SERIES A CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
THIS SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this
"Agreement") is made and entered into as of November 23, 1999, by and between
XXXXXX.XXX, INC., a Delaware corporation (the "Company") and NET VALUE HOLDINGS,
INC., a Delaware corporation (the "Investor").
RECITALS
The Company desires to sell to the Investor, and the Investor desires
to purchase from the Company, shares of the Company's Series A Convertible
Preferred Stock on the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. AGREEMENT TO PURCHASE AND SELL STOCK.
1.1 Authorization. As of the Closing (as defined below),
the Company will have authorized the issuance, pursuant to the terms and
conditions of this Agreement, of up to Three Hundred Thirty Two Thousand Five
Hundred (332,500) shares of the Company's Series A Convertible Preferred Stock,
$0.001 par value per share (the "Series A Stock") having the rights,
preferences, privileges and restrictions set forth in the Restated Certificate
of Incorporation of the Company attached to this Agreement as Exhibit A (the
"Series A Certificate").
1.2 Agreement to Purchase and Sell. The Company agrees to
sell to the Investor at the Closing, and the Investor agrees to purchase from
the Company at the Closing, 132,941 shares of Series A Stock, at a price of
$3.761 per share, or an aggregate price of $500,000. The shares of Series A
Stock purchased and sold pursuant to this Agreement will be collectively
referred to as the "Purchased Shares" and the shares of Common Stock issuable
upon conversion of the Purchased Shares will be collectively referred to as the
"Conversion Shares."
2. CLOSING. The purchase and sale of the Purchased Shares will
take place at the offices of Xxxxxxxx Xxxxxxxx Xxxxxxxx Xxxxxx & Israel PC,
counsel to the Company, at 00 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx,
Xxxxxxxxxxxxx 00000 at 9:00 a.m. Eastern Time, on November ____, 1999, or at
such other time and place as the Company and the Investor mutually agree upon
(which time and place are referred to in this Agreement as the "Closing"). At
the Closing, the Company will deliver to the Investor certificates representing
132,941 Purchased Shares against delivery to the Company by the Investor of the
full purchase price of the Purchased Shares less all
costs payable pursuant to Section 7.9, paid by (i) a wire transfer of funds to
the Company or (ii) certified bank check.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Investor that the statements in the
following paragraphs of this Section 3 are all true and correct:
3.1 Organization, Good Standing and Qualification. The
Company is a 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 own its properties and assets and to carry on its business as
now conducted and as presently proposed to be conducted. The Company is duly
qualified and in good standing to do business as a foreign corporation in each
jurisdiction where failure to be so qualified would have a material adverse
effect on its financial condition, business, prospects or operations.
3.2 Capitalization. Upon filing the Series A Certificate,
immediately prior to the Closing, the capitalization of the Company will consist
of the following:
(a) Preferred Stock. A total of Three Hundred Thirty
Two Thousand Five Hundred (332,500) authorized shares of preferred stock, $0.001
par value per share, designated as Series A Stock, none of which will be issued
and outstanding. The rights, preferences and privileges of the Series A Stock
will be as stated in the Series A Certificate and as provided by law.
(b) Common Stock. A total of One Million Six Hundred
Sixty Seven Thousand Five Hundred (1,667,500) authorized shares of common stock,
$0.001 par value per share (the "Common Stock "), of which Nine Hundred Seventy
Five Thousand (975,000) shares are issued and outstanding.
(c) Options, Warrants, Reserved Shares. Except as set
forth on Schedule 3.2(c), there are not outstanding any options, warrants,
rights (including conversion or preemptive rights) or agreements for the
purchase or acquisition from the Company of any shares of its capital stock or
any securities convertible into or ultimately exchangeable or exercisable for
any shares of the Company's capital stock. Except as set forth on Schedule
3.2(c), no shares of the Company's outstanding capital stock, or stock issuable
upon exercise or exchange of any outstanding options, warrants or rights, or
other stock issuable by the Company, are subject to any rights of first refusal
or other rights to purchase such stock (whether in favor of the Company or any
other person), pursuant to any agreement or commitment of the Company.
(d) Outstanding Security Holders. Attached to this
Agreement as Schedule 3.2(d) is a complete list of all outstanding stockholders,
option holders, warrant holders, convertible note holders an d other security
holders of the Company as of immediately prior to the Closing, which schedule
lists the type of instruments, certificate numbers in sequential order (if
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applicable), the dates of issuance, the names of holders and the number of
Shares held or to be held upon exercise of such instrument.
3.3 Subsidiaries. Except as set forth on Schedule 3.3, the
Company does not presently own or control, directly or indirectly, any interest
in any other corporation, partnership, trust, joint venture, ass ociation, or
other entity.
3.4 Due Authorization. All corporate action on the part of
the Company, its officers, directors and stockholders necessary for the
authorization, execution, delivery of, and the performance of all obligations of
the Company under, this Agreement, the Investor Rights Agreement (as defined in
Section 5.14) and the Co-Sale Agreement (as defined in Section 5.15),
(collectively, the "Related Agreements") and the authorization, issuance,
reservation for issuance and delivery of all of the Purchased Shares being sold
under this Agreement and of the Conversion Shares has been taken or will be
taken prior to the Closing, and this Agreement constitutes, and the Related
Agreements, when executed, will constitute, valid and legally binding
obligations of the Company, enforceable in accordance with their respective
terms, except as may be limited by (i) applicable bankruptcy, insolvency,
reorganization or others laws of general application relating to or affecting
the enforcement of creditors' rights generally and (ii) the effect of rules of
law governing the availability of equitable remedies.
