EXHIBIT 10.6
iOWN, INC.
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
This agreement (this "Agreement") is made effective as of April 28,
1999, between iOwn, Inc., a California corporation (the "Company"), and the
entities listed on Exhibit A hereto (each an "Investor," and collectively, the
"Investors").
SECTION I
Authorization and Sale of Series D Preferred Stock
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1.1 Authorization of Series D Preferred Stock. The Company has
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authorized the sale and issuance in the Initial Closing (as defined below)
hereunder of up to 8,000,000 shares of its Series D Preferred Stock (the "Series
D Preferred"), having the rights, preferences, privileges and restrictions set
forth in the Company's Amended and Restated Articles of Incorporation in the
form attached hereto as Exhibit B (the "Restated Articles") and up to 2,400,000
additional shares of Series D Preferred to be sold at a Subsequent Closing (as
defined below). The shares of Series D Preferred to be sold hereunder are
collectively referred to as the "Shares."
1.2 Sale of Series D Preferred. Subject to the terms and conditions
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hereof, on the Closing Date (as defined below) the Company will issue and sell
to each Investor, and each Investor will purchase severally, and not jointly, at
a purchase price of $2.50 per Share from the Company, the number of Shares
specified opposite the name of each such Investor on Exhibit A.
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SECTION 2
Closing Date; Delivery
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2.1 Closing Date. The closing of the purchase and sale of the Shares
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hereunder (the "Initial Closing") shall be held at the offices of Xxxxxxx Coie
LLP, 000 Xxxxxxxxxxxx Xxxxx, Xxxxx 000, Xxxxx Xxxx, Xxxxxxxxxx 00000-0000 on
April 28, 1999, or at such other time and place upon which the Company and the
Investors shall agree (the date of the Initial Closing is hereinafter referred
to as the "Closing Date").
2.2 Delivery. At the Initial Closing, the Company will deliver to
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each Investor a certificate or certificates representing the number of Shares
set forth opposite such Investor's name on Exhibit A hereto, as appropriate,
against payment of the purchase price therefor, by check or wire transfer
payable to the Company.
2.3 Subsequent Closing. The Company shall have the night, at any time
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on or prior to 45 days from the Closing Date, to sell up to additional shares of
Series D Preferred up to the fully authorized 11,000,000 of Series D Preferred
to one or more additional investors (the "Additional Investors") as determined
by the Company at the price and on the terms set forth herein; provided,
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however, that any Additional Investor shall be reasonably agreeable to CIBC Wood
Gundy Ventures, Inc. ("CHIC Wood Gundy") and required to execute a signature
page to, and become a party to, this Agreement. Thereafter, any such Additional
Investor shall be considered an "Investor" for purposes of this Agreement and
shall be added to Exhibit A hereof, and any shares of Series D Preferred so
acquired by such Additional Investor shall be considered "Shares" for purposes
of this Agreement and all other agreements contemplated hereby. The conditions
to the subsequent closing shall be the same as the conditions to the Closing and
shall not be waived unless consented to by a majority in interest of the Series
D Prefer-red, provided that there shall be no Opinion of Counsel or Compliance
Certificate pursuant to Sections 5.5 and 5.12, respectively, in any subsequent
closing.
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SECTION 3
Representations and Warranties of the Comp
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Except as set forth on Exhibit C attached hereto (the "Disclosure
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Schedule"), the Company hereby represents and warrants to each of the Investors
as of the date hereof as follows:
3.1 Organization and Standing; Certificate and Bylaw. The Company is
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a corporation duly organized and validly existing under, and by virtue of, the
laws of the State of California and is in good standing under such laws. The
Company has all requisite corporate power to own and operate its properties and
assets, and to carry on its business as presently conducted. The Company is
qualified to do business as a foreign corporation in any jurisdiction in which
failure to qualify would have a material adverse effect on the Company's
business. Attached hereto as Exhibit D are true and complete copies of its
Bylaws in effect as of the date hereof
3.2 Corporate Power. The Company has all requisite legal and
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corporate power to execute and deliver this Agreement and the Fourth Amended and
Restated Investor Rights Agreement of even date herewith, by and among the
Company, the holders of the Company's Series A Preferred Stock, the holders of
the Company's Series B Preferred Stock, the holders of the Company's Series C
Preferred Stock and the Investors, the form of which is attached hereto as
Exhibit E (the "Rights Agreement"), the Fourth Amended and Restated Voting
Agreement of even date herewith, by and among the Company, Xxxxxx X. Xxxx, the
holders of the Company's Series A Preferred Stock, the holders of the Company's
Series B Preferred Stock, the holders of the Company's Series C Preferred Stock
and the Investors, the form of which is attached hereto as Exhibit F (the
"Voting Agreement"), and the Fourth Amended and Restated Right of First Refusal
and Co-Sale Agreement of even date herewith, by and among the Company, Xxxxxx X.
