Exhibit 10.8
VSTREAM INCORPORATED
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
This Series B Preferred Stock Purchase Agreement (the "Agreement") is
entered into as of September 2, 1997, by and among VSTREAM INCORPORATED, a
Delaware corporation (the "Company") and each of those persons and entities,
severally and not jointly, whose names are set forth on the Schedule of
Purchasers attached hereto as Exhibit A (collectively the "Purchasers" and
---------
individually a "Purchaser").
In consideration of the mutual promises hereinafter set forth, the parties
hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 Authorization of Shares. On or prior to the Closing (as defined in
Section 2 below), the Company shall have authorized the sale and issuance to
Purchasers of the shares of Series B Preferred Stock (the "Shares") having the
rights, preferences, privileges and restrictions set forth in the Certificate of
Amendment to the Certificate of Incorporation of the Company, in the form
attached hereto as Exhibit B (the "Amended Certificate").
---------
1.2 Sale and Purchase. Subject to the terms and conditions hereof, at
the Closing (as hereinafter defined) the Company hereby agrees to issue and sell
to each Purchaser and each Purchaser agrees to purchase from the Company, the
number of Shares set forth opposite such Purchaser's name on Exhibit A, at a
---------
purchase price of One Hundred Dollars ($100) per Share.
2. CLOSING, DELIVERY AND PAYMENT.
2.1 Closing. The closing of the sale and purchase of the Shares under
this Agreement (the "Closing") shall take place at 10:00 AM on September 2,
1997, at the offices of Holland & Xxxx LLP, 000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000,
Xxxxxx, Xxxxxxxx 00000, or at such other time or place as the Company and
Purchasers may mutually agree (such date is hereinafter referred to as the
"Closing Date"). At the Closing, subject to the terms and conditions hereof,
the Company will deliver to the Purchasers certificates representing the number
of Shares to be purchased at the Closing by each Purchaser, against payment of
the purchase price therefor by check or wire transfer made payable to the order
of the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each Purchaser as follows:
3.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to own
and operate its properties and assets, to execute and deliver this Agreement, to
issue and sell the Shares and the Common Stock $.001 par value per share of the
Company (the "Common Stock") issuable upon conversion thereof (the "Conversion
Shares") and to carry out the provisions of this Agreement and the Amended
Certificate and to carry on its business as presently conducted and as presently
proposed to be conducted.
3.2 Capitalization. The authorized capital stock of the Company,
immediately prior to the Closing, will consist of fifteen million (15,000,000)
shares of Common Stock, four hundred seventy-five thousand (475,000) shares of
which are issued and outstanding and six million (6,000,000) shares of Preferred
Stock, five million twenty-five thousand (5,025,000) of which are designated
Series A Preferred Stock, all of which will be issued and outstanding and ten
thousand one hundred thirty-five (10,135) of which are designated Series B
Preferred Stock, none of which are issued and outstanding. All issued and
outstanding shares of the Company's Common Stock have been duly authorized,
validly issued, and are fully paid and nonassessable. The Conversion Shares have
been duly and validly reserved for issuance. Except as provided in Exhibit C
hereto or as provided in this Agreement, there are no outstanding options,
warrants or other rights to purchase from the Company any of its securities.
When issued in compliance with the provisions of this Agreement and the Amended
Certificate, the Shares and the Conversion Shares will be validly issued, fully
paid and nonassessable.
3.3 Authorization; Binding Obligations. All corporate action on the
part of the Company, its officers, directors and stockholders necessary for the
authorization of this Agreement, the performance of all obligations of the
Company hereunder at the Closing and the authorization, sale, and delivery of
the Shares has been taken or will be taken prior to the Closing.
3.4 Proprietary Rights. The Company has not received any
communications alleging that it has violated or, by conducting its business as
proposed would violate, any proprietary rights of any other person, nor is the
Company aware of any basis for the foregoing.
3.5 Actions Pending. There is no action, suit or proceeding pending
or, to the best knowledge of the Company, threatened against or affecting the
Company or any of its respective properties or rights before any court or by or
before any governmental body or arbitration board or tribunal.