3.5 Valid Issuance of Stock.
(a) The Purchased Shares, when issued, sold and
delivered in accordance with the terms of this Agreement for the consideration
provided for herein, will be duly and validly issued, fully paid and
nonassessable. The Conversion Shares have been duly and validly reserved for
issuance and, upon issuance in accordance with the terms of the Series A
Certificate, will be duly and validly issued, fully paid and nonassessable.
(b) Based in part on the representations made by the
Investor in Section 4 hereof, the Purchased Shares and (assuming no change in
applicable law and no unlawful distribution of Purchased Shares by the Investor
or other parties) the Conversion Shares will be issued in full compliance with
the registration and prospectus delivery requirements of the U.S. Securities Act
of 1933, as amended (the "1933 Act") and the registration and qualification
requirements of all applicable state securities laws; provided that, with
respect to the Conversion Shares, no commission or other remuneration is paid or
given, directly or indirectly, for soliciting the issuance of Conversion Shares
upon the conversion of the Purchased Shares and no additional consideration is
paid for the Conversion Shares other than surrender of the applicable Purchased
Shares upon conversion thereof in accordance with the Series A Certificate.
(c) The outstanding shares of the capital stock of the
Company are duly and validly issued, fully paid and nonassessable, and such
shares of capital stock, and all outstanding options, warrants, convertible
notes and other securities of the Company, have been issued in full compliance
with the registration and prospectus delivery requirements of the 1933 Act
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or in compliance with applicable exemptions therefrom, the registration and
qualification requirements of all applicable securities laws of states of the
United States and all other provisions of applicable securities laws of States
of the United States, including, without limitation, anti-fraud provisions.
3.6 Governmental Consents. No consent, approval, order or
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 and the Related Agreements, except for such
qualifications or filings under the 1933 Act and the regulations thereunder and
all other applicable securities laws of states of the United States as may be
required in connection with the transactions contemplated by this Agreement. All
such qualifications and filings will, in the case of qualifications, be
effective on the Closing and will, in the case of filings, be made within the
time prescribed by law.
3.7 Litigation. Except as set forth on Schedule 3.7, there
is no action, suit, proceeding, claim, arbitration or investigation ("Action")
pending or, to the best of the Company's Knowledge (as defined below), currently
threatened against the Company, its activities, properties or assets or, to the
best of the Company's Knowledge, against any officer, director or employee of
the Company in connection with such officer's, director's or employee's
relationship with, or actions taken on behalf of, the Company. Except as set
forth on Schedule 3.7, to the best of the Company's Knowledge, there is no
factual or legal basis for any such Action that might result, individually or in
the aggregate, in any material adverse change in the business, properties,
assets, financial condition, affairs or prospects of the Company. By way of
example but not by way of limitation, there are no Actions pending or, to the
best of the Company's Knowledge, threatened (or any basis therefor known to the
Company) relating to the prior employment of any of the Company's employees or
consultants, their use in connection with the Company's business of any
information, technology or techniques allegedly proprietary to any of their
former employers, clients or other parties, or their obligations under any
agreements with prior employers, clients or other parties. The Company is not a
party to or subject to the provisions of any order, writ, injunction, judgment
or decree of any court or government agency or instrumentality and there is no
Action by the Company currently pending or which the Company intends to
initiate. For the purposes of this Agreement, "Knowledge" means (i) the actual
knowledge of such party's partners, officers, directors, principals, affiliates
or agents; and (ii) the knowledge that a prudent business person would have
obtained in the conduct of his or her business after making reasonable inquiry
and exercising reasonable diligence with respect to the particular matter in
question.
3.8 Employee Intellectual Property Covenants. Each
employee, officer, consultant and contractor of the Company identified on
Schedule 3.8 has entered into and executed Employee Intellectual Property
Covenants in the form attached to this Agreement as Exhibit B or an employment
or consulting agreement containing substantially similar terms.
3.9 Status of Proprietary Assets.
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(a) Ownership. Except as set forth on Schedule 3.9(a),
the Company has full title and ownership of, or has license to, all patents,
patent applications, trademarks, service marks, trade names, copyrights, moral
rights, mask works, trade secrets, confidential and proprietary information,
compositions of matter, formulas, designs, proprietary rights, know-how and
processes (all of the foregoing collectively referred to as the "Proprietary
Assets") necessary to enable it to carry on its business as now conducted and as
presently proposed to be conducted, without any conflict with or infringement of
the rights of others. A complete list of all the Company's Proprietary Assets is
set forth on Schedule 3.9(a) to this Agreement. To the best of the Company's
Knowledge, no third party has any ownership right, title, interest, claim in or
lien on any of the Company's Proprietary Assets and the Company has taken, and
in the future the Company will use its best efforts to take, all steps
reasonably necessary to preserve its legal rights in, and the secrecy of, all
its Proprietary Assets, except those for which disclosure is required for
legitimate business or legal reasons.
(b) Licenses; Other Agreements. Except as set forth on
Schedule 3.9(b), the Company has not granted, and, there are not outstanding,
any options, licenses or agreements of any kind relating to any Proprietary
Asset of the Company, nor is the Company bound by or a party to any option,
license or agreement of any kind with respect to any of its Proprietary Assets.
The Company is not obligated to pay any royalties or other payments to third
parties with respect to the marketing, sale, distribution, manufacture, license
or use of any Proprietary Asset or any other property or rights.
(c) No Infringement. To the best of the Company's
Knowledge, the Company has not violated or infringed, and is not currently
violating or infringing, and the Company has not received any communications
alleging that the Company (or any of its employees or consultants) has violated
or infringed or, by conducting its business as proposed, would violate or
infringe, any Proprietary Asset of any other person or entity.
