SERIES B PREFERRED STOCK PURCHASE AGREEMENT
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THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is made
as of May 18, 1998, by and among 2BRIDGE SOFTWARE, a California corporation (the
"Company"), and the Investors set forth in Exhibit A attached hereto (each, an
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"Investor" and collectively, the "Investors").
NOW THEREFORE, in consideration of the promises herein made and on the terms and
subject to the conditions herein contained, the Company and the Investors agree
as follows:
1. Purchase and Sale of Stock. The Company will sell to the Investors,
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severally and not jointly, and the Investors will purchase from the Company,
severally and not jointly, up to 7,195,127 shares of the Company's Series B
Preferred Stock (the "Series B Preferred") at the per share purchase price of
$1.4081, allocated among the Investors as provided in Exhibit A attached hereto.
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The Series B Preferred will be subject to the rights, preferences, privileges
and restrictions as set forth in the Company's Amended and Restated Articles of
Incorporation, attached hereto as Exhibit B (the "Articles").
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2. Closing. The purchase and sale of the Series B Preferred shall be
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made in one or more closings, the first of which will take place at 10:00 a.m.
on May 18, 1998, at the offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, 000 Xxxx
Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx, or such other place and/or other date or dates
as the Company and the Investors mutually agree (which time and place are
designated the "Closing"). At each Closing, the Company will deliver to each
Investor a certificate representing the Series B Preferred which such Investor
is purchasing against delivery to the Company by the Investor of the applicable
purchase price set forth on Exhibit A attached hereto.
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3. Representations and Warranties of the Company to the Investors.
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Except as set forth in Exhibit C attached hereto, the Company hereby
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represents and warrants to the Investors as follows:
3.1 Corporate Organization and Authority. The Company: (a) is a
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corporation duly organized, validly existing, authorized to exercise all its
corporate powers, rights and privileges, and in good standing in the State of
California, and (b) has the corporate power and authority to (i) own and operate
its properties, (ii) carry on its business as now conducted and as proposed to
be conducted, (iii) execute and deliver this Agreement, the Amended and Restated
Investors' Rights Agreement in the form attached hereto as Exhibit D (the
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"Rights Agreement"), the Amended and Restated Co-Sale Agreement in the form
attached hereto as Exhibit E (the "Co-Sale Agreement") and the Amended and
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Restated Voting Agreement in the form attached hereto as Exhibit F (the "Voting
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Agreement") (collectively, the "Investment Agreements"), (iv) issue and sell the
Series B Preferred hereunder, (v) issue the Common Stock of the Company issuable
upon the conversion of the Series B Preferred, and (vi) carry out the provisions
of this Agreement, the Investment Agreements and the Articles. The Company is
duly qualified and is authorized to
do business and is in good standing as a foreign corporation in all
jurisdictions in which the nature of its activities and of its properties (both
owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so would not have a material adverse effect
on the Company or its business.
3.2 Capitalization. The Company's capitalization is as follows:
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(a) upon the filing of the Articles in the form attached hereto
as Exhibit B in the Office of the Secretary of State of California prior to the
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Closing, the Company will be authorized to issue two classes of shares of
capital stock, designated respectively "Common Stock" and "Preferred Stock" with
30,000,000 total authorized shares of Common Stock, and 11,668,514 total
authorized shares of Preferred Stock, with the Preferred Stock consisting of
3,871,300 shares of Series A Preferred Stock and 7,797,214 shares of Series B
Preferred;
(b) immediately after the Closing, the number of issued and
outstanding shares will be 12,787,500 shares of Common Stock, 3,871,300 shares
of Series A Preferred Stock, and up to 7,195,127 shares of Series B Preferred.
Immediately after the Closing, there will be 2,697,500 shares of Common Stock
reserved for issuance under the Company's 1997 Stock Option Plan, duly adopted
by the Board of Directors and approved by the Company's shareholders. Of such
reserved shares of Common Stock, 37,500 shares have been issued upon the
exercise of options, 1,458,000 shares are subject to outstanding options, and
1,239,500 shares remain available for issuance. Except as specifically
contemplated herein, and as provided in the Articles, there will be no other
outstanding options, warrants, rights (including conversion or preemptive rights
and rights of first refusal) proxy or shareholder agreements, or agreements of
any kind, oral or in writing, for the issuance, purchase or acquisition by the
Company of any shares of capital stock of the Company.
