Exhibit 10.17
xxx.xxx, inc.
SERIES E PREFERRED STOCK
PURCHASE AGREEMENT
July 16, 1999
TABLE OF CONTENTS
1. Purchase and Sale of Stock........................................................... 1
1.1 Sale and Issuance of Series E Preferred Stock........................................ 1
1.2 Funding.............................................................................. 1
2. Representations and Warranties of the Company........................................ 1
2.1 Organization, Good Standing and Qualification........................................ 2
2.2 Capitalization and Voting Rights..................................................... 2
2.3 Subsidiaries......................................................................... 3
2.4 Authorization........................................................................ 3
2.5 Valid Issuance of Preferred and Common Stock......................................... 3
2.6 Governmental Consents................................................................ 4
2.7 Offering............................................................................. 4
2.8 Litigation........................................................................... 4
2.9 Proprietary Information and Inventions Agreements.................................... 4
2.10 Patents and Trademarks............................................................... 5
2.11 Compliance with Other Instruments.................................................... 5
2.12 Agreements; Action................................................................... 6
2.13 Related Party Transactions........................................................... 7
2.14 Permits.............................................................................. 7
2.15 Environmental and Safety Laws........................................................ 7
2.16 Manufacturing and Marketing Rights................................................... 7
2.17 Disclosure........................................................................... 8
2.18 Offerees............................................................................. 8
2.19 Registration Rights.................................................................. 8
2.20 Corporate Documents.................................................................. 8
2.21 Title to Property and Assets......................................................... 8
2.22 Financial Statements................................................................. 8
2.23 Changes.............................................................................. 9
2.24 Employee Benefit Plans............................................................... 9
2.25 Tax Returns, Payments and Elections.................................................. 9
2.26 Insurance............................................................................ 10
2.27 Minutes.............................................................................. 10
2.28 Labor Agreements and Actions; Employee Compensation.................................. 10
2.29 Section 83(b) Elections.............................................................. 10
2.30 Real Property Holding Company........................................................ 10
2.31 Net Operating Loss Carryforward...................................................... 11
2.32 Brokers.............................................................................. 11
2.33 Significant Customers and Suppliers.................................................. 11
2.34 Year 2000............................................................................ 11
2.35 Reliance............................................................................. 11
3. Representations and Warranties of the Investor....................................... 11
3.1 Authorization........................................................................ 11
3.2 Purchase Entirely for Own Account.................................................... 11
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3.3 Disclosure of Information............................................................ 12
3.4 Investment Experience................................................................ 12
3.5 Accredited Investor.................................................................. 12
3.6 Restricted Securities................................................................ 12
3.7 Qualified Institutional Buyer........................................................ 12
3.8 Qualified Passive Investor........................................................... 12
3.9 Further Limitations on Disposition................................................... 13
3.10 Legends.............................................................................. 13
3.11 Investor's State of Residence........................................................ 13
4. Conditions of Investor's Obligations at Funding...................................... 13
4.1 Representations and Warranties....................................................... 14
4.2 Performance.......................................................................... 14
4.3 Compliance Certificate............................................................... 14
4.4 Qualifications....................................................................... 14
4.5 Proceedings and Documents............................................................ 14
4.6 Proprietary Information and Inventions Agreement..................................... 14
4.7 Opinion of Company Counsel........................................................... 14
4.8 Amended and Restated Investors' Rights Agreement..................................... 14
4.9 Commercial Agreement................................................................. 15
4.10 Due Diligence and No Material Adverse Change......................................... 15
5. Conditions of the Company's Obligations at Funding................................... 15
5.1 Representations and Warranties....................................................... 15
5.2 Qualifications....................................................................... 15
5.3 Commercial Agreement................................................................. 15
6. Miscellaneous........................................................................ 15
6.1 Survival of Warranties............................................................... 15
6.2 Successors and Assigns............................................................... 15
6.3 Governing Law........................................................................ 16
6.4 Counterparts......................................................................... 16
6.5 Titles and Subtitles................................................................. 16
6.6 Notices.............................................................................. 16
6.7 Finder's Fee......................................................................... 16
6.8 Expenses............................................................................. 16
6.9 Amendments and Waivers............................................................... 16
6.10 Severability......................................................................... 17
6.11 Public Announcements................................................................. 17
6.12 Aggregation of Stock................................................................. 17
6.13 Entire Agreement..................................................................... 17
6.14 Special Approval Rights of Series E Preferred Stockholders........................... 16
SCHEDULE OF EXCEPTIONS
SCHEDULE A Investor Schedule
EXHIBIT A Restated Certificate of Incorporation
EXHIBIT B List of Stockholders
EXHIBIT C Amended and Restated Investors' Rights Agreement
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xxx.xxx, inc.