(d) No Breach by Employee. The Company is not aware
that any employee or consultant of the Company is obligated under any agreement
(including licenses, covenants or commitments of any nature) or subject to any
judgment, decree or order of any court or administrative agency, or any other
restriction that would interfere with the use of his or her best efforts to
carry out his or her duties for the Company or to promote the interests of the
Company or that would conflict with the Company's business as proposed to be
conducted. The carrying on of the Company's business by the employees and
contractors of the Company and the conduct of the Company business as presently
proposed, will not, to the best of the Company's Knowledge, conflict with or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract, covenant or instrument under which any of such
employees or contractors or the Company is now obligated. The Company does not
believe it is or will be necessary to utilize any inventions of any employees of
the Company (or persons the Company currently intends to hire) made prior to
their employment by the Company which have not otherwise become property of the
Company. At no time during the conception of or reduction of any of the
Proprietary Assets to practice was any developer, inventor or other contributor
to such patents operating under any grants from any
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governmental entity or agency or private source, performing research sponsored
by any governmental entity or agency or private source or subject to any
employment agreement or invention assignment or nondisclosure agreement or other
obligation with any third party that could adversely affect the Company's rights
in such Proprietary Assets.
3.10 Compliance with Law and Charter Documents. The Company
is not in violation or default of any provisions of its Certificate of
Incorporation or Bylaws, both as amended, and to the best of the Company's
Knowledge, the Company is in compliance with all applicable statutes, laws,
regulations and executive orders of the United States of America and all states,
foreign countries or other governmental bodies and agencies having jurisdiction
over the Company's business or properties. The Company has not received any
notice of any violation of such statutes, laws, regulations or orders which has
not been remedied prior to the date hereof. The execution, delivery and
performance of this Agreement and the Related Agreements and the consummation of
the transactions contemplated hereby or thereby will not result in any such
violation or default, or be in conflict with or constitute, with or without the
passage of time or the giving of notice or both, either a default under the
Company's Certificate of Incorporation or Bylaws, or any agreement or contract
of the Company, or, to the best of the Company's Knowledge, a violation of any
statutes, laws, regulations or orders, or an event which results in the creation
of any lien, charge or encumbrance upon any asset of the Company.
3.11 Material Agreements.
(a) List of Material Agreements. Attached to this
Agreement as Schedule 3.11 is a complete list of all agreements, contracts,
leases, licenses, instruments and commitments (oral or written) to which the
Company is a party or is bound that, individually or in the aggregate, are
material to the business, properties, financial condition, results of operation,
affairs or prospects of the Company ("Material Agreements"); provided that for
purposes of this Section 3.11 only, no agreement under which the only remaining
obligation of the Company is to make a payment of money in the amount of $5,000
or less will be deemed to be material to its business, properties, financial
condition or results of operations if the failure to make such payment will not
result in the loss by the Company of any rights that are material to the conduct
of its business.
(b) No Breach. The Company has not breached, nor does
the Company have any Knowledge of any claim or threat that the Company has
breached, any term or condition of (i) any Material Agreement set forth in
Schedule 3.11 or (ii) any other agreement, contract, lease, license, instrument
or commitment that, individually or in the aggregate, would have a material
adverse effect on the business, properties, financial condition, results of
operations or affairs or prospects of the Company. Each Material Agreement set
forth in Schedule 3.11 is in full force and effect and, to the Company's
Knowledge, no other party to such Material Agreement is in default thereunder.
The Company is not a party to any agreement that restricts its ability to market
or sell any of its products (whether by territorial restriction or otherwise).
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3.12 Registration Rights. Except as provided in the
Investor Rights Agreement, the Company has not granted or agreed to grant to any
person or entity any rights (including piggyback registration rights) to have
any securities of the Company registered with the United States Securities and
Exchange Commission ("SEC") or any other governmental authority.
3.13 Charter Documents; Minutes. The Certificate of
Incorporation and the Bylaws of the Company are in the form previously provided
to the Investor. The minute books of the Company provided to the Investor
contain a complete summary of all meetings, consents and actions of the board of
directors and the stockholders of the Company since the time of its
incorporation, accurately reflecting all transactions referred to in such
minutes in all material respects.
3.14 Title to Property and Assets. The Company owns its
properties and assets free and clear of all mortgages, deeds of trust, liens,
encumbrances, security interests and claims except for statutory liens for the
payment of current taxes that are not yet delinquent and liens, encumbrances and
security interests which arise in the ordinary course of business and which do
not affect material properties and assets of the Company. With respect to the
property and assets it leases, the Company is in compliance with such leases
and, to the best of the Company's Knowledge, the Company holds valid leasehold
interests in such assets free of any liens, encumbrances, security interests or
claims of any party other than the lessors of such property and assets.
3.15 Financial Statements. The Company has no historical
financial statements.
3.16 Certain Actions. Except as set forth on Schedule 3.16,
, the Company has not: (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 $10,000 in the aggregate; (iii) made any
loans or advances to any person, other than ordinary advances for travel
expenses; (iv) sold, exchanged or otherwise disposed of any material assets or
rights other than the sale of inventory in the ordinary course of its business;
or (v) entered into any transactions with any of its officers, directors or
employees or any entity controlled by any of such individuals.