(c) all issued and outstanding shares of the Company's Series A
Preferred Stock and Common Stock (i) have been duly authorized and validly
issued, (ii) are fully paid and nonassessable, and (iii) were issued in
compliance with all applicable state and federal laws concerning the issuance of
securities.
A list of shareholders of the Company which contains the name and number of
shares held by each shareholder, is attached to this agreement as Schedule 3.2.
3.3 No Subsidiaries. The Company does not own, nor does it control,
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directly or indirectly, any interest in any other corporation, association or
other business entity. The Company is not a participant in any joint venture,
partnership or similar arrangement.
3.4 Authorization. All action on the part of the Company, its
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officers, directors and shareholders necessary for the authorization, execution,
delivery and performance of all obligations under this Agreement and the
Investment Agreements and for the authorization, sale,
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issuance and delivery of the Series B Preferred and the Common Stock of the
Company issuable upon the conversion of the Series B Preferred has been taken.
This Agreement and the Investment Agreements, when executed and delivered, each
constitutes legally valid and binding obligations of the Company enforceable
against the Company in accordance with its terms, except to the extent that such
enforcement may be subject to applicable federal or state bankruptcy,
insolvency, reorganization, arrangement, moratorium, fraudulent conveyance or
other laws or court decisions relating to or affecting the rights of creditors
generally, and such enforcement may be limited by equitable principles of
general applicability.
3.5 Validity of Shares. The Series B Preferred are duly authorized
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and, when issued, sold and delivered in accordance with the terms of and for the
consideration expressed in this Agreement, will be duly and validly issued
(including, without limitation, issued in compliance with applicable federal and
state securities laws), fully-paid and non-assessable and will be free and clear
of all preemptive rights, rights of first refusal, liens, charges, restrictions,
claims and encumbrances imposed by or through the Company, except as
specifically set forth in the Articles, this Agreement or the Investment
Agreements. The Common Stock issuable upon the conversion of the Series B
Preferred has been duly and validly reserved for issuance and, when so issued,
will be duly authorized, validly issued (including, without limitation, issued
in compliance with applicable federal and state securities laws), fully paid and
nonassessable and will be free and clear of all preemptive rights, rights of
first refusal, liens, charges, restrictions on transfer, claims and encumbrances
imposed by or through the Company, except as specifically set forth in the
Articles, this Agreement, or the Investment Agreements.
3.6 No Conflict with other Instruments. The execution, delivery and
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performance of this Agreement and the Investment Agreements will not result in
any event that results in the creation of any lien, charge or encumbrance upon
any assets of the Company or the suspension, revocation, impairment, forfeiture
or nonrenewal of any material permit, license, authorization or approval
applicable to the Company, its business or operation of any of its assets or
properties or result in any violation of, be in conflict with, or constitute a
default under: (a) any provision of the Articles or the Company's Bylaws; (b)
any provision of any judgment, decree or order to which the Company is a party
or by which it is bound; (c) any mortgage, indenture, license, contract,
obligation or commitment to which the Company is a party or by which it is
bound; or (d) any statute, rule or governmental regulation applicable to the
Company.
3.7 Litigation. There is no action, proceeding or investigation
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pending or, to the knowledge of the Company, threatened, or any basis therefor
known to the Company, that questions the validity of this Agreement, or the
Investment Agreements or the right of the Company to enter into any such
agreements, or to consummate the transactions contemplated hereby or thereby, or
which might result, either individually or in the aggregate, in any material
adverse change in the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company. The Company is not a party to any such lawsuit or similar action or
proceeding, nor does the Company intend to initiate any such litigation.
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3.8 Title to Properties; Liens and Encumbrances. The Company has
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good and marketable title to all of its properties and assets, both real and
personal, subject to no mortgage, pledge, lien, security interest, conditional
sale agreement, encumbrance or charge. With respect to the properties and
assets it leases, the Company is in compliance with such leases, and to its
knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances.