Xxxx, the holders of the Company's Series A Preferred Stock, the holders of the
Company's Series B Preferred Stock, the holders of the Company's Series C
Preferred Stock and the Investors, the form of which is attached hereto as
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Exhibit G (the "Co-Sale Agreement"), to sell and issue the Shares hereunder, to
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issue the Common Stock issuable upon conversion of the Shares and to carry out
and perform its obligations under the terms of this Agreement and the
transactions contemplated hereby. The Rights Agreement, the Voting Agreement and
the CoSale Agreement shall be referred to, collectively, as the "Ancillary
Agreements."
3.3 Subsidiaries. The Company has no subsidiaries or affiliated
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companies and does not otherwise own or control any other corporation,
association or business entity.
3.4 Capitalization. The authorized capital stock of the Company will,
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upon the Closing Date, consist of (a) 125,000,000 shares of Common Stock,
7,320,036 of which are issued and outstanding prior to the Initial Closing, and
(b) 86,807,648 shares of Preferred Stock of which (i) 2,492,900 are designated
as Series A Preferred Stock, all of which are issued and outstanding as of the
Closing Date, (ii) 2,492,900 are designated as Series A- I Preferred Stock, none
of which are issued and outstanding as of the Closing Date, (iii) 12,170,924 are
designated as Series B Preferred Stock, 11,951,764 of which are issued and
outstanding as of the Closing Date,(iv) 12,170,924 are designated as Series B- 1
Preferred Stock, none of which are issued and outstanding as of the Closing
Date, (v) 17,740,000 are designated as Series C Preferred Stock, 17,740,000 of
which are issued and outstanding as of the Closing Date, (vi) 17,740,000 are
designated as Series C-1 Preferred Stock, none of which are issued and
outstanding as of the Closing Date, (vii) 11,000,000 are designated as Series D
Preferred Stock, none of which are issued and outstanding prior to the Closing
Date and (viii) 11,000,000 are designated as Series D-1 Preferred Stock, none of
which are issued and outstanding as of the Closing Date. All such issued and
outstanding shares have been duly authorized and validly issued, and are fully
paid and nonassessable and were issued in compliance with applicable federal and
state securities laws. The Company has reserved an aggregate of 86,807,648
shares of Common Stock for issuance upon conversion of the Preferred Stock and
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10,057,012 shares of its Common Stock (which includes an increase of 1,829,912
shares concurrently with the Initial Closing) for issuance to officers,
directors, employees, sales representatives and consultants of the Company
pursuant to the Company's 1997 Stock Option Plan. As of the Closing Date, the
Company has reserved authorized but unissued shares of Common Stock in an amount
that would be sufficient to effect the conversion of all outstanding shares of
Preferred Stock as of such date. The Series D Preferred Stock and Series D-1
Preferred Stock shall have the rights, preferences, privileges and restrictions
set forth in the Restated Articles. Except as referenced herein, in the Rights
Agreement or in the Disclosure Schedule, there are no options, warrants,
conversion privileges or other rights presently outstanding to purchase or
otherwise acquire any authorized but unissued shares of the capital stock or
other securities of the Company, nor any agreements or understandings with
respect thereto. Except for the Voting Agreement, the Company is not a party or
subject to any agreement or understanding and, to the Company's knowledge, there
is no agreement or understanding between any persons and/or entities, which
affects or relates to the voting or giving of consents with respect to any
security of the Company.
3.5 Authorization. All corporate action on the part of the Company,
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its officers, directors and shareholders necessary for the authorization,
execution, delivery and performance of this Agreement and the Ancillary
Agreements by the Company; and the authorization, sale, issuance and delivery of
the Shares (and the Common Stock issuable upon conversion of the Shares) and the
performance of the Company's obligations hereunder and thereunder has been taken
prior to the Initial Closing. This Agreement and the Ancillary Agreements, have
been duly executed and delivered by the Company, and constitute the* valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing equitable remedies.
3.6 Validity of Shares. The Shares have been duly authorized and,
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when issued, sold and delivered in compliance with the provisions of this
Agreement, will be duly and validly issued and will be fully paid and
nonassessable and free and clear of all liens and encumbrances, the Series D-1
Preferred Stock issuable upon special mandatory conversion of the Shares has
been duly authorized and validly reserved and, when issued and delivered in
compliance with the provisions of the Restated Articles, will be duly and
validly issued and will be fully paid and nonassessable and free and clear of
all liens and encumbrances, and the Common Stock issuable upon conversion of the
Shares or the Series D- I Preferred Stock has been duly authorized and validly
reserved and, when issued and delivered in compliance with the provisions of the
Restated Articles, will be duly and validly issued and will be fully paid and
nonassessable and free and clear of all liens and encumbrances and restrictions
on transfer other than as set forth in this Agreement and the Ancillary
Agreements; provided, however, that the Shares and the Series D-1 Preferred
Stock issuable upon special mandatory conversion of the Shares (and the Common
Stock issuable upon conversion of the Shares or the Series D-1 Preferred Stock)
may be subject to restrictions on transfer under state and/or federal securities
laws. Except as set forth herein or in the Rights Agreement, there are no
outstanding rights of first refusal or preemptive rights applicable to the
Shares or the Series D-1 Preferred Stock.
