investors in matters unrelated to the transactions described in this
Agreement, including the representation of such Investors in venture capital
financings and other matters. Accordingly, each party to this Agreement hereby
(1) acknowledges that they have had an opportunity to ask for information
relevant to this disclosure; and (2) gives its informed consent to Xxxxxxx Coie
LLP's representation of certain of
-17-
the Investors in such unrelated matters and to Xxxxxxx Coie LLP's representation
of the Company in connection with this Agreement and the transactions
contemplated hereby.
[SIGNATURE PAGE FOLLOWS]
-18-
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date set forth above.
"COMPANY"
iOwn Holdings, Inc., a Delaware corporation
By: /s/ Xxxxxx X. Xxxx
---------------------------------------
Xxxxxx X. Xxxx, Chief Executive Officer