3.9 Employee Agreement. All current employees and consultants of the
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Company are parties to a written agreement ("Confidential Information and
Inventions Agreement") in the form previously furnished to Investors' counsel,
pertaining to (i) the disclosure and transfer to the Company of certain
inventions, developments and discoveries made or conceived by him or her during
the period of his or her employment with or performance of services for the
Company, and (ii) maintaining the confidentiality of proprietary information of
the Company. The Company, after reasonable investigation, is not aware that any
of its employees or consultants is in violation thereof, and the Company will
use commercially reasonable efforts to prevent any such violation.
3.10 Permits. The Company has all franchises, permits, licenses and
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other similar authority (collectively, "Permits") necessary for the conduct of
its business as now being conducted by it, the lack of which could materially
and adversely affect the business, properties, prospects, or financial condition
of the Company, and believes that it can obtain, without undue burden or
expense, any Permits for the conduct of its business as planned to be conducted.
The Company is not in default in any material respect under any such Permits.
3.11 Patents, Copyrights and Trademarks. For purposes of this Section
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3.11, the term "Proprietary Rights" means patents, trademarks, service marks,
trade names, copyrights, trade secrets or other proprietary rights and
processes. To the best of its knowledge, the Company owns or possesses
sufficient legal rights to all Proprietary Rights necessary for its business as
now conducted and as proposed to be conducted, without any known infringement of
the rights of others. The Company has not received any communication alleging
that the Company has violated or, by conducting its business as proposed, would
violate any of the Proprietary Rights of any other person or entity. The
Company is not aware of any third party which is infringing or violating any of
its Proprietary Rights. There are no outstanding options, licenses, or
agreements of any kind relating to the Proprietary Rights of the Company other
than those incurred in the ordinary course of business, nor is the Company bound
by or a party to any options, licenses or agreements of any kind with respect to
the Proprietary Rights of any other person or entity other than those incurred
in the ordinary course of business. 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
their duties to the Company or that would conflict with the Company's business
as proposed to be conducted. Neither the execution nor delivery of this
Agreement, nor the carrying on of the Company's business by the employees of the
Company, nor the conduct of the Company's business as proposed, will, to the
Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
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covenant or instrument under which any employee is now obligated. The Company
does not believe it is or will be necessary to utilize any inventions, trade
secrets or proprietary information of any of its employees made prior to their
employment by the Company, except for inventions, trade secrets or proprietary
information that have been assigned to the Company. Set forth in the Schedule of
Exceptions attached hereto as Exhibit C is a listing of all patents and
trademarks of the Company.
3.12 Taxes. All federal, state, local and foreign tax returns
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required to be filed by the Company have been timely filed, or if not yet filed
the Company has been granted extensions of the filing dates, which extensions
have not expired. All taxes, assessments, fees and other governmental charges
upon the Company, or upon any of its properties, income or franchises, have been
paid or adequate reserves therefor have been set up and have been disclosed in
the Financial Statements (as described in Section 3.18 below) if any of such
taxes are being contested in good faith. If any of such tax returns have not
been filed or if any such taxes have not been paid or so reserved for, the
failure so to file or to pay would not result in a material adverse effect on
the business, properties, prospects or financial condition of the Company. The
Company knows of no proposed additional tax assessment that is not provided for
in the Financial Statements. The Company has no pending or, to the knowledge of
the Company, threatened tax audit.
3.13 Agreements; Actions: Obligations to Related Parties.
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(a) Except for the agreements explicitly contemplated hereby and
agreements between the Company and its employees with respect to the sale of the
Company's Common Stock (including without limitation stock option agreements),
there are no agreements, understandings or proposed transactions between the
Company and any of its officers or directors or any affiliate thereof.
(b) There are no agreements understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or to its knowledge by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $50,000, (ii) provisions restricting or affecting in any
material, adverse way the development, manufacture or distribution of the
Company's products or services, or (iii) indemnification by the Company with
respect to infringements of Proprietary Rights (other than indemnification
obligations arising from purchase or sale agreements entered into in the
ordinary course of business).
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities (other than with respect to dividend obligations,
distributions, indebtedness and other obligations incurred in the ordinary
course of business or as disclosed in the Financial Statements described in
Section 3.18 below) individually in excess of $50,000 or, in the case
indebtedness and/or liabilities individually less than $50,000, in excess of
$100,000 in the aggregate, (iii) made any loans or advances to any
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person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than the
sale of its inventory in the ordinary course of business. For the purposes of
this subsection (b), all indebtedness, liabilities, agreements, understandings,
instruments, contracts and proposed transactions involving the same person or
entity (including persons or entities the Company has reason to believe are
affiliated therewith) shall be aggregated for the purpose of meeting any minimum
dollar amount.