3.7 Title to Properties and Assets; Liens, etc. The Company has good
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and marketable title to all its properties and assets, and is in compliance with
the lease of all material properties leased by it, in each case subject to no
mortgage, pledge, lien, lease, encumbrance or charge, other than the lien of
current taxes not yet due and payable. The Company is not in default under or in
breach of any provision of its leases, and the Company holds valid leasehold
interests in the properties which it leases. The Company's material properties
and assets are in good condition and repair, ordinary wear and tear excepted, in
all material respects.
3.8 Material Contracts and Commitments. The Disclosure Schedule sets
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forth a list of all agreements, contracts, indebtedness, liabilities and other
obligations to which the Company is a party or by which it or its assets are
bound that (a) involve in excess of $50,000 aggregating similar agreements or
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obligations to the same party; (b) involve any Affiliate (as defined below) of
the Company, any consultants or employees of the Company or, to the Company's
knowledge, any members of the immediate family of the foregoing; or (c) obligate
the Company to share, license or develop any product. Copies of such agreements
and contracts and documentation evidencing such liabilities and other
obligations have been made available by the Company to the Investors or their
counsel. Except as expressly contemplated by this Agreement or as set forth on
the Disclosure Schedule, the Company is not a party to any written or oral: (i)
pension, profit sharing, stock option, employee stock purchase or other plan or
arrangement providing for deferred or other compensation to employees or any
other employee benefit plan or arrangement, or any contract with any labor
union, or any severance agreements; (ii) contract for the employment of any
officer, individual employee or other Person on a full-time, part-time,
consulting or other basis providing annual compensation in excess of $ 100,000
or contract relating to loans to officers, directors or affiliates; (iii)
contract under which it has advanced or loaned any other Person amounts in the
aggregate exceeding $15,000; or (iv) contract or agreement prohibiting it from
freely engaging in any business or competing anywhere in the world. Solely for
purposes of this Section 3.8: (i) "Affiliate" means, with respect to any
specified Person (as defined below), any other Person which, directly or
indirectly, controls, is under common control with, or is owned or controlled
by, such specified Person, (ii) "control" means, with respect to any specified
Person, either (x) the beneficial ownership of 10 percent or more of any class
of equity securities or (y) the power to direct the management or policies of
the specified Person through the ownership of voting securities, by contract,
voting agreement or otherwise, (iii) the terms "controlling", "control with" and
"controlled by", etc. shall have meanings correlative to the foregoing and (iv)
the officers, directors and 10% shareholders of any specified Person shall be
deemed to be Affiliates of the Company. "Person" means any individual,
corporation, general or limited partnership, joint venture, association, limited
liability company, joint stock company, trust, business trust, bank, trust
company, estate (including any beneficiaries thereof), unincorporated
organization, cooperative, association or government or branch, agency or
political subdivision thereof
3.9 Patents, Trademarks, etc. To the knowledge of the Company, the
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Company has sufficient title and ownership of all patents, trademarks, service
marks, trade names, copyrights, trade secrets, proprietary rights and processes
necessary for its business as now conducted, without conflict with or
infringement of the rights of others. The Company has not received any
communications alleging that the Company has violated or, by conducting its
business, would violate, the proprietary or intellectual property rights of any
other person or entity. The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants, or commitments of
any nature) or other agreement, or subject to any judgment, decree, or order of
any court or administrative agency, that would interfere with the use of such
employee's best efforts to promote the interests of the Company or that would
conflict with the Company's business. Neither the execution nor delivery of this
Agreement or the Ancillary Agreements, nor, to the Company's knowledge, the
carrying on of the Company's business by the employees of the Company, will
conflict with or result in a breach of the terms, conditions, or provisions of,
or constitute a default under, any contract, covenant, or instrument under which
any of such employees is now obligated. The Company is not aware of any
violation or infringement by a third party of any of the Company's patents,
licenses, trademarks, service marks, trade names, copyrights, trade secrets or
other proprietary rights.
3.10 Compliance with Other Instruments. The Company is not in
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violation of any term of the Restated Articles or Bylaws, or in any material
respect of any term or provision of any mortgage, indenture, contract,
agreement, instrument, judgment or decree, and to its knowledge is not in
violation of any order, statute, rule or regulation applicable to the Company.
