SERIES A CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
THIS SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this
"Agreement") is made and entered into as of January 31, 2000, by and between
XXXXXXXXXXXXXXXX.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 Million (3,000,000) shares of the Company's
Series A Convertible Preferred Stock, $.001 par value per share (the "Series A
Stock") having the rights, preferences, privileges and restrictions set forth in
the Certificate of Designation designating the Series A Stock 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, 2,858,215 shares of Series A Stock which shall equal 25%
of the Company's Common Stock on a post-investment fully diluted basis at a
price of $0.35 per share, or an aggregate price of $1,000,000 as part of the
first round of the Company's financing, which round shall end on or before
February 28, 2000 (the "First Round Offering"). 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 Klehr, Harrison, Xxxxxx, Xxxxxxxxx & Xxxxxx, LLP,
counsel to the Investor, at 000 X. Xxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx
00000 at 9:00 a.m. Eastern Time, on January 31, 2000, 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 the Purchased Shares
against delivery to the Company by the Investor of the full purchase price of
the Purchased Shares, 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 Ten Million
(10,000,000) authorized shares of preferred stock, $.001 par value per share, of
which Three Million (3,000,000) shares are 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 Twenty Million
(20,000,000) authorized shares of common stock, $0.001 par value per share (the
"Common Stock"), of which Six Million Four Hundred Fifty-nine Thousand Seven
Hundred Fifteen (6,459,715) 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 and other security
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holders of the Company as of immediately prior to the Closing, which schedule
lists the type of instruments, certificate numbers in sequential order (if
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, association, 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), and the
Employment Agreements (as defined in Section 5.9), (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.
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(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 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 Proprietary Information and Inventions Agreement. Each
employee, officer, consultant and contractor of the Company identified on
Schedule 3.8 has entered into and executed a Proprietary Information and
Inventions Agreement in the form attached to this Agreement as Exhibit B or an
employment or consulting agreement containing substantially similar terms.
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3.9 Status of Proprietary Assets.
(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
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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 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
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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).
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. Attached to this Agreement as
Schedule 3.15 is an audited balance sheet of the Company dated December 31, 1999
(the "Balance Sheet Date") and an audited income, statement of changes in
stockholder equity and statement of cash flows of the Company for the period
ended December 31,1999 (all such financial statements being collectively
referred to herein as the "Financial Statements"). Such financial statements (a)
are in accordance with the books and records of the Company; (b) are true,
correct and complete and present fairly the financial condition of the Company
at the date or dates therein indicated and the results of operations for the
period or periods therein specified and (c) have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis,
except, as to the unaudited financial statement, for the omission of notes
thereto and normal year-end audit adjustments. The Company has good and
marketable title to all assets set forth on the balance sheets of the Financial
Statements, except for such assets as have been spent, sold or transferred in
the ordinary course of business since the Balance Sheet Date.
3.16 Certain Actions. Except as set forth on Schedule 3.16,
since the Balance Sheet Date, the Company has not: (a) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
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class or series of its capital stock; (b) incurred any indebtedness for money
borrowed or incurred any other liabilities individually in excess of $5,000 or
in excess of $10,000 in the aggregate; (c) made any loans or advances to any
person, other than ordinary advances for travel expenses; (d) 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 (d) entered into any
transactions with any of its officers, directors or employees or any entity
controlled by any of such individuals.
3.17 Activities Since Balance Sheet Date. Except as set forth
on Schedule 3.17, since the Balance Sheet Date, 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;
(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 on the Balance Sheet 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, since the Balance Sheet Date,
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);
8
(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
(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. The Company intends to obtain and 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
9
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 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 balance sheets contained in the Company Financial
Statements fully and properly reflect, as of the dates thereof, the liabilities
of the Company for all accrued taxes, additions to tax, penalties, and interest;
(h) for periods ending after the date of the most recent Financial Statements,
the books and records of the Company fully and properly reflect its liability
for all accrued taxes, additions to tax, penalties, and interest; (i) 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; (j)
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; (k) 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 (l) 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.