(d) Except for the agreements explicitly contemplated hereby, and
the Company's Articles and Bylaws, the Company is not a party to, and is not
bound by any contract, agreement or instrument which materially affects its
business as now conducted or as proposed to be conducted, its properties or its
financial condition.
(e) There are no obligations of the Company to officers,
directors, shareholders, or employees of the Company other than (i) for payment
of salary for services rendered, (ii) reimbursement for reasonable expenses
incurred on behalf of the Company, (iii) for other standard employee benefits
made generally available to all employees (including stock option agreements
outstanding under any stock option plan approved by the Board of Directors of
the Company), or (iv) general obligations that a corporation has to its
shareholders under California General Corporation Law, the Articles and the
Bylaws of the Company. The Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
3.14 No Defaults, Violations or Conflicts. The Company is not in
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violation or default in any material respect of any term or provision of its
Articles, Bylaws, or of any instrument, judgment, order, writ, decree, license,
permit or contract to which it is a party or by which it is bound or of any
provision of federal or state statute, rule or regulation applicable to the
Company, which violation or violations, either individually or in the aggregate,
would materially and adversely affect the business, assets, liabilities,
financial condition, operations or prospects of the Company. The Company has
avoided every condition, and has not performed any act, the occurrence of which
would result in the Company's loss of any right granted under any license,
distribution or other agreement, which is necessary for the conduct of its
business as now being conducted by it, the lack of which could materially and
adversely affect the business, properties, prospects, or financial condition of
the Company.
3.15 Insurance. The Company has obtained insurance as specified in
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Exhibit C. The Company is not aware of any pending or threatened claims against
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the Company for personal injuries or property damages which materially and
adversely affect the business, assets, liabilities, financial condition,
operations or prospects of the Company.
3.16 Private Offering. The Company agrees that neither the Company
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nor anyone acting on its behalf will offer any of the Series B Preferred or any
similar securities for issuance or sale to, or solicit any offer to acquire any
of the same from, anyone in such a way as to make the issuance and sale of the
Series B Preferred subject to the registration requirements of Section 5 of the
Securities Act of 1933, as amended (the "Securities Act").
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3.17 Prior Registration Rights. Except as provided in the Rights
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Agreement, the Company is not under any contractual obligation, and has not
granted any rights, to register under the Securities Act any of its securities
that are presently outstanding or may subsequently be issued under such
obligation.
3.18 Financial Statements. The Company has delivered to the Investors
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its audited financial statements (including balance sheet, income statement and
statement of cash flows) as of December 31, 1997 and for the fiscal year then
ended and its unaudited financial statements (including balance sheet, income
statement and statement of cash flows) as of March 31, 1998 and for the three
month period then ended (collectively, the "Financial Statements"), as well as
the Report of Independent Auditors for 1997. The Financial Statements are
complete and correct in all material respects, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the period indicated, except as disclosed therein, and present fairly
the financial condition and results of operations of the Company as of the dates
and for the periods presented. Except as set forth in the Financial Statements,
the Company has no liabilities, contingent or otherwise, other than liabilities
incurred in the ordinary course of business and not required under generally
accepted accounting principles to be reflected in the Financial Statements,
which, individually or in the aggregate, are not material to the financial
condition of the Company.