3.17 Activities. Except as set forth on Schedule 3.17, the
Company has not:
(a) formed or acquired or disposed of any interest in
any corporation, partnership, joint venture, or other entity;
(b) written up, written down, or written off the book
value of any amount of assets;
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(c) declared, paid, or set aside for payment any
dividend or distribution with respect to its capital stock;
(d) redeemed, purchased, or otherwise acquired, or
sold, granted, or otherwise disposed of, directly or indirectly, any of its
capital stock or securities or any rights to acquire such capital stock or
securities, or agreed to changes in the terms and conditions of any such rights;
(e) increased the compensation of or paid or accrued
any bonus to any employee or contributed or accrued or contributed to any
employee benefit plan, other than in accordance with policies, practices, or
requirements established and in effect as of the Closing Date;
(f) entered into any employment, compensation,
consulting or collective bargaining agreement with any person or group;
(g) entered into, adopted, or materially amended any
employee benefit plan; or
(h) entered into any other material commitment or
transaction not disclosed elsewhere herein.
In addition to the foregoing, there has not been:
(i) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the assets, properties,
financial condition, operating results, prospects or business of the Company (as
presently conducted and as presently proposed to be conducted);
(j) any waiver by the Company of a valuable right or
of a material debt owed to it;
(k) any satisfaction or discharge of any lien, claim
or encumbrance or payment of any obligation by the Company, except such a
satisfaction, discharge or payment made in the ordinary course of business that
is not material to the assets, properties, financial condition, operating
results or business of the Company;
(l) any material change or amendment to a material
agreement or arrangement by which the Company or any of its assets or properties
is bound or subject, except for changes or amendments which are expressly
provided for or disclosed in this Agreement; or
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(m) to the Company's Knowledge, any other event or
condition of any character which would materially and adversely affect the
assets, properties, financial condition, operating results or business of the
Company.
3.18 ERISA Plans. Schedule 3.18 identifies all employee
benefit plans or arrangements applicable to the employees of the Company, and
all material fixed or contingent liabilities or obligations of the Company with
respect to any person now or formerly employed by the Company, including pension
or thrift plans, individual or supplemental pension or accrued compensation
arrangements, contributions to hospitalization or other health or life insurance
programs, incentive plans, bonus arrangements, and vacation, sick -leave,
disability, and termination arrangements or policies, including workers'
compensation policies. The Company shall furnish or make available to the
Investor true and complete copies of all written documents or information with
respect to employee matters and arrangements, including without limitation all
employee handbooks, rules, policies, plan documents, trust agreements,
employment agreements, summary plan descriptions, and descriptions of any
unwritten plans identified in Schedule 3.18. Any employee benefits and welfare
plans or arrangements identified in Schedule 3.18 were established and have been
executed, managed, and administered without material exception in accordance
with all applicable requirements of the Internal Revenue Code of 1986, as
amended (the "Code"), and the Employee Retirement Income Security Act of 1974,
as amended, and other applicable laws. There is no governmental audit or
examination of any of such plans or arrangements pending, nor, to the Knowledge
of the Company, threatened. There exists no action, suit, or claim (other than
routine claims for benefits) with respect to any of such plans or arrangements
pending, or, to the Knowledge of the Company, threatened, against any of such
plans or arrangements, and the Company knows of no facts which could give rise
to any such action, suit, or claim.
3.19 Insurance. Within ten (10) days of entering into a
lease or other arrangement for the use or acquisition of any office space for
use by the business, the Company will put in place, and thereafter will maintain
in full force and effect, fire and casualty insurance policies as is customary
for the type of business engaged in by the Company, 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. True and complete
copies of all such insurance policies have previously been furnished to the
Investor and notice of any termination or threatened termination of such
policies has been made known to the Investor.
3.20 Tax Returns and Payments. Neither the Company, nor any
entity to whose liabilities the Company has succeeded or assumed, has filed or
been included in a consolidated, unitary, or combined tax return with another
person. Except as set forth on Schedule 3.20, the Company represents and
warrants that: (a) the Company has filed all tax returns and reports required to
have been filed by or for it; including but not limited to those with respect to
income, payroll, property, employee withholding, social security, unemployment,
franchise, excise, use, and sales taxes, and has either paid in full all taxes
that have become due as reflected on any such return or report (including any
interest and penalties with respect thereto shown to be due) or has fully
accrued on its books or has established adequate reserves for all taxes payable
but not
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yet due; (b) all material information set forth in such returns or reports is
accurate and complete; (c) the Company has paid or made adequate provision for
all taxes, additions to tax, penalties, and interest payable by the Company; (d)
to the best of the Company's Knowledge, no unpaid tax deficiency has been
asserted against or with respect to the Company by any taxing authority, and the
Company has not received written notice of any such assertion; (e) the Company
has collected or withheld all amounts required to be collected or withheld by it
for any taxes, and to the extent required by law, all such amounts have been
paid to the appropriate governmental agencies or set aside in appropriate
accounts for future payment when due; (f) the Company is in compliance with, and
its records contain all information and documents necessary to comply with, all
applicable information reporting and tax withholding requirements; (g) the books
and records of the Company fully and properly reflect its liability for all
accrued taxes, additions to tax, penalties, and interest; (h) the Company has
not granted, nor is it subject to, any waiver of the period of limitations for
the assessment of tax for any currently open taxable period; (i) the Company has
not made or entered into, and holds no asset subject to, a consent filed
pursuant to Section 341(f) of the Code and the regulations thereunder or a "safe
harbor lease" subject to former Section 168(f)(8) of the Internal Revenue Code
of 1954, as amended before the Tax Reform Act of 1986, and the regulations
thereunder; (j) the Company is not required to include in income any amount for
an adjustment pursuant to Section 481 of the Code or the regulations thereunder;
and (k) the Company is not a party to, or obligated under, any agreement or
other arrangement providing for the payment of any amount that would be an
"excess parachute payment" under Section 280G of the Code.