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(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.
(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.
(a) During the period that the Company has leased or
owned its properties or owned or operated any facilities, there have been no
disposals, releases or threatened releases of Hazardous Materials (as defined
below) on, from or under such properties or facilities. The Company has no
Knowledge of any presence, disposals, releases or threatened releases of
Hazardous Materials on, from or under any of such properties or facilities,
which may have occurred prior to the Company having taken possession of any of
such properties or facilities. For purposes of this Agreement, the terms
"disposal", "release", and "threatened release" shall have the definitions
assigned thereto by the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. ss. 9601 et seq., as amended ("CERCLA"). For
the purposes of this Section, "Hazardous Materials" shall mean any hazardous or
toxic substance, material or waste which is or becomes prior to the Closing
regulated under, or defined as a "hazardous substance", "pollutant",
"contaminant", "toxic chemical", "hazardous material", "toxic substance", or
"hazardous chemical" under (i) CERCLA; (ii) the Emergency Planning and Community
Right-to-Know Act, 42 U.S.C. Section 11001 et seq.; (iii) the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq.; (iv) the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq.; (v) the Occupational
Safety and Health Act of 1970, 29 U.S.C. Section 651 et seq.; (vi) regulations
promulgated under any of the above statutes; or (vii) any applicable state or
local statute, ordinance, rule, or regulation that has a scope or purpose
similar to those statutes identified above.
(b) None of the Company's properties or facilities is
in material violation of any federal, state, or local law, ordinance,
regulation, or order relating to industrial hygiene or to the environmental
conditions on, under or about such properties or facilities, including, but not
limited to, soil and ground water condition. During the time that the Company
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has owned or leased its properties and facilities, neither the Company nor, to
the Company's Knowledge, any third party, has used, generated, manufactured or
stored on, under or about such properties or facilities or transported to or
from such properties or facilities any Hazardous Materials.
(c) During the time that the Company has owned or
leased its properties and facilities, there has been no litigation brought or
threatened against the Company, or any settlement reached by the Company with,
any party or parties alleging the presence, disposal, release or threatened
release of any Hazardous Materials on, from or under any of such properties or
facilities.
(d) During the period that the Company has owned or
leased its properties and facilities, no Hazardous Materials have been
transported from such properties or facilities to any site or facility now
listed or proposed for listing on the National Priorities List, at 40 C.F.R.
Part 300, or any list with a similar scope or purpose published by any state
authority.
3.23 Interested Party Transactions. To the Company's
Knowledge,
(a) 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.
12
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.
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 individually, or $10,000 or more in the aggregate,
other than:
(i) the liabilities and obligations that are
fully reflected, accrued or reserved against on the balance sheets of the
Financial Statements, for which the reserves are appropriate and reasonable, or
incurred in the ordinary course of business and consistent with past practices;
(ii) the contractual obligations disclosed
on Schedules 3.11; and
(iii) the litigation and claims described on
Schedule 3.7.
(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 other than those set forth in the Financial Statements.
3.29 Accounts Receivable. The accounts receivable of the
Company reflected on the Financial Statements or otherwise arising in the
ordinary course of business after the date hereof reflect valid sales of
products and services made on or before such date.
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.
13
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 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.
4.4 Accredited Investor Status. The Investor is an "accredited
investor" within the meaning of Regulation D promulgated under the Act.
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 Act
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under the Act and applicable rules and
regulations thereunder such securities may be resold without registration under
the 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 Act ("Rule 144"), as presently in effect, and understands
the resale limitations imposed thereby and by the 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.
14
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 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 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 ANY STATE. 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:
15
THE SECURITIES REPRESENTED 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 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.
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 Proprietary Information and Inventions Agreements. As
provided in Section 3.8 above, the Company shall have furnished the Investor
with copies of the Proprietary Information and Inventions Agreement signed by
each employee, officer, consultant or contractor of the Company identified on
Schedule 3.8.