3.19 Changes in Financial Condition. Since the date of the Financial
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Statements, the Company has not (i) made any loans or advances to any person,
other than ordinary advances for travel and other ordinary employee related
expenses; (ii) sold, exchanged or otherwise disposed of any of its assets or
rights necessary for the conduct of its business as now being conducted by it,
the lack of which could materially and adversely affect the business,
properties, prospects, or financial condition of the Company; nor has there been
(iii) any material and adverse change in the business assets, liabilities,
financial condition, prospects or operations of the Company; (iv) any
resignation or termination of any key officers of the Company, and the Company,
to the best of its knowledge, does not know of the impending resignation or
termination of employment of any such officers; (v) any material change, except
in the ordinary course of business, in the contingent obligations of the Company
by way of guaranty, endorsement, indemnity, warranty or otherwise; (vi) any
damage, destruction or loss, whether or not covered by insurance, materially and
adversely affecting the properties, business or prospects or financial condition
of the Company; (vii) any waiver by the Company of a valuable right or of a
material debt owed to it; (viii) any material change in any compensation
arrangement or agreement with any employee, officer, director or shareholder;
(ix) any declaration or payment of any dividend or other distribution of the
assets of the Company; (x) any debt, obligation or liability incurred, assumed
or guaranteed by the Company, except those for immaterial amounts sand for
current liabilities incurred in the ordinary course of business; (xi) any sale,
assignment or transfer of any patents, trademarks, copyrights; trade secrets or
other intangible assets, except in the ordinary course of business; or (xii) any
change in any material agreement to which the Company is a party or by which it
is bound which materially and adversely affects the business, assets,
Liabilities, financial condition, operations or prospects of the Company,
including compensation agreements with the Company's employees.
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3.20 Employee Compensation Plans. Except as set forth in Exhibit C or
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as specifically contemplated in this Agreement, the Company is not party to or
bound by any currently effective employment contracts, deferred compensation
agreements, bonus plans, incentive plans, profit sharing plans, retirement
agreements or other employee compensation or severance agreements, including
without limitation any Employee Benefit Plan as defined in the Employee
Retirement Income Security Act of 1974.
3.21 Employee Relations. The Company believes its relations with its
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employees are satisfactory. The Company is not bound by or subject to any
written or oral, express or implied, contract, commitment or arrangement with
any labor union and the Company's employees are not represented by any labor
unions nor, to the Company's knowledge, is any union organization campaign in
progress. There is no strike or other labor dispute involving the Company
pending or, to the knowledge of the Company, threatened, which could have a
material and adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (in each case, as such business is
presently conducted and as it is proposed to be conducted), nor is the Company
aware of any labor organization activity involving its employees. To the
Company's knowledge, no employee of the Company, nor any consultant with whom
the Company has contracted, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement relating to
the right of any such individual to be employed by, or to contract with, the
Company because of the nature of the business to be conducted by the Company;
and to the Company's knowledge the continued employment by the Company of its
present employees, and the performance of the Company's contracts with its
independent contractors, will not result in any such violation. The Company has
not received any notice alleging that any such violation has occurred. No
employee of the Company has been granted the right to continued employment by
the Company or to any material compensation following termination of employment
with the Company. The Company is not aware that any officer or key employee, or
that any group of key employees, intends to terminate their employment with the
Company nor does the Company have a present intention to terminate the
employment of any of the foregoing. The employment of each officer and employee
of the Company is terminable at the will of the Company. The Company has
complied in all material respects with all applicable state and federal equal
employment opportunity laws and with other laws related to employment.
3.22 Brokers and Finders. No agent, broker, investment banker or
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other firm or person acting on behalf or under the authority of the Company is
or will be entitled to any broker's or finder's fee or any other commission or
similar fee from the Company in connection with any of the transactions
contemplated by this Agreement.
3.23 Governmental Consents. No consent, approval, order or
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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 Company's valid execution and
delivery of this Agreement or the Investment Agreements, or the offer, sale or
issuance of the Series B Preferred (and the Common Stock issuable upon the
conversion thereof)
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or the consummation of any other transaction contemplated hereby, except for the
filing of the Articles in the Office of the Secretary of State of California,
which will be filed by the Company prior to the Closing, and, the filing of a
Form D notice under Regulation D of the Securities Act, and any other post-sale
filings required by applicable state securities laws. The offer, sale and
issuance of the Series B Preferred (and of the Common Stock issuable upon the
conversion thereof) in conformity with the terms of this Agreement are exempt
from the registration requirements of Section 5 of the Securities Act and from
the qualification requirements of applicable state securities laws, assuming the
accuracy of the representations and warranties of the Investors as set forth in
Section 5 of this Agreement.
3.24 Environmental and Safety Laws. To its 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.
3.25 Real Property Holding Corporation. The Company is not a real
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property holding corporation within the meaning of Code Section 897(c)(2) and
any regulations promulgated thereunder.