3.6 Investments in United States Real Property Interests. The
Company's capital stock does not constitute a United States real property
interest as that term is defined in Section 897(c)(1)(A)(ii) of the Internal
Revenue Code of 1986, as amended (the "Code"). The preceding representation is
based on a determination by the Company that the Company is not and has not been
a United States real property holding corporation (as that term is defined in
Section 897(c)(2) of the Code) during the five (5) year period preceding the
date of this letter.
2
3.7 Qualified Small Business. To the best of its knowledge the Company
qualifies as a "Qualified Small Business" as defined in Section 1202(d) of the
Code and covenants that so long as its shares are held by the Purchasers (or a
transferee in whose hands the shares are eligible to qualify as Qualified Small
Business Stock as defined in Section 1202(c) of the Code), it will use its
reasonable efforts to cause the shares to qualify as Qualified Small Business
Stock; provided that, notwithstanding the foregoing, the Company shall not be
obligated to take any action, or refrain from any action which in its
discretion, is not in the best interests of the Company or its stockholders.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser hereby
represents and warrants to the Company as follows:
4.1 Requisite Power and Authority. Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver this
Agreement and to carry out its provisions. All actions on Purchaser's part
required for the lawful execution and delivery of this Agreement have been or
will be effectively taken prior to the Closing.
4.2 Investment Representations. Purchaser understands that neither the
Shares nor the Conversion Shares have been registered under the Securities Act
of 1933, as amended (the "Securities Act"). Purchaser also understands that the
Shares are being offered and sold pursuant to an exemption from registration
contained in the Securities Act based in part upon Purchaser's representations
contained in this Agreement. Purchaser hereby represents and warrants as
follows:
(a) Purchaser Bears Economic Risk. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment indefinitely unless the Shares (or the Conversion Shares) are
registered pursuant to the Securities Act, or an exemption from registration is
available. Purchaser understands that the Company has no present intention of
registering the Shares, the Conversion Shares or any shares of its Common Stock.
Purchaser also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow Purchaser to transfer all or any portion
of the Shares or the Conversion Shares under the circumstances, in the amounts
or at the times Purchaser might propose.
(b) Acquisition for Own Account. Purchaser is acquiring the
Shares and the Conversion Shares for Purchaser's own account for investment
only, and not with a view towards their distribution.
(c) Purchaser Can Protect Its Interest. Purchaser represents that
by reason of its, or of its management's business or financial experience,
Purchaser
3
has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement. Further, Purchaser is aware of no
publication of any advertisement in connection with the transactions
contemplated in this Agreement.
(d) Accredited Investor. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
(e) Company Information. Purchaser has had an opportunity to
discuss the Company's business, management and financial affairs with directors,
officers and management of the Company. Purchaser has also had the opportunity
to ask questions of and receive answers from, the Company and its management
regarding the terms and conditions of this investment.
(f) Rule 144. Purchaser acknowledges and agrees that the
Conversion Shares must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. Purchaser has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act, which permits limited resale of shares
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.
4.3 Transfer Restrictions. Each Purchaser acknowledges and agrees that the
Shares and the Conversion Shares are subject to restrictions on transfer as set
forth herein.
5. FUTURE OFFERINGS.
5.1 Series C Financing. The Company has identified to Centennial Fund
V, L.P. and its affiliates ("Centennial V") certain milestones which it is
seeking to accomplish. The Company and Centennial V expect that upon
satisfactory completion or progress toward those milestones (in the sole
discretion of Centennial V), Centennial V currently intends to provide
$10,000,000 in Series C Convertible Preferred Stock financing of the Company on
or before June 30, 1998 at a price equal to $1.04 per share of Common Stock into
which the preferred stock sold in the Series C Financing is convertible (the
"Series C Financing").
5.2 Right of First Offer on Subsequent Offerings. If at any time the
Company offers any "Equity Securities" (as defined below), then Centennial V
shall have a right of first offer to purchase up to $10,000,000 of all Equity
Securities (the "First Offer Amount") that the Company may propose to sell and
issue, other than the Equity Securities excluded by Section 5.2(d) hereof. The
term "Equity Securities" shall mean
4
(i) any capital stock of the Company, (ii) any security convertible, with or
without consideration, into any capital stock, (iii) any security carrying any
warrant or right to subscribe to or purchase any capital stock or (iv) any such
warrant or right.