The execution, delivery and performance of and compliance with this Agreement
and the Ancillary Agreements and the issuance of the Shares (and the Common
Stock issuable upon conversion of the Shares), have not (i) resulted and will
not result in any violation of, or conflict with, or constitute a default under
any of the foregoing, (ii) resulted and will not result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the
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Company, (iii) resulted and will not result in the breach of or constitute a
default under any material contact, agreement or instrument to which the Company
is a party or by which it is bound that is listed on the Disclosure Schedule
("Material Contracts") (iv) given or gives any person rights to terminate any
Material Contracts or agreements of the Company or, to its knowledge, otherwise
to exercise rights against the Company or (v) violated and will not violate any
order, writ, judgment, injunction, decree, statute, rule or regulation of any
court, tribunal or governmental entity applicable to or the Company or any of
its assets or businesses.
3.11 Litigation, etc. There are no actions, suits, proceedings or
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investigations pending or, to the Company's knowledge, threatened against the
Company or its properties before any court or governmental agency, which, either
in any case or in the aggregate, might result in any material adverse change in
the business, prospects, financial condition, affairs, operations or equity
ownership of the Company or any of its properties or assets, or in any material
impairment of the right or ability of the Company to carry on its business as
now conducted, or in any material liability on the part of the Company, and none
which questions the validity of this Agreement or the Ancillary Agreements or
any action taken or to be taken in connection herewith. There is no action,
suit, proceeding, or investigation by the Company currently pending or that the
Company intends to initiate.
3.12 Employees. To the Company's knowledge, no employee of the
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Company is or will be in violation of any judgment, decree or order of any court
or administrative agency, or any term of any employment contract or any other
contract (including without limitation any covenant not to compete) or agreement
relating to the relationship of any such employee with the Company or any other
party because of the nature of the business conducted by the Company or to the
utilization by the employee of such employee's reasonable efforts with respect
to such business. Except as set forth in the Disclosure Schedule, the Company is
not a party to or bound by any currently effective employment contract, deferred
compensation agreement, bonus plan, incentive plan, profit sharing plan,
retirement agreement, or other written employee compensation agreement. The
Company does not have any collective bargaining agreements covering any of its
employees. To the Company's knowledge, the Company is not using any inventions
of any of its employees, consultants or officers made before their employment by
the Company. To the Company's knowledge, no employee, consultant or officer has
taken, removed, or made use of any proprietary documentation, manuals, products,
materials, or any other tangible items from the employee's previous employers
relating to the Company's business. To the Company's knowledge, no officer or
key employee of the Company currently intends to terminate his or her employment
with the Company. The Company is not a party to any Plan, as defined in the
Employee Retirement Income Security Act of 1974.
3.13 Insurance. The Company has in full force and effect fire,
casualty and comprehensive general liability insurance policies with recognized
insurers with such coverages as are sufficient in amount to allow replacement of
the tangible properties of the Company that might be damaged or destroyed and
the Company has not received any notice of cancellation with respect to, and
does not have any pending claims under, such policies.
3.14 Registration Rights. Except as contemplated by the Rights
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Agreement, the Company is not under any obligation to register any of its
presently outstanding securities or any of its securities that may hereafter be
issued.
3.15 Governmental Consents, etc. No consent, approval, order or
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authorization of or designation, declaration or filing with any state or federal
governmental authority of the United States on the part of the Company is
required in connection with the valid execution and delivery of this Agreement,
or the offer, sale or issuance of the Shares (and the Preferred Stock or Common
Stock issuable upon conversion of the Shares), or the consummation of any other
transaction contemplated hereby, except (a) filing of the Restated Articles in
the office of the Secretary of State of the State of California, and (b)
qualification (or taking such
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action as may be necessary to secure an exemption from qualification, if
available) under the California Corporate Securities Law and other applicable
Blue Sky laws, of the offer and sale of the Shares (and the Common Stock
issuable upon conversion of the Shares), which filing and qualification, if
required, will be accomplished in a timely manner prior to or promptly following
completion of the Initial Closing.
3.16 Offering. Assuming the accuracy of the Investor representations
in Section 4 hereof, the offer, sale and issuance of the Shares to be issued in
conformity with the terms of this Agreement (and the issuance of the Preferred
Stock or Common Stock to be issued upon conversion of the Shares) constitute
transactions exempt from the registration requirements of Section 5 of the
Securities Act of 1933, as amended (the "Securities Act"), and will have been
registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws. Neither the Company nor any agent on its behalf has
solicited or will solicit any offers to sell or has offered to sell or will
offer to sell all or any part of the Shares to any person or persons so as to
bring the sale of such Shares by the Company within the registration provisions
of the Securities Act.