3.26 Full Disclosure. The representations and warranties of the
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Company contained in this Agreement and other provisions of this Agreement and
the Investor Agreements, the certificates prepared or supplied to the Investors
by the Company, and the other materials presented to the Investors by the
Company, do not contain any untrue statement of a material fact or omit any
material fact necessary to make the statements contained therein or herein (in
view of the circumstances under which they were made) not misleading. To the
Company's knowledge, there are no facts which (individually or in the aggregate)
materially adversely affect the business, assets, liabilities, financial
condition, prospects or operations of the Company that have not been set forth
in this Agreement, the Exhibits hereto, the Investment Agreements or in the
other documents delivered to the Investors or their attorneys or agents in
connection herewith.
3.27 Investment Company Act. The Company is not an "investment
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company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
3.28 Qualified Small Business Stock.
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(a) As of and immediately following the Closing, the Series B
Preferred will meet each of the requirements for qualification as "qualified
small business stock" set forth in Section 1202(c) of the Internal Revenue Code
of 1986, as amended (the "Code"), including without limitation the following:
(i) the Company will be a domestic C corporation, (ii) the Company will not have
made any purchases of its own stock described in Code Section 1202(c)(3)(B)
during the one-year period preceding the Closing, and (iii) the Company's (and
any predecessor's) aggregate gross assets, as defined by Code Section
1202(d)(2), at no time
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from the date of incorporation of the Company and through the Closing have
exceeded or will exceed $50 million, taking into account the assets of any
corporations required to be aggregated with the Company in accordance with Code
Section 1202(d)(3).
(b) As of the Closing, at least 80% (by value) of the assets of
the Company are used by it in the active conduct of one or more qualified trades
or businesses, as defined by Code Section 1202(e)(3), and the Company is an
eligible corporation, as defined by Code Section 1202(e)(4).
4. Representations and Warranties of the Investors.
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Each Investor severally represents and warrants to the Company as
follows:
4.1 Authorization. When executed and delivered by the Investor, and
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assuming execution and delivery by the Company, this Agreement will constitute a
valid obligation of the Investor, enforceable in accordance with its terms,
except to the extent that such enforcement may be subject to applicable federal
or state bankruptcy, insolvency, reorganization, arrangement, moratorium,
fraudulent conveyance or other laws or court decisions relating to or affecting
the rights of creditors generally, and such enforcement may be limited by
equitable principles of general applicability.
4.2 Brokers and Finders. No agent, broker, investment banker or other
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firm or person acting on behalf or under the authority of the Investor is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee from the Investor or the Company in connection with any of the
transactions contemplated by this Agreement.
5. Securities Laws.
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5.1 California Securities Law. THE SALE OF THE SECURITIES WHICH ARE
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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 AN EXEMPTION FROM SUCH QUALIFICATION IS
AVAILABLE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, OR SUCH EXEMPTION BEING
AVAILABLE.
5.2 Securities Law Representations and Covenants of Investors.
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(a) The Company is entering into this Agreement with each
Investor in reliance upon the Investor's representation to the Company, which
the Investor's execution of this Agreement hereby confirms, that the Series B
Preferred to be received by the Investor and the shares of Common Stock issuable
upon the conversion of any Series B Preferred will be acquired
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for investment for the Investor's own account, not as a nominee or agent, and
not with a view to the sale or distribution of any part thereof in violation of
applicable securities laws. By executing this Agreement, each Investor further
represents that the Investor does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer, or grant participations to
such person or to any third person, with respect to any of the Series B
Preferred or the shares of Common Stock issuable upon conversion of any of the
Series B Preferred.
(b) Each Investor understands and acknowledges that the offering
of the Series B Preferred pursuant to this Agreement will not be registered
under the Securities Act on the grounds that the offering and sale of securities
contemplated by this Agreement are exempt from registration pursuant to Section
3(b) or Section 4(2) of the Securities Act or Regulation D promulgated
thereunder, and that the Company's reliance upon such exemption is predicated
upon the Investor's representations set forth in this Agreement.
(c) Each Investor acknowledges and agrees that the Series B
Preferred and, if issued, the shares of Common Stock issued upon conversion of
the Series B Preferred must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. Each Investor has been advised or is aware of the provisions of Rule
144 promulgated under the Securities Act, which permits limited resale of
securities purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things: 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 through an unsolicited 'broker's transaction or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934, as amended) and the number of shares being sold during any
three-month period not exceeding specified limitations.