3.21 Employee Matters.
(a) The Company is not bound by or subject to any
contract, commitment or arrangement with any labor union, and to the Company's
Knowledge, no labor union has requested, sought or attempted to represent any
employees, representatives or agents of the Company. There is no strike or other
labor dispute involving the Company pending nor, to the Company's Knowledge,
threatened, nor is the Company aware of any labor organization activity
involving its employees.
(b) The Company is not aware that any officer or
employee intends to terminate his or her employment with the Company, nor does
the Company have any present intention to terminate the employment of any of its
officers or employees. Schedule 3.21(b) identifies all employees and consultants
of the Company and the title, term (if other than at will) and compensation of
each.
(c) After due inquiry, to the Company's Knowledge, the
Company (i) is in full compliance with all applicable laws respecting employment
and employment practices, terms and conditions of employment, and wages and
hours; (ii) is in full compliance with all of its obligations under applicable
workers compensation laws, rules, and regulations; and (iii) is not engaged in
any unfair labor practice.
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(d) To the Company's Knowledge, no current employee,
director or officer has been indicted or convicted of a felony or misdemeanor
(other than traffic violations).
3.22 Environmental Matters.
The Company has no leased or owned properties, and has
not owned, leased or operated any facilities at any time prior to the Closing.
3.23 Interested Party Transactions. To the Company's
Knowledge,
(a) Except as disclosed on Schedule 3.23, no officer,
employee or director of the Company or any "affiliate" or "associate" (as those
terms are defined in Rule 405 of the 0000 Xxx) has had, either directly or
indirectly, a material interest in: (i) any person or entity which purchases
from or sells, licenses or furnishes to the Company any goods, property,
technology, intellectual or other property rights or services; or (ii) any
contract or agreement to which the Company is a party or by which it may be
bound or affected.
(b) the Company has no indebtedness to or with an
officer, employee, director, affiliate or associate.
3.24 Use of Proceeds. The Company shall use the proceeds
from the sale of the Purchased Shares for the purposes identified on Schedule
3.24.
3.25 Disclosure. This Agreement and the Schedules and
Exhibits hereto (when read together) do not contain any untrue statement of a
material fact and do not omit to state a material fact necessary to make the
statements therein or herein not misleading. To the Company's Knowledge, the
financial projections contained in the Business Plan, attached hereto as
Schedule 3.25 (as supplemented through the date hereof, the "Business Plan "),
fairly present its management's good faith estimates as of the date of the
Business Plan and as of the date of this Agreement.
3.26 Real Property Holding Corporation Status. Since its
inception, the Company has not been a "United States real property holding
corporation," as defined in Section 897(c)(2) of the Code, and in Section
1.897-2(b) of the Treasury Regulations issued thereunder (the "Regulations"),
and the Company has filed with the Internal Revenue Service all statements, if
any, with its United States income tax returns which are required under Section
1.897-2(h) of the Regulations.
3.27 Tax Elections. The Company has not elected pursuant to
the Code, to be treated as an "S" corporation or a collapsible corporation
pursuant to Section 341(f) or Section 1362(a) of the Code, nor has it made any
other elections pursuant to the Code (other than elections which relate solely
to matters of accounting, depreciation or amortization) which would have a
material affect on the Company, its financial condition, its business as
presently conducted or presently properties or material assets.
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3.28 No Material Undisclosed Liabilities.
(a) There is no liability or obligation of the Company
of any nature, whether absolute, accrued, contingent, or otherwise in the amount
of $5,000 or more, other than closing costs associated with this Agreement and
the contractual obligations disclosed on Schedule 3.11.
(b) The Company is not signatory to, and is not in any
manner a guarantor, endorser, assumptor or otherwise primarily or secondarily
liable for or responsible for the payment of, any notes payable or other
obligations.
3.29 Accounts Receivable. The Company does not have any
accounts receivable as of the date hereof.
4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF
INVESTOR. The Investor hereby represents and warrants to, and agree with, the
Company that:
4.1 Authorization. This Agreement constitutes the
Investor's valid and legally binding obligation, enforceable in accordance with
its terms except as may be limited by (i) applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting the
enforcement of creditors' rights generally and (ii) the effect of rules of law
governing the availability of equitable remedies. The Investor represents that
it has full power and authority to enter into this Agreement and the Related
Agreements.
4.2 Purchase for Own Account. The Purchased Shares to be
purchased by the Investor hereunder will be acquired for investment for the
Investor's own account, not as a nominee or agent, and not with a view to the
public resale or distribution thereof within the meaning of the 1933 Act, and
the Investor has no present intention of selling, granting any participation in,
or otherwise distributing the same. The Investor also represents that it has not
been formed for the specific purpose of acquiring the Purchased Shares.
4.3 Disclosure of Information. The Investor has received or
has had full access to all the information it considers necessary or appropriate
to make an informed investment decision with respect to the Purchased Shares to
be purchased by the Investor under this Agreement. The Investor further has had
an opportunity to ask questions and receive answers from the Company regarding
the terms and conditions of the offering of the Purchased Shares and to obtain
additional information (to the extent the Company possessed such information or
could acquire it without unreasonable effort or expense) necessary to verify any
information furnished to the Investor or to which the Investor had access. The
foregoing, however, does not in any way limit or modify the representations and
warranties made by the Company in Section 3.