3.17 Disclosure. No statement by the Company contained in this
Agreement, any Ancillary Agreement, or any exhibit, attachment or schedule, or
in any certificate furnished or to be furnished to the Investors pursuant hereto
or written information otherwise provided to the Investors, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances under which they were made.
3.18 Brokers or Finders. The Company has not incurred, and will not
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incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
3.19 Environmental Laws. To the Company's knowledge, the Company is
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not in violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.
3.20 Liabilities. Except as set forth in the Disclosure Schedule,
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the Company has not entered into any agreements involving, individually or in
the aggregate, in excess of $50,000 (written or verbal) with any third parties,
including employees and consultants.
3.21 Financial Statements; Undisclosed Liabilities The Company has
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delivered to each Investor an audited Balance Sheet, Income Statement and
Statement of Cash Flows (collectively, the "Financial Statements") dated
December 31, 1998 (the "Statement Date"). The Company has also delivered an
unaudited Balance Sheet, Statement of Income and Statement of Cash Flows for the
two months ending February 28, 1999 (the "Interim Financial Statements"). The
Financial Statements are complete and correct in all material respects, have
been prepared in accordance with generally accepted accounting principles, and
present fairly the financial condition of the Company as of the Statement Date
and the results of operations and cash flows of the Company for the period then
ended; provided, however, that such statements are subject to normal recurring
year-end audit adjustments and do not contain footnotes required under generally
accepted accounting principles.
3.22 Changes. Since the Statement Date, there has not been:
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(i) any damage, destruction or loss, whether or not covered by
insurance, materially adversely affecting the properties or tangible assets of
the Company;
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(ii) any waiver or compromise by the Company of a valuable
right or of a material debt owed to it;
(iii) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and that is not material to the business, properties,
prospects or financial condition of the Company (as such business is presently
conducted);
(iv) any sale, assignment or transfer by the Company of any
patents, trademarks, copyrights, trade secrets or other intangible assets;
(v) any resignation or termination of employment of any key
officer of the Company or any change in officer compensation except in the
ordinary course of business and consistent with past practice;
(vi) any mortgage, pledge, or transfer of a security interest
in or lien created by the Company with respect to any of its material properties
or assets, except liens for taxes not yet due or payable;
(vii) any loans or guarantees made by the Company to or for
the benefit of its employees, shareholders, officers, or directors, or any
members of their immediate families, other than in amounts immaterial to the
Company's operating results or financial condition and other than travel
advances and other advances made in the ordinary course of its business;
(viii) any declaration, setting aside, or payment of any
dividend or other distribution of the Company's assets in respect of any of the
Company's capital stock, or any direct or indirect redemption, purchase, or
other acquisition of any of such stock by the Company;
(ix) any incurrence of any material indebtedness;
(x) any changes in the assets, liabilities, financial
condition or operating results of the Company other than that reflected in the
Financial Statements or Interim Financial Statements that, either individually
or in the aggregate, would have a material, adverse effect on the Company's
business, prospects, properties, financial condition or results of operations;
or
(xi) any commitment, obligation, understanding or other arrangement,
contingent or otherwise, to effect, directly or indirectly, any of the
foregoing.
3.23 Proprietary Information Agreement. All officers, employees of
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and consultants to the Company with access to proprietary information of the
Company have executed and delivered to the Company a Proprietary Information
Agreement in substantially the form attached as Exhibit H hereto, and the
Company is not aware of any material breach thereof by any such persons.
3.24 Taxes. The Company has never had any tax deficiency proposed or
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assessed against it and has not executed any waiver of any statute of
limitations on the assessment or collection of any tax or governmental charge.
The Company has timely filed all tax returns, submitting true and complete
information; has paid all taxes when due (other than those that are being
contested in good faith); and has received no notice of audit. Except as set
forth on the Disclosure Schedule, no federal or state income tax returns of the
Company has ever been audited. Proper and accurate amounts have been withheld by
the Company from its employees for all periods in compliance with the tax,
social security and any employment withholding provisions of applicable federal
and state laws. The Company has complied in all material respects with all
employee income tax withholding, social security and unemployment taxes.
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3.25 Other Relationships. Except as set forth on the Disclosure
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Schedule, to the best knowledge of the Company (a) no officer of the Company,
nor any of its affiliates, has any interest (other than as non-controlling
holders of securities of a publicly-traded company), either directly or
indirectly, in any Person (whether as an employee, officer, director,
shareholder, agent, independent contractor, security holder, creditor,
consultant or otherwise) that presently (1) provides any services or designs,
produces or sells any products or product lines, or engages in any activity
which is the same, or competitive with any activity or business in which the
Company is now engaged, (ii) is a supplier of, customer of, creditor of, or has
an existing contractual relationship with, the Company, or (iii) has any direct,
or indirect interest in any asset or property used by the Company or any
property, real or personal, tangible or intangible, that is necessary or
desirable for the conduct of the business of the Company; and (b) no current or
former stockholder, director, officer or employee of the Company, nor any of its
affiliates, is at present, or since the inception of the Company has been,
directly or indirectly through his affiliation with any other Person, a party to
any transaction (other than as an employee) with the Company providing for the
furnishing of services by, or rental of real or personal property from, or
otherwise requiring cash payments to any such Person.