(d) Each Investor represents that: (i) the Investor (or his or
her purchaser representative, if any) is an "accredited investor" under the
Securities Act and has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of the Investor's
prospective investment in the Company, (ii) the Investor has the ability to bear
the economic risks of the Investor's prospective investment; (iii) the Investor
is able, without materially impairing its financial condition, to hold the
Series B Preferred for an indefinite period of time and to suffer complete loss
on its investment; (iv) the Investor is a resident of, or has its principal
office in the state indicated for the Investor as set forth on the Investor
Suitability Questionnaire supplied by the Investor to the Company on or before
the Closing; (v) the Investor understands and has fully considered for purposes
of this investment the risks of this investment and understands that (1) this
investment is suitable only for an investor who is able to bear the economic
consequences of losing its entire investment, (2) the Company has a limited
financial and operating history, (3) the Series B Preferred represent an
extremely speculative investment which involves a high degree of risk of loss,
and (4) there are substantial restrictions on the transferability of, and there
will be no public market for, the Series B Preferred or the Common Stock
issuable upon the conversion of any of the Series B Preferred; accordingly, it
may not be
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possible for the Investor to liquidate its investment in the Series B Preferred;
(vi) there have been no representations as to the possible future value, if any,
of the Series B Preferred; and (vii) the Investor has received all the
information it has requested from the Company and considers necessary or
appropriate for deciding whether to purchase the Series B Preferred.
6. Conditions of Investors' Obligations at Closing.
-----------------------------------------------
The obligations of the Investors under Sections 1 and 2 of this
Agreement are subject to the fulfillment at or before the Closing of each of the
following conditions, any of which may be waived in writing by the Investors:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 3 of this Agreement will be true,
correct and complete on and as of the Closing with the same effect as if made on
and as of the Closing.
6.2 Performance. The Company will have performed or fulfilled all
-----------
agreements, obligations and conditions contained herein required to be performed
or fulfilled by the Company at or before the Closing.
6.3 Minimum Commitment. The total purchase price set forth on
------------------
Exhibit A hereto shall not be an amount less than six million dollars
---------
($6,000,000).
6.4 Blue Sky Compliance. The Company will have complied with and be
-------------------
effective under all state securities or Blue Sky laws, including those of New
York, applicable to the offer and sale of the Series B Preferred to the
Investors.
6.5 Opinion of Company's Counsel. The Investors will have received
----------------------------
from Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, counsel for the Company, a favorable
opinion, dated the date of the Closing, in the form attached hereto as Exhibit
-------
G.
-
6.6 Proceedings Satisfactory: Compliance Certificate. All corporate
-------------------------------------------------
and legal proceedings taken by the Company in connection with the transactions
contemplated by this Agreement and all documents and papers relating to such
transactions will be satisfactory to the Investors, in the reasonable exercise
of the judgment of the Investors. The Company will have delivered to the
Investors a certificate dated as of the Closing, signed by the Company's
President, certifying that the conditions set forth in Sections 6.1 and 6.2 have
been satisfied.
6.7 Investors' Rights. The Company and each of the Investors will
-----------------
have executed and delivered an Investors' Rights Agreement in the form of
Exhibit D attached hereto.
---------
6.8 Co-Sale Agreement and Voting Agreement. Each of the Company,
--------------------------------------
Xxxxxxx Xxxxxxx, and each of the Investors will have executed and delivered a
Co-Sale Agreement in the form of Exhibit E and a Voting Agreement in the form of
---------
Exhibit F attached hereto.
---------
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6.9 Articles. The Articles in the form of Exhibit B attached hereto
-------- ---------
will have been filed with and accepted by the Office of the Secretary of State
of California.
6.10 Consents, Permits, and Waivers. The Company shall have obtained
------------------------------
any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and the
Investment Agreements (except for such as may be properly obtained subsequent to
the Closing).
6.11 Reservation of Conversion Shares. The shares of Common Stock
--------------------------------
issuable upon conversion of the Series B Preferred shall have been duly
authorized and reserved for issuance upon such conversion.
7. Conditions of the Company's Obligations at Closing.
--------------------------------------------------
The obligations of the Company under Sections 1 and 2 of this
Agreement are subject to the fulfillment at or before the Closing of each of the
following conditions, any of which may be waived in writing by the Company:
7.1 Representations and Warranties. The representations and
------------------------------
warranties of the Investors contained in Sections 4 and 5 will be true on and as
of the Closing with the same effect as though said representations and
warranties had been made on and as of the Closing.
