NETZERO, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
This Series C Preferred Stock Purchase Agreement (the "Stock Purchase
Agreement") is made as of __________________, by and between NetZero, Inc.,
a California corporation (the "Company"), and Xxxxx X. Xxxxxxx ("Optionee"
or "Purchaser").
All capitalized terms in this Agreement shall have the meaning assigned
to them in this Agreement or in the attached Appendix.
A. EXERCISE OF OPTION
1. EXERCISE. Optionee hereby purchases 150,000 shares of Series C
Preferred Stock (the "Purchased Shares") pursuant to that certain option (the
"Option") granted Optionee on December 4, 1998 (the "Grant Date") to purchase
up to 150,000 shares of Series C Preferred Stock (the "Option Shares") at the
exercise price of $0.6446 per share (the "Exercise Price").
2. PAYMENT. Concurrently with the delivery of this Agreement to the
Company, Optionee shall pay the Exercise Price for the Purchased Shares in
accordance with the provisions of the Option Agreement and shall deliver
whatever additional documents may be required by the Option Agreement as a
condition for exercise, together with a duly-executed blank Assignment
Separate from Certificate (in the form attached hereto as Exhibit I with
respect to the Purchased Shares.
3. SHAREHOLDER RIGHTS. Until such time as the Company exercises the
Repurchase Right, Optionee (or any successor in interest deriving their claim
of ownership through a Permitted Transfer from Optionee, such successor an
"Owner") shall have all the rights of a shareholder with respect to the
Purchased Shares as set forth in the Company's Articles of Incorporation, as
amended (including voting, dividend, liquidation and conversion rights),
subject, however, to the transfer restrictions of Article B.
B. SECURITIES LAW COMPLIANCE
1. EXEMPTION FROM REGISTRATION. Purchaser acknowledges that the
Purchased Shares are not being registered under the Securities Act of 1933,
as amended (the "1933 ACT"), based, in part, on reliance that the issuance of
the Purchased Shares is exempt from registration under Section 4(2) of the
1933 Act as not involving any public offering. Purchaser further acknowledges
that the Company's reliance on such exemption is predicated, in part, on the
representations set forth below made by Purchaser to the Company:
(a) Purchaser is acquiring the Purchased Shares solely for his
own account, for investment purposes only, and not with an intent to sell,
or for resale in connection with any distribution of all or any portion of
the Shares within the meaning of the 1933 Act;
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(b) Purchaser is an "Accredited Investor" as that term is defined
in Rule 501 of the General Rules and Regulations under the Securities Act of
1933;
(c) In evaluating the merits and risks of an investment in the
Purchased Shares, Purchaser has relied upon the advice of Purchaser's legal
counsel, tax advisors, and/or other investment advisors;
(d) Purchaser is experienced in evaluating and investing in
companies such as the Company. In addition, Purchaser has a preexisting
business relationship with the Company. Purchaser has been given access to
all books, records and other information of the Company which Purchaser has
desired to review and analyze in connection with Purchaser's purchase of the
Purchased Shares hereunder;
(e) Purchaser is aware that an investment in securities of a
closely held corporation such as the Company is non-marketable,
non-transferable and will require Purchaser's capital to be invested for an
indefinite period of time, possibly without return. Purchaser has no need for
liquidity in this investment, has the ability to bear the economic risk of
this investment, and can afford a complete loss of the entire purchase price
paid for the Purchased Shares;
(f) Purchaser understands that the Shares being purchased
hereunder are characterized as "restricted securities" under the federal
securities laws since the Purchased Shares are being acquired from the
Company in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without
registration under the 1933 Act only in certain limited circumstances.
Purchaser understands that the Company has no obligation to file a
registration statement under the 1933 Act for the Purchased Shares or to
otherwise assist Purchaser in complying with any exemption from registration.
Purchaser represents that Purchaser is familiar with Rule 144 promulgated
under the 1933 Act, as presently in effect, and understands the resale
limitations imposed thereby and by the 1933 Act; and
(g) At no time was an oral representation made to Purchaser
relating to the purchase of the Purchased Shares or was Purchaser presented
with or solicited by any leaflet, public or promotional material, newspaper
or magazine article, radio or television advertisement or any other form of
general advertising relating to the purchase hereunder.
2. DISPOSITION OF PURCHASED SHARES. Purchaser hereby agrees that
Purchaser shall make no disposition of the Purchased Shares unless and until:
(a) Purchaser shall have notified the Company of the proposed
disposition and provided a written summary in reasonable detail of the terms
and conditions of the proposed disposition;
(b) Purchaser shall have complied with all requirements of this
Agreement applicable to the disposition of the Shares;
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(c) Purchaser shall have provided the Company with reasonable
written assurances, in form and substance satisfactory to the Company, that
(i) the proposed disposition does not require registration or qualification
of the Shares under the 1933 Act or any state securities laws or (ii) all
appropriate action necessary for compliance with the registration
requirements of the 1933 Act or any state securities laws or of any exemption
from registration available under the 1933 Act (including Rule 144) or any
state securities laws has been taken; and
(d) Purchaser shall have provided the Company with reasonable
written assurances, in form and substance satisfactory to the Company, that
the proposed disposition will not result in the contravention of any transfer
restrictions applicable to the Shares.