3.26 Small Business Investment Company Applicant. The Company's
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tangible net worth (including its Affiliates) is not in excess of $18 million,
and the Company's average net income after Federal income taxes (excluding any
carry-over losses) for the preceding 2 completed fiscal years is not in excess
of $6 million. The Company has heretofore furnished to each Investor that is an
SBIC Holder (as defined below) the following completed forms, which are true and
correct in all material respects: Size Status Declaration on SBA Form 480,
Assurance of Compliance on SBA Form 652D and Portfolio Financing Report on SBA
Form 1031 (the "SBA Forms"). As of the Closing Date, the Company is not a
"relender" or "reinvestor" as defined in Section 107.720 of Title 13 of the Code
of Federal Regulations." "SBIC Holder" means that the Investor is a Small
Business Investment Company regulated pursuant to Section 121.301(c)(1) of Title
13 of the Code of Federal Regulations (an "SBIC").
3.27 Investment Company Act. The Company is not, and immediately
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after the Closing Date will not be, an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act.
SECTION 4
Representations, Warranties and Covenants of the Investor
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Each of the Investors hereby represents,, warrants and covenants,
severally and not jointly, to the Company with respect to its individual
purchase of the Shares as follows:
4.1 Accredited Investor. The Investor is an accredited investor as
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defined in Rule 501 (a) of Regulation D promulgated under the Securities Act.
4.2 Foreign Investor. If the Investor is not a United States person
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(as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as
amended), such Investor hereby represents that it has satisfied itself as to the
full observance of the laws of its jurisdiction in connection with any
invitation to subscribe for the Shares or any use of this Agreement, including
(i) the legal requirements within its jurisdiction for the purchase of the
Shares, (ii) any foreign exchange restrictions applicable to such purchase,
(iii) any governmental or other consents that may need to be obtained, and (iv)
the income tax and other tax consequences, if any, that may be relevant to the
purchase, holding, redemption, sale, or transfer of the Shares. Such Investor's
subscription and payment for and continued beneficial ownership of the Shares,
will not violate any applicable securities or other laws of the Investor's
jurisdiction.
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4.3 Experience; Risk. The Investor has such knowledge and experience
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in financial and business matters that such Investor is capable of evaluating
the merits and risks of the purchase of the Shares pursuant to this Agreement
and of protecting the Investor's interests in connection therewith. The
Investor's financial condition is such that it has the ability to bear the
economic risk of the investment, including complete loss of the investment. The
Investor is experienced in evaluating and investing in new companies such as the
Company.
4.4 Investment. The Investor is acquiring the Shares for investment
for its own account, not as a nominee or agent, and not with a view to, or for
resale in connection with, any distribution thereof; and the Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. The Investor understands that the Shares to be purchased
have not been registered under the Securities Act by reason of a specific
exemption from the registration provisions of the Securities Act which depends
upon, among other things, the bona fide nature of the investment intent and the
accuracy of such Investor's representations as expressed herein.
4.5 Restricted Securities; Rule 144. The Investor understands that
-------------------------------
the Shares and the shares of Common Stock issuable upon conversion of the
Shares, will be "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
the Shares may be resold without registration under the Securities Act only in
certain limited circumstances. The Investor acknowledges that the Shares must be
held indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. The Investor is aware of the
provisions of Rule 144 promulgated under the Securities Act which permit limited
resale of shares purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things, the existence of a public
market for the shares, the availability of certain current public information
about the Company, the resale occurring not less than one year after a party has
purchased and paid for the security to be sold, the sale being effected through
a "broker's transaction" or in transactions directly with a "market maker" (as
provided by Rule 144(f)) and the number of shares being sold during any three-
month period not exceeding specified limitations.
4.6 No Public Market. The Investor understands that no public market
----------------
now exists for any of the securities issued by the Company and that there is no
assurance that a public market will ever exist for the Shares.
4.7 Access to Data. The Investor has had an opportunity to discuss
--------------
the Company's business, management and financial affairs with the Company's
management and the opportunity to review the Company's facilities and has
received all information requested from the Company regarding the investment in
the Company.
4.8 Authorization. The Investor represents that it has all requisite
-------------
corporate power and authority to enter into and perform the Investor's
obligations under this Agreement and the Ancillary Agreements, and this
Agreement, the Rights Agreement, the Voting Agreement and the Co-Sale Agreement
when executed and delivered by the Investor will constitute valid and binding
obligations of the Investor, enforceable in accordance with their respective
terms, subject to the laws of general application relating to bankruptcy,
insolvency and the relief of debtors, rules of law governing specific
performance, injunctive relief or other equitable remedies.