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4.4 Accredited Investor Status. The Investor is an
"accredited investor" within the meaning of Regulation D promulgated under the
0000 Xxx.
4.5 Investment Experience. The Investor understands that
the acquisition of the Purchased Shares involves substantial risk. The Investor:
(i) has experience as an investor in securities of companies in the development
stage and acknowledges that it is able to fend for itself, can bear the economic
risk of its acquisition of the Purchased Shares and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of this acquisition of the Purchased Shares and protecting its
own interests in connection with this acquisition and/or (ii) has a preexisting
personal or business relationship with the Company and certain of its officers,
directors or controlling persons of a nature and duration that enables the
Investor to be aware of the character, business acumen and financial
circumstances of such persons.
4.6 Restricted Securities. The Investor understands that
the Purchased Shares are characterized as "restricted securities" under the 1933
Act inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under the 1933 Act and applicable rules and
regulations thereunder such securities may be resold without registration under
the 1933 Act only in certain limited circumstances. In this connection, the
Investor represents that it is familiar with Rule 144 of the rules and
regulations promulgated under the 1933 Act ("Rule 144"), as presently in effect,
and understands the resale limitations imposed thereby and by the 1933 Act. The
Investor understands that the Company is under no obligation to register any of
the securities sold hereunder except as provided in the Investor Rights
Agreement. The Investor understands that no public market now exists for any of
the Purchased Shares and that it is uncertain whether a public market will ever
exist for the Purchased Shares or the Conversion Shares.
4.7 Further Limitations on Disposition. Without in any way
limiting the representations set forth above, the Investor further agrees not to
make any disposition of all or any portion of the Purchased Shares or the
Conversion Shares unless and until:
(a) there is then in effect a registration statement
under the 1933 Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or
(b) (i) the Investor shall have notified the Company of
the proposed disposition and shall have furnished the Company with a statement
of the circumstances surrounding the proposed disposition, and (ii) the Investor
shall have furnished the Company, at the expense of the Investor or its
transferees, with an opinion of counsel, reasonably satisfactory to the Company,
that such disposition will not require registration of such securities under the
1933 Act.
Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be required:
(i) for any transfer of any Purchased Shares or Conversion Shares in compliance
with Rule 144 or Rule 144A; or (ii) for any transfer of any Purchased Shares or
Conversion Shares by the Investor to (A) a partner or member of such
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Investor, (B) a retired partner of such Investor who retires after the date
hereof, or (C) the estate of any such partner or member; provided that in each
of the foregoing cases the transferee agrees in writing to be subject to the
terms of this Section 4 (other than Section 4.4) to the same extent as if the
transferee were an original Investor hereunder.
4.8 Legends. It is understood that the certificates
evidencing the Purchased Shares and the Conversion Shares will bear the legends
set forth below:
(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER
THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION
OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
(b) Any legend required by state securities laws,
including a legend substantially in the form of the following:
THE SHARES EVIDENCED BY THIS CERTIFICATE: (1) ARE CONVERTIBLE INTO
SHARES OF COMMON STOCK OF THE COMPANY AT THE OPTION OF THE HOLDER AT ANY TIME
PRIOR TO AUTOMATIC CONVERSION THEREOF; AND (2) AUTOMATICALLY CONVERT INTO COMMON
STOCK OF THE COMPANY IN THE EVENT OF A PUBLIC OFFERING MEETING CERTAIN
REQUIREMENTS OR UPON CERTAIN CONSENTS OF THE HOLDERS OF THE COMPANY'S PREFERRED
STOCK; ALL PURSUANT TO AND UPON THE TERMS AND CONDITIONS SPECIFIED IN THE
COMPANY'S CERTIFICATE OF DESIGNATION. A COPY OF SUCH CERTIFICATE OF DESIGNATION
MAY BE OBTAINED, WITHOUT CHARGE, AT THE COMPANY'S PRINCIPAL OFFICE.
The legend set forth in (a) above shall be removed by the
Company from any certificate evidencing Purchased Shares or Conversion Shares
upon delivery to the Company of an opinion by counsel, reasonably satisfactory
to the Company, that a registration statement under the 1933 Act is at that time
in effect with respect to the legended security or that such security can be
freely transferred in a public sale without such a registration statement being
in effect and that such transfer will not jeopardize the exemption or exemptions
from registration pursuant to which the Company issued the Purchased Shares or
Conversion Shares.
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5. CONDITIONS TO INVESTOR'S OBLIGATIONS AT CLOSING. The
obligations of the Investor to the Company under this Agreement are subject to
the fulfillment or waiver, on or before the Closing, of each of the following
conditions, the waiver of which shall not be effective against the Investor if
the Investor does not consent to such waiver, which consent may be given by
written communication to the Company or its counsel:
5.1 Representations and Warranties True. Each of the
representations and warranties of the Company contained in Section 3 shall be
true and correct 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.
5.2 Due Diligence. The Investor shall have completed, to
its sole satisfaction, its due diligence of the Company.
5.3 Employee Confidentiality Agreements. As provided in
Section 3.8 above, the Company shall have furnished the Investor with copies of
the Employee Intellectual Property Covenants signed by each employee, officer,
consultant or contractor of the Company identified on Schedule 3.8. At closing,
Xxxxxx X. Xxxxxxxxx and Xxxxxxx Xxxxx Xxxxx will execute and deliver employment
agreements acceptable to the Investor.
5.4 Performance. The Company shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing and shall have obtained all approvals, consents and qualifications
necessary to complete the purchase and sale described herein.
5.5 Series A Certificate. The Series A Certificate shall
have been duly adopted by the Company by all necessary corporate action of its
Board of Directors and stockholders, and shall have been duly filed with and
accepted by the Delaware Secretary of State.