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES E PREFERRED STOCK PURCHASE AGREEMENT is made as of the 16th day
of July, 1999, by and between xxx.xxx, inc., a Delaware corporation (the
"Company"), and Staples, Inc., a Delaware corporation (the "Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
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1.1 Sale and Issuance of Series E Preferred Stock.
(a) The Company filed on July 6, 1999 with the Secretary of State of
Delaware the Restated Certificate of Incorporation in the form attached hereto
as Exhibit A (the "Restated Certificate").
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(b) On or prior to the Funding (as defined below), the Company shall
have authorized (i) the sale and issuance to the Investor of 177,665 shares of
Series E Preferred Stock (as defined below), (ii) the issuance of the shares of
Common Stock (as defined below) to be issued upon conversion of the Series E
Preferred Stock (the "Common Shares"). The Series E Preferred Stock shall have
the rights, preferences, privileges and restrictions set forth herein, in the
Amended and Restated Investors' Rights Agreement in the form attached hereto as
Exhibit C and in the Restated Certificate.
(c) Subject to the terms and conditions of this Agreement, the
Investor agrees to purchase at the Funding and the Company agrees to sell and
issue to the Investor at the Funding that number of shares of the Company's
Series E Preferred Stock set forth opposite the Investor's name on Schedule A
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hereto for the purchase price set forth thereon.
1.2 Funding. The funding and delivery of the Series E Preferred
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Stock shall take place at the offices of Day, Xxxxx & Xxxxxx LLP, CityPlace I,
Hartford, Connecticut, at 9:30 A.M., on July 16, 1999, or at such other time and
place as the Company and Investors mutually agree upon orally or in writing
(which time and place are designated as the "Funding"). At the Funding the
Company shall deliver to the Investor a certificate representing the Series E
Preferred Stock purchased thereby against payment of the purchase price therefor
by wire transfer, cancellation of indebtedness, or any combination thereof. In
the event that payment by an Investor is made, in whole or in part, by
cancellation of indebtedness, then the Investor shall surrender to the Company
for cancellation at the Funding any evidence of such indebtedness or shall
execute an instrument of cancellation in form and substance acceptable to the
Company.
2. Representations and Warranties of the Company. The Company
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hereby represents and warrants to the Investor that, except as set forth on a
Schedule of Exceptions (the "Schedule of Exceptions") furnished to the Investor
and counsel for the Investor, specifically identifying the relevant subparagraph
hereof, which exceptions shall be deemed to be representations and warranties as
if made hereunder:
2.1 Organization, Good Standing and Qualification. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure to so qualify would have a material adverse
effect on its business or properties.
2.2 Capitalization and Voting Rights.
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(a) The authorized capital of the Company consists, or will
consist at the time of the Funding, of: (i) 18,962,500 shares of Preferred
Stock, par value $.001 per share (the "Preferred Stock"), 3,862,500 of which
will be designated Series A Preferred Stock (the "Series A Preferred Stock"),
225,000 of which will be issued and outstanding at the time of the Funding,
6,500,000 of which will be designated Series B Preferred Stock (the "Series B
Preferred Stock"), of which 6,500,000 will be issued and outstanding at the time
of the Funding, 3,500,000 of which will be designated Series C Preferred Stock
(the "Series C Preferred Stock"), 2,785,516 of which will be issued and
outstanding at the time of the Funding, 3,000,000 of which will be designated
Series D Preferred Stock (the "Series D Preferred Stock"), 2,963,672 of which
will be issued and outstanding at the time of the Funding, and 2,100,000 of
which will be designated Series E Preferred Stock (the "Series E Preferred
Stock"), 761,421 of which will be issued and outstanding at the time of the
Funding and up to 177,665 of which will be issuable pursuant to this Agreement;
and (ii) 55,925,000 shares of common stock, par value $.0005 per share ("Common
Stock"), of which 10,600,000 shares will be issued and outstanding at the time
of the Funding. The rights, privileges and preferences of the Common Stock,
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock will be as stated in the
Restated Certificate.