(a) Exercise of Rights. If the Company proposes to offer any
Equity Securities, it shall give Centennial V written notice of its intention,
describing the Equity Securities, the price, and the terms and conditions upon
which the Company proposes to offer the same. Centennial V shall have thirty
(30) days from the giving of such notice to agree to purchase up to its pro rata
portion of the First Offer Amount for the price and upon the terms and
conditions specified in the notice by giving written notice to the Company and
stating therein the quantity of Equity Securities to be purchased. If Centennial
V exercises its right of first offer, the Company shall be obligated to sell to
Centennial V all of the Equity Securities which Centennial V elects to purchase
(up to the First Offer Amount) in accordance with the terms of this Section
5.2(a).
(b) Issuance of Equity Securities to Other Persons. If Centennial
V fails to exercise in whole or in part the rights to purchase Equity Securities
within such thirty (30) day period, the Company shall have ninety (90) days
thereafter to sell the Equity Securities in respect of which Centennial V's
rights were not exercised, at a price and upon terms and conditions that are not
materially more favorable to the purchasers thereof than specified in the
Company's notice to Centennial V pursuant to this Section. If the Company has
not sold such Equity Securities within such ninety (90) days, the Company shall
not thereafter issue or sell any Equity Securities, without first offering such
securities to Centennial V in the manner provided above.
(c) Termination of Rights to First Offer. The rights of first
offer established by this Section shall terminate upon the closing of the next
equity financing pursuant to which the Company sells Equity Securities with an
aggregate purchase price of not less than $10,000,000 (a "Qualified Financing"),
provided that such sale has been effected in compliance with this Article V.
(d) Excluded Securities. The right of first offer established in
this Article V shall have no application to any of the following:
(i) 975,000 shares of Common Stock (and/or options, warrants
or other Common Stock purchase rights issued pursuant to such options,
warrants or other rights) issued or to be issued to employees, officers or
directors of, or consultants or advisors to the Company or any subsidiary,
pursuant to stock purchase or stock option plans or other arrangements
approved by the Company's Board of Directors (including such shares or
rights issued to such persons prior to or on the date of this Agreement);
(ii) any Equity Securities issued pursuant to a merger,
consolidation, acquisition or similar business combination or pursuant to a
recapitalization or stock split;
5
(iii) any Equity Securities issued pursuant to any venture
leasing arrangement (whether issued to a lessor, guarantor or other
person), if such issuance is approved by the Board of Directors (including
approval by Centennial V's representative to the Board of Directors;
(iv) Equity Securities issued upon conversion of the Shares
or the shares of Series A Preferred Stock;
(v) any borrowings, direct or indirect, from financial
institutions or other persons by the Company, whether or not presently
authorized, including any type of loan or payment evidenced by any type of
debt instrument; provided such borrowings do not have equity features
including warrants, options or other rights to purchase capital stock and
are not convertible into capital stock of the Company;
(vi) Equity Securities issued to vendors or customers or to
other persons in similar commercial situations with the Company if such
issuance is approved by the Board of Directors of the Company (including
approval by Centennial V's representative to the Board of Directors);
(vii) Equity Securities issued in connection with corporate
partnering transactions on terms approved by the Board of Directors
(including approval by Centennial V's representative to the Board of
Directors); and
(viii) any right, option or warrant to acquire any security
convertible into the securities described in subsections (i) through (vii)
above.
(e) No Participation Required. The Company acknowledges that
nothing in this Section 5 (including Section 5. 1) shall obligate Centennial V
to participate in the Series C Financing or to purchase Equity Securities, and
Centennial V has not made any commitments or representations that it will do so.
(f) Not Assignable. The right of first offer set forth in this
Section 5 may not be assigned or transferred except to an affiliate of
Centennial V or to SOFTBANK Technology Ventures.
6. Covenants of the Company.
6.1 Board of Directors. Effective upon the Closing, X. Xxxxxxx
Xxxxxxxxxx, Jr. shall become a member of the Company's Board of Directors.