5.6 Compliance Certificate. The Company shall have
delivered to the Investor at the Closing a certificate signed on its behalf by
its President, Chief Executive Officer, or Chief Financial Officer certifying
that the conditions specified in Sections 5.1 and 5.3 through 5.6 have been
fulfilled and stating that there shall have been no material adverse change in
the business, affairs, prospects, operations, properties, assets or condition of
the Company.
5.7 Securities Exemptions. The offer and sale of the
Purchased Shares to the Investor pursuant to this Agreement shall be exempt from
the registration requirements of the 1933 Act and the registration and/or
qualification requirements of all other applicable state securities laws.
5.8 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 Investor and to the counsel for the
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Investor, and they shall each have received all such counterpart originals and
certified or other copies of such documents as they may reasonably request. Such
documents shall include (but not be limited to) the following:
(a) Certified Charter Documents. A copy of the
Certificate of Incorporation, Series A Certificate and Bylaws of the Company (as
amended through the date of the Closing), certified by the Secretary of the
Company as true and correct copies thereof as of the Closing.
(b) Secretary's Incumbency Certificate. A certificate
of the Secretary or an Assistant Secretary or other officer of the Company
certifying the names of the officers of the Company authorized to sign this
Agreement, the certificates for the Purchased Shares and the other documents,
instruments or certificates to be delivered pursuant to this Agreement by the
Company or any of its officers, together with the true signatures of such
officers.
(c) Corporate Actions. A copy of the resolutions of the
Board of Directors and the stockholders of the Company evidencing the approval
of the Series A Certificate, the approval of this Agreement, the Related
Agreements, the issuance of the Purchased Shares and the other matters
contemplated hereby, certified by the Secretary of the Company to be true,
complete and correct.
(d) Good Standing Certificates. A certificate of good
standing of the Company issued by the Delaware Secretary of State, dated no
earlier than ten (10) days prior to the date of Closing.
5.9 Ownership of Technology. The Investor shall have
received from the Company all documents and other materials requested by the
Investor in writing for the purpose of examining and determining the Company's
rights in and to any technology, product and Proprietary Assets now used,
proposed to be used in, or necessary to, the Company's business as now conducted
and proposed to be conducted, and the status of the Company's ownership rights
in and to all such technology, products and Proprietary Assets shall be
reasonably satisfactory to the Investor.
5.10 Board of Directors. All appropriate action shall be
taken to ensure that the Company's Board of Directors consists of Xxxxxx
Xxxxxxxxx, Winston Xxxxx Xxxxx and Xxx Xxxx following the Closing.
5.11 No Material Change. There shall have been no material
adverse change in the business, affairs, prospects, operations, properties,
assets or condition of the Company.
5.12 Opinion of Company Counsel. The Investor shall have
received an opinion from Xxxxxxxx Xxxxxxxx Xxxxxxxx Xxxxxx & Israel PC, counsel
for the Company, dated as of the date of the Closing, in the form attached
hereto as Exhibit C.
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5.13 Investor Rights Agreement. The Company and the
Investor shall have executed and delivered the Investor Rights Agreement in the
form attached to this Agreement as Exhibit D (the "Investor Rights Agreement").
5.14 Co-Sale Agreement. The Company, the stockholders of
the Company named therein and the Investor shall have executed and delivered the
Co-Sale Agreement in the form attached as Exhibit E (the "Co-Sale Agreement").
5.15 Strategic Plan. The Company and the Investor shall
have commenced mutually developing a Strategic Plan for the Company. The Company
covenants and agrees to continue mutual development of the strategic Plan
following Closing. The Strategic Plan shall be inserted in the Company's minute
books for reference and be updated on an annual basis.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The
obligations of the Company to the Investor under this Agreement are subject to
the fulfillment or waiver, on or before the Closing, of each of the following
conditions, the waiver of which shall not be effective against the Company if
the Company does not consent to such waiver, which consent may be given by
written communication to the Investor or its counsel:
6.1 Representations and Warranties. The representations and
warranties of the Investor contained in Section 4 shall be true and correct on
the date of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
6.2 Payment of Purchase Price. The Investor shall have
delivered to the Company the full purchase price of $500,000 less all costs
payable pursuant to Section 7.9, in accordance with the provisions of Section 2.
6.3 Series A Certificate. The Series A Certificate shall
have been duly adopted by the Company by all necessary corporate action of its
Board of Directors and stockholders, and shall have been duly filed with and
accepted by the Delaware Secretary of State.
6.4 Securities Exemptions. The offer and sale of the
Purchased Shares to the Investor pursuant to this Agreement shall be exempt from
the registration requirements of the 1933 Act and the registration and/or
qualification requirements of all other applicable state securities laws.
6.5 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 Company and to the Company's legal counsel, and the Company
shall have received all such counterpart originals and certified or other copies
of such documents as it may reasonably request.
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6.6 Investor Rights Agreement. The Company and the Investor
shall have executed and delivered the Investor Rights Agreement.
6.7 Co-Sale Agreement. The Company, the stockholders of the
Company named therein and the Investor shall have executed and delivered the
Co-Sale Agreement.
7. MISCELLANEOUS.
7.1 Survival of Warranties. The representations, warranties
and covenants of the Company and the Investor contained in or made pursuant to
this Agreement shall survive the execution and delivery of this Agreement and
the Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investor, its counsel or the Company,
as the case may be.
7.2 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.