The Company shall NOT be required (i) to transfer on its books any
Shares which have been sold or transferred in violation of the provisions of
this Article II NOR (ii) to treat as the owner of the Shares, or otherwise to
accord voting, dividend or liquidation rights to, any transferee to whom the
Shares have been transferred in contravention of this Agreement.
3. RESTRICTIVE LEGENDS. In order to reflect the restrictions on
disposition of the Purchased Shares, the stock certificates for the Purchased
Shares will be endorsed with restrictive legends, including the following
legends:
(i) "THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS THERE
IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES OR THE ISSUER RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO IT
STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
(ii) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE TERMS AND CONDITIONS OF AN INVESTOR'S RIGHTS AGREEMENT AMONG THE ISSUER,
THE HOLDER OF THE SECURITIES EVIDENCED HEREBY (OR SUCH HOLDER'S PREDECESSOR
IN INTEREST) AND CERTAIN OTHER SHAREHOLDERS WHICH MAY RESTRICT THE
DISPOSITION OF SUCH SHARES FOLLOWING A PUBLIC OFFERING OF THE COMPANY'S
SECURITIES."
(iii) Any legends required by state securities laws.
C. REPURCHASE RIGHT
1. GRANT. The Company is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the sixty (60) day period
following the date Optionee ceases for any reason to remain in Service or (if
later) during the sixty (60) day period following the execution date of this
Agreement, to repurchase at the Exercise Price any or all of the Purchased
Shares in which Optionee is not, at the time of his or her cessation of
Service, vested
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in accordance with the Vesting Schedule applicable to those shares or the
special vesting acceleration provisions of Paragraph C.6 of this Agreement
(such shares to be hereinafter referred to as the "Unvested Shares").
2. EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall be
exercisable by written notice delivered to each Owner of the Unvested Shares
prior to the expiration of the sixty (60) day exercise period. The notice
shall indicate the number of Unvested Shares to be repurchased and the date
on which the repurchase is to be effected, such date to be not more than
thirty (30) days after the date of such notice. The certificates representing
the Unvested Shares to be repurchased shall be delivered to the Company on or
before the close of business on the date specified for the repurchase.
Concurrently with the receipt of such stock certificates, the Company shall
pay to Owner, in cash or cash equivalents (including the cancellation of any
purchase-money indebtedness), an amount equal to the Exercise Price
previously paid for the Unvested Shares which are to be repurchased from
Owner.
3. TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right shall
terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph C.2. In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to any and all Purchased
Shares in which Optionee vests in accordance with the Vesting Schedule. All
Purchased Shares as to which the Repurchase Right lapses shall, however,
remain subject to the Investors' Rights Agreement.
4. AGGREGATE VESTING LIMITATION. If the Option is exercised in
more than one increment so that Optionee is a party to one or more other
Stock Purchase Agreements (the "Prior Purchase Agreements") which are
executed prior to the date of this Agreement, then the total number of
Purchased Shares as to which Optionee shall be deemed to have a fully-vested
interest under this Agreement and all Prior Purchase Agreements shall not
exceed in the aggregate the number of Purchased Shares in which Optionee
would otherwise at the time be vested, in accordance with the Vesting
Schedule, had all the Purchased Shares (including those acquired under the
Prior Purchase Agreements) been acquired exclusively under this Agreement.
5. RECAPITALIZATION. Any new, substituted or additional securities
or other property (including cash paid other than as a regular cash dividend)
which is by reason of any Recapitalization distributed with respect to the
Purchased Shares shall be immediately subject to the Repurchase Right and any
escrow requirements hereunder, but only to the extent the Purchased Shares
are at the time covered by such right or escrow requirements. Appropriate
adjustments to reflect such distribution shall be made to the number and/or
class of Purchased Shares subject to this Agreement and to the price per
share to be paid upon the exercise of the Repurchase Right in order to
reflect the effect of any such Recapitalization upon the Company's capital
structure; provided, however, that the aggregate purchase price shall remain
the same.
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6. CORPORATE TRANSACTION.
(a) The Repurchase Right shall automatically terminate in its
entirety, and all the Purchased Shares shall vest in full, immediately prior
to the consummation of any Corporate Transaction, except to the extent the
Repurchase Right is to be assigned to the successor entity in such Corporate
Transaction.