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.
16
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 Section 5.1 and Sections 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 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 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.
17
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: Xxxxxxx
Xxxxxxxxxxx, Xxxxx Xxxxx, Xxxxx Xxxxxx, and Xxxxxxx Xxxxxxxxxx following the
Closing.
5.11 Officers' Certificates. The Company shall deliver to the
Investor certificates executed by each of its officers and directors in which
each of them represents that he or she (i) has not made a personal filing or
been an officer or director, partner or member of an entity that has filed an
action seeking protection under the Bankruptcy Code of the United States of
America or analogous law of any jurisdiction not subject to the laws of the
United States of America during the past seven (7) years and (ii) has never been
convicted of any action that is defined as a crime that would adversely affect
the company or its public image or would be required to be disclosed under
Paragraph 401(f) of Regulation 5-K under the Act.
5.12 No Material Change. There shall have been no material
adverse change in the business, affairs, prospects, operations, properties,
assets or condition of the Company.
5.13 Opinion of Company Counsel. The Investor shall have
received an opinion from Xxxx, Forward, Xxxxxxxx & Scripps LLP, counsel for the
Company, dated as of the date of the Closing, in the form satisfactory to the
Investor and its counsel.
5.14 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").
5.15 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").
5.16 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.
5.17 Payment of Expenses. The Company shall have paid the
commissions, fees, costs and expenses identified in Section 7.9 of this
Agreement.
18
5.18 Employment Agreements. The Company shall have executed
with each of the individuals set forth on Schedule 5.18 (the "Founders")
employment agreements, and stock restriction agreements, in form satisfactory to
the Investor (collectively, the "Employment Agreements").
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 5 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 one million dollars ($1,000,000) 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 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.
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.
19
7.1 Year 2000 Budget. Promptly following the Closing, the
Company shall provide the Investor with operating and capital budgets for the
calendar year 2000 which are acceptable to the Investor.
7.2 D&O Insurance. As soon as practicable following the
Closing, the Company shall procure and maintain at all times Directors and
Officers Liability Insurance with industry standard coverage limits for
companies that are similar to the Company, but in no event less than $2,000,000
per occurrence.
7.3 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.
7.4 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.
7.5 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) or the State of
California and the parties hereby consent to the jurisdiction of such courts 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.
7.6 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.
7.7 Headings. The headings and captions used in this Agreement
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.
7.8 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:
20
If to the Investor: Net Value Holdings, Inc.
0 Xxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Attention: President
with a copy (which shall not constitute notice hereunder) to:
Klehr, Harrison, Xxxxxx, Branzburg & Xxxxxx, LLP
000 X. Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
If to the Company: XxxxxxxxxxXxxxxx.Xxx, Inc.
00 Xxxxxxxx
Xxxxxxx Xxxxxx, XX 00000
Attention: Xxxxx Xxxxx
with a copy (which shall not constitute notice hereunder) to:
Xxxx, Forward, Xxxxxxxx & Scripps, LLP
000 X. Xxxxxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx, 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.
7.9 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.
21
7.10 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.
7.11 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 $25,000.
7.12 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 8.10 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.
7.13 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.
7.14 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.
7.15 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.
7.16 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.
22
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:
XXXXXXXXXXXXXXXX.XXX, INC.,
a Delaware corporation
By: /s/ Xxxxx Xxxxx
---------------------------
Xxxxx Xxxxx, President
THE INVESTOR:
NET VALUE HOLDINGS, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxx
---------------------------
Xxxxxx X. Xxxxx, President
23
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 3.15A Year End Financial Statements
Schedule 3.15B Interim Financial Statements
Schedule 3.16 Certain Actions
Schedule 3.17 Activities Since Balance Sheet Date
Schedule 3.18 ERISA Plans
Schedule 3.20 Tax Matters
Schedule 3.21(b) Employee Matters
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 Investor Rights Agreement
Exhibit D Form of Co-Sale Agreement
24