Thereafter, for so long as Centennial V (or its affiliates) owns at least 10% of
the Shares (or an equivalent amount of Common Stock issued upon conversion
thereof) purchased pursuant to this Agreement, at each annual or special meeting
or in connection with the taking of action by written consent for the election
of the Board of Directors, the Company shall cause one representative designated
by Centennial V to be nominated to
6
the Company's Board of Directors and shall use its best efforts to cause the
election of such representatives.
6.2 Management Rights. The Company hereby grants Centennial V the
following contractual rights:
(a) Centennial V shall be entitled to consult with and advise
management of the Company on significant business issues, including management's
proposed annual operating plans. Management will meet with Centennial V
regularly during each year at the Company's facilities at mutually agreeable
times for such consultation and advice and to review progress in achieving said
plans.
(b) Centennial V may examine the books and records of the Company
and inspect its facilities and may request information at reasonable times and
intervals concerning the general status of the Company's financial condition and
operation; subject to subsection 6.2(d) below.
(c) If Centennial V is not represented on the Company's Board of
Directors, the Company shall give a representative of Centennial V copies of all
notices, minutes, consents, and other material that it provides to its
directors. Upon reasonable notice and a scheduled meeting of the Board of
Directors or such other time, if any, as the Board of Directors may determine in
its sole discretion, such representative may address the Board of Directors with
respect to Centennial V's concerns regarding significant business issues facing
the Company.
(d) Centennial V agrees, and any representative of Centennial V
will agree, that as a condition precedent to the rights granted under this
Section 6.2 each person having access to any information provided to the Board
of Directors by the Company will hold in confidence and trust and not use or
disclose any confidential information provided to or learned by it in connection
with its rights under this Agreement. The Company reserves the right not to
provide information and to exclude non-director representatives of Centennial V
from any meeting or portion thereof if delivery of such information or
attendance at such meeting would adversely affect the attorney-client privilege
between the Company and its counsel.
(e) The rights described in this Section 6.2 shall terminate and
be of no further force or effect upon the consummation of the sale of the
Company's securities pursuant to a registration statement filed by the Company
under the Securities Act in connection with the firm commitment underwritten
offering of its securities to the general public or in the event that Centennial
V no longer holds at least 10% of the Shares (or an equivalent amount of Common
Stock upon conversion thereof) purchased pursuant to this Agreement. The
confidentiality provisions hereof will survive any such termination.
6.3 Company Rights. The Purchasers acknowledge that the available pool
for issuance of stock or options to employees, consultants or directors (the
"Option
7
Pool") consists of 975,000 shares of Common Stock subsequent to the Closing. In
addition, 175,000 shares of Common Stock have been issued from the Option Pool
to employees as of the date of this Agreement.
6.4 United States Real Property Holding Company. The Company shall use
its best efforts to ensure that it does not at any time in the future become a
United States real property holding corporation ("USRPHC") and from time to
time, upon request of any Purchaser shall make a determination as to its status
as a USRPHC. If at any time in the future the Company should become a United
States real property holding corporation, the Company shall, as promptly as
possible, notify the Purchasers of such change in status.
6.5 Unrelated Business Taxable Income. Any gross income derived by the
Purchasers from the Company shall be in the form of dividends, interest, capital
gains and losses from the disposition of property, and rents and royalties, but
only such rents and royalties as are excluded pursuant to Code Sections
512(b)(2) and 512(b)(3) respectively, in calculating unrelated business taxable
income and only such dividends, interest, capital gains and losses, and rents
and royalties that are not included under Section 512(b)(4) of the Code in
calculating unrelated business taxable income.
7. REPURCHASE RIGHTS. All or any portion of the Shares purchased hereunder
(and any shares of Conversion Shares or securities issued thereupon as a
dividend or other distribution, or in connection with a reorganization or
recapitalization) by Centennial V shall be subject to repurchase by the Company
at the Company's option at a $100 per share repurchase price (as appropriately
adjusted for any stock splits) upon Centennial V's failure to participate in the
Series C Financing. Such repurchase option shall be exercisable at any time
within eighteen (18) months following Centennial V's failure to participate in
the Series C Financing by written notice signed by an officer of the Company.
Upon exercise of the repurchase option, Centennial V shall duly execute the
share certificates for transfer and deliver the certificates to the Company
against payment of the aggregate purchase price in immediately available funds.