7.2 Performance. The Investors will have performed or fulfilled all
-----------
agreements, obligations and conditions contained herein required to be performed
or fulfilled by the Investors at or before the Closing, including without
limitation delivery to the Company of the pro rata purchase price for such
Investors' Series B Preferred as set forth in Section 1 above, or as set forth
on Exhibit A attached hereto, in the form of immediately available funds.
---------
7.3 Blue Sky Compliance. The Company will have complied with and be
-------------------
effective under the securities laws of the State of California and any other
applicable state as necessary to offer and sell the Series B Preferred to the
Investors.
8. Miscellaneous.
-------------
8.1 Entire Agreement; Successors and Assigns. This Agreement (and the
----------------------------------------
Exhibits hereto) constitutes the entire contract between the Company and the
Investors relative to the subject matter hereof, and any previous or
contemporaneous agreement between the Company and the Investors regarding the
subject matter of this Agreement is superseded by this Agreement. Subject to the
exceptions specifically set forth in this Agreement, the terms and conditions of
this Agreement will inure to the benefit of and be binding upon the respective
executors, administrators, heirs, successors and assigns of the parties.
-13-
8.2 Expenses. The Company will pay reasonable fees and expenses of
--------
two special counsel to the Investors up to a maximum of $10,000 per counsel.
8.3 Governing Law. This Agreement will be governed by and construed
-------------
in accordance with the laws of the State of California applicable to contracts
entered into and wholly to be performed within the State of California by
California residents.
8.4 Headings. The headings of the Sections of this Agreement are for
--------
convenience and will not by themselves determine the interpretation of this
Agreement.
8.5 Notices. Any notice required or permitted hereunder will be
-------
given in writing and will be conclusively deemed effectively given upon personal
delivery, or five days after deposit in the United States mail, by certified
mail, postage prepaid, return receipt requested, addressed (i) if to the
Company, as set forth below the Company's name on the signature page of this
Agreement, and (ii) if to an Investor, at such Investor's address as set forth
below its name on the signature page of this Agreement, or at such other address
as the Company or the Investor may designate by ten (10) days' advance written
notice to such Investor or the Company, respectively.
8.6 Amendment of Agreement: Waiver. This Agreement may be amended or
------------------------------
modified only upon the written consent of the Company and by the holders of at
least a majority of the then outstanding Series B Preferred. The obligations of
the Company and the rights of the holders of the Series B Preferred and the
shares of Common Stock issuable upon conversion of the Series B Preferred under
the Agreement may be waived only with the written consent of the holders of at
least a majority of the then outstanding Series B Preferred.
8.7 Finders Fees. Each of the Company and the Investors will
------------
indemnify the other against all liabilities incurred by the indemnifying party
with respect to claims related to investment banking or finders fees in
connection with the transactions contemplated by this Agreement, arising out of
arrangements between the party asserting such claims and the indemnifying party,
and all costs and expenses (including reasonable fees of counsel) of
investigating and defending such claims.
8.8 Invalid or Void Provisions. If any provision of this Agreement is
--------------------------
deemed invalid, illegal, or unenforceable in any jurisdiction, such provision
will be deemed amended to conform to applicable law so as to be valid, legal and
enforceable in such jurisdiction, and the validity, legality and enforceability
of such provision will not be affected or impaired thereby in any other
jurisdiction; if such provision cannot be amended without altering materially
the intention of the parties, it will be stricken and the remainder of this
Agreement will remain in full force and effect.
8.9 Cooperation. The parties agree that after the Closing, they will
-----------
from time to time, upon the request of any party hereto and without further
consideration, execute, acknowledge
-14-
and deliver in proper form any further instruments and take such other actions
as such other party may reasonably require in order to effectively carry out the
intent of this Agreement.
8.10 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
[This space intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
2BRIDGE SOFTWARE
By: ________________________________
Xxxxxxx Xxxxxxx, President
[Signature Page to the Purchase Agreement]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
INVESTOR:
By: ________________________________
Printed Name:_______________________
Title:______________________________
[SIGNATURE PAGE TO THE PURCHASE AGREEMENT]