4.9 Government Consents. No consent, approval or authorization of or
-------------------
designation, declaration or filing (other than the SBA Forms) with any state,
federal or foreign governmental authority on the part of the Investor is
required in connection with the valid execution and delivery of this Agreement
by the Investor, and the consummation by the Investor of the transactions
contemplated hereby.
9
4.10 Further Limitations on Disposition. Without in any way limiting
----------------------------------
the presentations set forth above, the Investor further agrees not to make any
disposition of all or any portion of the Shares unless and until:
(a) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such Registration Statement; or
(b) The Investor shall have notified the Company of the proposed
disposition and shall have furnished the Company with a statement of the
proposed disposition, and if reasonably requested by the Company, such Investor
shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
under the Securities Act.
4.11 Legends. It is understood that each certificate representing the
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Shares (and the shares of Common Stock issuable upon conversion of the Shares)
and any securities issued in respect thereof under applicable state securities
laws shall bear the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR, IF REASONABLY REQUESTED BY
THE CORPORATION, AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933."
(b) "THE SALE, TRANSFER OR ASSIGNMENT OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF AN AGREEMENT BETWEEN
THE COMPANY AND THE REGISTERED HOLDER OR HIS PREDECESSOR IN INTEREST. COPIES OF
SUCH AGREEMENT MAY BE OBTAINED BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD
OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY."
(c) Any legend required to be placed thereon by the California
Commissioner of Corporations or any other applicable state securities laws.
4.12 SBIC Holder. CIBC Wood Gundy represents and warrants that it is
-----------
an SBIC Holder, that it is a wholly owned subsidiary of a bank listed in
Schedule I to the Canadian Bank Act, that all of CIBC Wood Gundy's voting shares
are owned by such bank listed in Schedule I to the Canadian Bank Act, and that
CIBC Wood Gundy is purchasing the Shares as a principal.
SECTION 5
Conditions to Initial Closing of Investor
-----------------------------------------
Each Investor's obligation to purchase the Shares at the Initial
Closing is, at the option of the each of the Investors individually, subject to
the fulfillment on or prior to the Closing Date of the following conditions:
5.1 Execution of Documents. The Company and the Investors shall have
----------------------
duly authorized and executed copies of this Agreement, each Ancillary Agreement
and each other agreement, document or instrument related hereto or thereto
required in connection with the consummation of the transactions contemplated
hereby, including the Side Letter between the Company and Canadian Imperial Bank
of Commerce with respect to Canadian operations. This Agreement, each Ancillary
Agreement and each other related agreement, document or instrument shall be in
full force and effect on the Closing Date.
10
5.2 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by the Company in Section 3 hereof shall be true and correct in
all material respects when made, and shall be true and correct on the Closing
Date in all material respects with the same force and effect as if they had been
made on and as of said date.
5.3 Covenants. All covenants, agreements and conditions contained in
---------
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects.
5.4 Good Standing. The Company shall have obtained a good standing
-------------
certificate from the State of California and from each other state where it is
qualified to do business and shall have provided copies to special counsel to
the Investors on or prior to the Closing Date.
5.5 Opinion of Company's Counsel. The Investors shall have received
----------------------------
from Xxxxxxx Coie LLP, counsel to the Company, an opinion addressed to the
Investors, dated the Closing Date, substantially in the form of Exhibit I
hereto.
5.6 Blue Sky. The Company shall have obtained all necessary Blue Sky
--------
law permits and qualifications, or secured an exemption therefrom, required by
any state for the offer and sale of the Shares and the Common Stock issuable
upon conversion of the Shares.
5.7 Restated Articles of Incorporation. The Restated Articles shall
----------------------------------
have been filed with, and approved by, the Secretary of State of the State of
California.
5.8 Reservation of Common Stock. The shares of the Common Stock
---------------------------
issuable upon conversion of the Shares shall have been duly authorized and
reserved for issuance upon such conversion.
5.9 Board of Directors. The Bylaws of the Company shall reflect that
------------------
the size of the Board of Directors shall be variable from four (4) to seven (7)
members. Immediately prior to the Initial Closing, the Board of Directors shall
be comprised of Xxxxxx Xxxx, Xxxxxxx Xxx, Xxxxx Xxxx, Xxxxx Xxxxxxx, Xxxxx Xxxx,
Xxxxx Xxxx and a director appointed by the holders of the Series D Preferred in
accordance with the Voting Agreement.
5.10 SBA Forms. The Company shall have completed and filed the SBA
---------
Forms.
5.11 Aggregate Purchase. The Investors shall purchase an aggregate of
------------------
at least $19,500,000 worth of Series D Preferred on the Closing Date.