(b) To the extent the Repurchase Right remains in effect
following a Corporate Transaction, such right shall apply to any new
securities or other property (including any cash payments) received in
exchange for the Purchased Shares in consummation of the Corporate
Transaction, but only to the extent the Purchased Shares are at the time
covered by such right. Appropriate adjustments shall be made to the price per
share payable upon exercise of the Repurchase Right to reflect the effect of
the Corporate Transaction upon the Company's capital structure; provided,
however, that the aggregate purchase price shall remain the same. The new
securities or other property (including any cash payments) issued or
distributed with respect to the Purchased Shares in consummation of the
Corporate Transaction shall be immediately deposited in escrow with the
Company (or the successor entity) and shall not be released from escrow until
Optionee vests in such securities or other property in accordance with the
same Vesting Schedule in effect for the Purchased Shares.
(c) The Repurchase Right shall also terminate on an accelerated
basis, and the Purchased Shares shall immediately vest in full, in the event
Optionee voluntarily resigns from the Board at the request of the Company's
Board of Directors or controlling shareholders, if Optionee is involuntarily
removed from the Board for any reason other than Misconduct, or if Optionee
is not re-elected to the Board for any reason other than Misconduct.
D. SPECIAL TAX ELECTION
The acquisition of the Purchased Shares may result in adverse tax
consequences which may be avoided or mitigated by filing an election under
Code Section 83(b). Such election must be filed within thirty (30) days after
the date of this Agreement. A description of the tax consequences applicable
to the acquisition of the Purchased Shares and the form for making the Code
Section 83(b) election are set forth in Exhibit II. OPTIONEE SHOULD CONSULT
WITH HIS OR HER TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF ACQUIRING
THE PURCHASED SHARES AND THE ADVANTAGES AND DISADVANTAGES OF FILING THE CODE
SECTION 83(b) ELECTION. OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE
RESPONSIBILITY, AND NOT THE COMPANY'S, TO FILE A TIMELY ELECTION UNDER CODE
SECTION 83(b), EVEN IF OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVES
TO MAKE THIS FILING ON HIS OR HER BEHALF.
E. GENERAL PROVISIONS
1. ASSIGNMENT. The Company may assign the Repurchase Right to any
person or entity selected by the Board, including (without limitation) one
or more shareholders of the Company.
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2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or
in the Plan shall confer upon Optionee any right to continue in Service for
any period of specific duration or interfere with or otherwise restrict in
any way the rights of the Company (or any Parent or Subsidiary employing or
retaining Optionee) or of Optionee, which rights are hereby expressly
reserved by each, to terminate Optionee's Service at any time for any reason,
with or without cause.
3. NOTICES. Any notice required to be given under this Agreement
shall be in writing and shall be deemed effective upon personal delivery or
upon deposit in the U.S. mail, registered or certified, postage prepaid and
properly addressed to the party entitled to such notice at the address
indicated below such party's signature line on this Agreement or at such
other address as such party may designate by ten (10) days advance written
notice under this paragraph to all other parties to this Agreement.
4. NO WAIVER. The failure of the Company in any instance to
exercise the Repurchase Right shall not constitute a waiver of any other
repurchase rights and/or rights of first refusal that may subsequently arise
under the provisions of this Agreement or any other agreement between the
Company and Optionee. No waiver of any breach or condition of this Agreement
shall be deemed to be a waiver of any other or subsequent breach or
condition, whether of like or different nature.
5. CANCELLATION OF SHARES. If the Company shall make available, at
the time and place and in the amount and form provided in this Agreement, the
consideration for the Purchased Shares to be repurchased in accordance with
the provisions of this Agreement, then from and after such time, the person
from whom such shares are to be repurchased shall no longer have any rights
as a holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such shares shall be deemed
purchased in accordance with the applicable provisions hereof, and the
Company shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.
6. OPTIONEE UNDERTAKING. Optionee hereby agrees to take whatever
additional action and execute whatever additional documents the Company may
deem necessary or advisable in order to carry out or effect one or more of
the obligations or restrictions imposed on either Optionee or the Purchased
Shares pursuant to the provisions of this Agreement.
7. AGREEMENT IS ENTIRE CONTRACT. This Agreement and the Option
Agreement constitute the entire contract between the parties hereto with
regard to the subject matter hereof.
8. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California without
resort to that State's conflict-of-laws rules.
9. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together
shall constitute one and the same instrument.
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10. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Company and its successors
and assigns and upon Optionee, Optionee's permitted assigns and the legal
representatives, heirs and legatees of Optionee's estate, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.
IN WITNESS WHEREOF, the parties have executed this Series C
Preferred Stock Purchase Agreement on the day and year first indicated above.
COMPANY:
NETZERO, INC.
a California corporation
/s/ XXXXXX X. XXXX
-----------------------------------------
By: Xxxxxx X. Xxxx
Its President
PURCHASER:
/s/ XXXXX X. XXXXXXX
-----------------------------------------
Xxxxx X. Xxxxxxx
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