The Company acknowledges that its repurchase right applies only to a failure to
participate in the Series C Financing and does not apply to any other round of
financing by the Company.
8. MISCELLANEOUS.
8.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of Colorado as such laws are applied to agreements between
Colorado residents entered into and performed entirely in Colorado.
8.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company hereunder in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
8
8.3 Successors and Assigns. Except as otherwise expressly 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 and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
8.4 Entire Agreement. This Agreement, the Exhibits and Schedules
hereto and the other documents delivered pursuant hereto, including the letter
dated of even date herewith entitled "Disqualified Parties," constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and no party shall be liable or bound to any other in any manner
by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.
8.5 Severability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
8.6 Amendment or Waiver.
(a) This Agreement may be amended or modified only upon the
mutual written consent of the Company and holders of at least a majority of the
Shares (treated as if converted and including any Conversion Shares into which
the Shares have been converted that have not been sold to the public).
(b) The obligations of the Company and the rights of the holders
of the Shares and the Conversion Shares under the Agreement may be waived only
with the written mutual consent of the holders of at least a majority of the
Shares (treated as if converted and including any Conversion Shares into which
the Shares have been converted that have not been sold to the public).
8.7 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
Company at the address as set forth on the signature page hereof and to
Purchaser at the address set forth on Exhibit A attached hereto or at such other
---------
address as the Company or Purchaser may designate by ten (10) days advance
written notice to the other parties hereto.
8.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
9
8.9 Broker's Fees. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 8.9 being untrue.
8.10 Expenses. The Company agrees to pay, and hold each Purchaser
harmless against liability for the payment of, (a) the fees and expenses of
their special counsel arising in connection with the negotiation and execution
of this Agreement and the consummation of the transactions contemplated by this
Agreement which shall be payable at the Closing, (b) other fees and expenses
incurred by the Company, including due diligence expense, (c) the fees and
expenses incurred with respect to any amendments or waivers under or in respect
of this Agreement, the agreements contemplated hereby, and the Amended
Certificate, (d) stamp and other taxes which may be payable in respect of the
execution and delivery of this Agreement or the issuance, delivery or
acquisition of the Shares and the Conversion Shares, and (e) the fees and
expenses incurred with respect to the enforcement of the rights granted under
this Agreement, the agreements contemplated hereby and the Amended Certificate;
provided that the fees and expenses for which the Company is responsible under
(a) and (b) above shall not exceed $10,000 in the aggregate.
8.11 Remedies. Each Purchaser shall have the rights and remedies set
forth in this Agreement, the Amended Certificate and all rights and remedies
which such holders have been granted at any time under any other agreement or
contract and all of the rights which such holders have under any law. Any person
having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law.
IN WITNESS WHEREOF, the parties hereto have executed the Agreement as of
the date set forth in the first paragraph hereof
COMPANY:
VSTREAM INCORPORATED
By: /s/ Xxxxx X. XxXxxx
------------------------------
Title: Chief Financial Officer
----------------------------
10
PURCHASERS
Centennial Fund V, L.P.
By: Centennial Holdings V, L.P.,
Its General Partner
By: /s/ X. Xxxxxxx Xxxxxxxxxx
-------------------------------------
a General Partner
Centennial Entrepreneurs Fund V., L.P.
By: Centennial Holdings V, L.P.
Its General Partner
By: /s/ X. Xxxxxxx Xxxxxxxxxx
-------------------------------------
Title: General Partner
-----------------------------------
VStream Investment Partnership
By: /s/ X. Xxxxxxx Xxxxxxxxxx
--------------------------------------
Its: Partner
-------------------------------------
11
SERIES B STOCK PURCHASE AGREEMENT
EXHIBIT A
Schedule of Purchasers
----------------------
Name and Address Series B Shares Aggregate
---------------- --------------- ---------
Purchase Price
--------------
Centennial Fund V, L.P. 9,700 $ 970,000
0000 00xx Xxxxxx
Xxxxxx, XX 00000
Centennial Entrepreneurs Fund 300 $ 30,000
V, L.P.
0000 00xx Xxxxxx
Xxxxxx, XX 00000
VStream Investment Partnership 135 $ 13,500
0000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
------ ----------
TOTAL 10,135 $1,013,500