7.3 Governing Law; Venue; Waiver of Jury Trial. This
Agreement and the Related Agreements shall be governed by and construed under
the internal laws of the State of Delaware, without reference to principles of
conflict of laws or choice of laws. The venue for any claim, controversy or
dispute which arises between the parties hereto (with respect to this Agreement
or any Related Agreement) shall be the United States District Court for the
District of Delaware (or state court if federal jurisdiction does not apply) and
the parties hereby consent to the jurisdiction of such court and waive any
objection to such venue. THE PARTIES TO THIS AGREEMENT HEREBY WAIVE THEIR RIGHT
TO A TRIAL BY JURY WITH RESPECT TO DISPUTES ARISING UNDER THIS AGREEMENT AND THE
RELATED AGREEMENTS AND CONSENT TO A BENCH TRIAL WITH THE APPROPRIATE JUDGE
ACTING AS THE FINDER OF FACT.
7.4 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.
7.5 Headings. The headings and captions used in this Ag
reement are used for convenience only and are not to be considered in construing
or interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules shall, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which exhibits and schedules are incorporated herein by this reference.
7.6 Notices. Any notice, request or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or if deposited in the U.S. mail by
registered or certified mail, return receipt requested, postage prepaid, as
follows:
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If to the Investor: Net Value Holdings, Inc.
0 Xxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Attention: President
with a copy to: Klehr, Harrison, Xxxxxx, Branzburg & Xxxxxx, LLP
(which shall not constitute 000 X. Xxxxx Xxxxxx
notice hereunder) Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
If to the Company: XxxxXx.xxx, Inc.
00 Xxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx, President
with a copy to: Xxxxxxxx Xxxxxxxx Xxxxxxxx Xxxxxx & Israel PC
(which shall not constitute 00 Xxxxxxx Xxxxxx, Xxxxx 000
notice hereunder) Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx, Esquire
Any party hereto (and such party's permitted assigns) may by notice so
given change its address for future notices hereunder. Notice shall conclusively
be deemed to have been given when personally delivered or when deposited in the
mail in the mail in the manner set forth above.
7.7 No Finder's Fees. Neither the Investor, the Company, or
any officer, director, or employee of the Investor or the Company (i) employed
any broker or finder, or (ii) incurred any liability whatsoever, for any
brokerage fees, commissions, or finders' fees in connection with the
transactions contemplated hereby. The Investor agrees to indemnify and to hold
harmless the Company from any liability for any commission or compensation in
the nature of a finders' or broker's fee (and any asserted liability) for which
the Investor or any of its officers, partners, employees, or representatives is
responsible. The Company agrees to indemnify and hold harmless the Investor from
any liability for any commission or compensation in the nature of a finder's or
broker's fee (and any asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
7.8 Attorneys' Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the Related
Agreements or the Series A Certificate, the prevailing party shall be entitled
to reasonable attorneys' fees, costs and necessary disbursements in addition to
any other relief to which such party may be entitled.
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7.9 Costs, Expenses. The Company shall pay, or reimburse
the Investor, for all costs and out-of pocket expenses of the Investor incurred
in connection with (i) the Investor's due diligence performed in connection with
its proposed investment in the Company; and (ii) the negotiation, preparation,
execution and delivery of this Agreement, the Related Agreements and the Series
A Certificate (including without limitation, the fees and expenses of counsel to
the Investor), such fees and expenses not to exceed $15,000. The commissions,
fees, costs and expenses identified in this Section 7.9 of this Agreement shall
be paid at closing out of the purchase price to be delivered by the Investor.
7.10 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 Investor.
Any amendment or waiver effected in accordance with this Section 7.10 shall be
binding upon each holder of any Purchased Shares and/or Conversion Shares at the
time outstanding, each future holder of such securities, and the Company.
7.11 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision(s)
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
7.12 Entire Agreement. This Agreement, together with all
exhibits and schedules hereto, constitutes the entire agreement and
understanding of the parties with respect to the subject matter hereof and
supersedes any and all prior negotiations, correspondence, agreements,
understandings duties or obligations between the parties with respect to the
subject matter hereof.
7.13 Further Assurances. From and after the date of this
Agreement, upon the request of the Investor or the Company, the Company and the
Investor shall execute and deliver such instruments, documents or other writings
as may be reasonably necessary or desirable to confirm and carry out and to
effectuate fully the intent and purposes of this Agreement.
7.14 Mutual Drafting. This Agreement is the result of the
joint efforts of the Company and the Investor, and each provision hereof has
been subject to the mutual consultation, negotiation and agreement of the
parties and there shall be no construction against any party based on any
presumption of the party's involvement in the drafting thereof.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Series A
Convertible Preferred Stock Purchase Agreement as of the date first above
written.
THE COMPANY:
XXXXXX.XXX, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------
Xxxxxx X. Xxxxxxxxx, President
THE INVESTOR:
NET VALUE HOLDINGS, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxx
-------------------------------
Xxxxxx X. Xxxxx, President
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LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
Schedule 3.2(c) - Outstanding Warrants, Options and
Reserved Shares
Schedule 3.2(d) - Outstanding Security Holders
Schedule 3.7 - Litigation
Schedule 3.8 Key Employees
Schedule 3.9(a) - Ownership of Proprietary Assets
Schedule 3.9(b) Licenses, Other Agreements relating to Proprietary Assets
Schedule 3.11 - List of Material Contracts
Schedule 3.16 - Certain Actions
Schedule 3.17 - Activities
Schedule 3.18 - ERISA Plans
Schedule 3.20 - Tax Matters
Schedule 3.21(b) - Employee Matters
Schedule 3.23 - Interested Party Transactions
Schedule 3.24 - Use of Proceeds
Schedule 3.25 - Business Plan
EXHIBITS
Exhibit A - Series A Certificate
Exhibit B - Form of Invention Assignment and Confidentiality Agreement
Exhibit C - Form of Legal Opinion
Exhibit D - Form of Investor Rights Agreement
Exhibit E - Form of Co-Sale Agreement
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