5.12 Compliance Certificate. The Company shall have delivered to the
----------------------
Investors a certificate executed by the President of the Company, dated the
Closing Date and certifying to the fulfillment of the conditions specified in
Sections 5.2, 5.4, 5.6, 5.7, 5.8, 5.9 and 5. 10 of this Agreement.
SECTION 6
Conditions to Initial Closing of the Company
--------------------------------------------
The Company's obligation to sell and issue the Shares at the Initial
Closing is, at the option of the Company, subject to the fulfillment of the
following conditions:
11
6.1 Representations. The representations made by the Investors in
---------------
Section 4 hereof shall be true and correct in all material respects when made,
and shall be true and correct on the Closing Date in all material respects with
the same force and effect as if they had been made on and as of said date.
6.2 Ancillary Agreements. The Investors shall have executed and
--------------------
delivered to the Company the Ancillary Agreements.
6.3 Restated Articles of Incorporation. The Restated Articles shall
----------------------------------
have been filed with, and approved by, the Secretary of State of the State of
California.
SECTION 7
Miscellaneous
-------------
7.1 Governing Law. This Agreement shall be governed in all respects
-------------
by the laws of the State of California as applied to contracts made and to be
fully performed entirely within that state between residents of that state.
7.2 Survival. The representations, warranties, covenants and
--------
agreements made herein shall survive any investigation made by any Investor and
the closing of the transactions contemplated hereby.
7.3 Successors and Assigns. Except as otherwise provided herein, the
----------------------
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto;
provided, however, that the rights of the Investors to purchase the Shares shall
not be assignable without the consent of the Company.
7.4 Entire Agreement; Amendment. This Agreement and the other
---------------------------
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and
thereof. This Agreement or any term hereof may be amended, waived, discharged or
terminated solely by a written instrument signed by the Company and the holders
of a majority of the Common Stock issued or issuable upon conversion of the
Shares.
7.5 Notices, etc. All notices and other communications required or
------------
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to an Investor, at the address set forth on Exhibit A, hereto,
or at such other address as shall have been furnished to the Company upon not
less than 10 days notice in writing, with a copy to Xxxxx, Xxxxx & Xxxxx, 0000
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxx X. Xxxxxxxxxxxxx, Esq. and
to Canadian Imperial Bank of Commerce, 000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxxxxxx Xxxxxx, Esq., (b) if to any other
holder of the Shares, at such address as such holder will have furnished to the
Company upon not less than 10 days notice in writing, with a copy to Xxxxx,
Xxxxx & Xxxxx, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 100 19, Attention: Xxxx X.
Xxxxxxxxxxxxx, Esq. and to Canadian Imperial Bank of Commerce, 000 Xxxxxxxxx
Xxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx 100 17, Attention: Xxxxxxxxxxx Xxxxxx,
Esq., or (c) if to the Company, at the address set forth below and addressed to
the attention of the President and with a copy to Xxxxxxx Coie LLP, 000
Xxxxxxxxxxxx Xxxxx, Xxxxx 000, Xxxxx Xxxx, Xxxxxxxxxx 00000-0000, Attention:
Xxxxx X. Xxxxxxx, 000, Xxx. or at such other address as the Company shall have
furnished to the Investors upon not less than 10 days notice in writing.
7.6 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any holder of any Shares, upon any breach or default
of the Company under this Agreement, shall impair any such right, power or
remedy of such holder nor shall it be construed to be a waiver of any such
12
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
7.7 California Corporate Securities Law. THE SALE OF THE SECURITIES
-----------------------------------
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
7.8 Expenses. Upon receipt of documentation therefor at the Closing,
--------
the Company shall pay the reasonable fees and expenses of Mayor, Xxxxx & Xxxxx
special counsel for the Investors, incurred with respect to this Agreement, the
documents referred to herein and the transactions contemplated hereby and
thereby, in an amount not to exceed $10,000.
7.9 Severability. In the event that any provision of this Agreement
------------
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
7.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
7.11 Waiver of Potential Conflict of Interest. Each party to this
----------------------------------------
Agreement acknowledges that Xxxxxxx Coie LLP, counsel for the Company, may in
the past have performed and may continue to perform legal services for certain
of the Investors in matters unrelated to the transactions described in this
Agreement, including the representation of such Investors in venture capital
financings and other matters. Accordingly, each party to this Agreement hereby
(1) acknowledges that they have had an opportunity to ask for information
relevant to this disclosure; and (2) gives its informed consent to Xxxxxxx Coie
LLP's representation of certain of the Investors in such unrelated matters and
to Xxxxxxx Coie LLP's representation of the Company in connection with this
Agreement and the transactions contemplated hereby.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
set forth above.
"COMPANY"
iOwn, Inc., a California corporation
By:____________________________________
Xxxxxx X. Xxxx, President