(b) The outstanding shares of Common Stock and Preferred Stock
will be owned by the stockholders, in the numbers specified and subject to the
restrictions set forth in Exhibit B hereto, at the time of the Funding.
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(c) At the time of the Funding, the outstanding shares of Common
Stock and Preferred Stock will all be duly and validly authorized and issued,
fully paid and nonassessable and issued in accordance with the registration or
qualification provisions of the Securities Act of 1933, as amended (the "Act"),
and any relevant state securities laws, or pursuant to valid exemptions
therefrom.
(d) Except for (A) the conversion privileges of the Preferred
Stock, (B) the rights provided in Section 2.4 of the Amended and Restated
Investors' Rights Agreement, and the options and warrants listed in Exhibit B,
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there are not outstanding any options, warrants, rights (including conversion or
preemptive rights) or agreements for the purchase or acquisition from the
Company of any shares of its capital stock. In addition to the aforementioned
warrants, the Company has reserved 7,400,000 shares of its Common Stock for
purchase upon exercise of options granted and to be granted in the future to
directors, officers, employees, consultants and advisors under the Company's
1999 Stock Plan (the "Option Plan"). Except for the Amended and Restated Voting
Agreement, dated as of May 12, 1999, by and among the Company and the Founders
and Series B Investors, Series C Investors and Series D
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Investors as defined therein, the Company is not a party or subject to any
agreement or understanding, and, to the best of 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 written consents with respect to
any security or by a director of the Company. Following the transactions
contemplated hereby, except as set forth in the Schedule of Exceptions and
except as set forth in the Amended and Restated Investors' Rights Agreement
described in Section 4.8, there will be no preemptive or similar rights to
purchase or otherwise acquire shares of capital stock of the Company pursuant to
any provision of law, the Restated Certificate or the By-Laws of the Company or
any agreement to which the Company is a party, or otherwise.
2.3 Subsidiaries. The Company does not presently own or control,
------------
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.
2.4 Authorization. All corporate action on the part of the Company,
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its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement and the Amended and Restated Investors'
Rights Agreement described in Section 4.8, the performance of all obligations of
the Company hereunder and thereunder, and the authorization, issuance (or
reservation for issuance), sale and delivery of the Series E Preferred Stock
being sold hereunder and the Common Stock issuable upon conversion of the Series
E Preferred Stock being sold hereunder, has been taken or will be taken prior to
the Funding, and this Agreement and the Amended and Restated Investors' Rights
Agreement constitute, or will, upon execution thereof by the parties thereto,
constitute, valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws and principles relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Amended and Restated
Investors' Rights Agreement may be limited by applicable federal or state
securities laws.
2.5 Valid Issuance of Preferred and Common Stock. The Series E
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Preferred Stock that is being purchased by the Investor hereunder, when issued,
sold and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Amended and Restated
Investors' Rights Agreement and under applicable state and federal securities
laws. The Common Shares have been or will, prior to the Funding, be duly and
validly reserved for issuance and, upon issuance in accordance with the terms of
the Restated Certificate, will be duly and validly issued, fully paid, and
nonassessable and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Amended and Restated
Investors' Rights Agreement and under applicable state and federal securities
laws.
2.6 Governmental Consents. No consent, approval, order or
---------------------
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the
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consummation of the transactions contemplated by this Agreement except the
filings pursuant to Regulation D under the Act, and applicable state securities
laws, which filings will be effected within 15 days of the sale of the Series E
Preferred Stock hereunder, and such other post-Funding filings as may be
required.
2.7 Offering. Subject in part to the truth and accuracy of each
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Investor's representations set forth in Section 3 of this Agreement, the offer,
sale and issuance of the Series E Preferred Stock as contemplated by this
Agreement are exempt from the registration requirements of any applicable state
and federal securities laws, and neither the Company nor any authorized agent
acting on its behalf will take any action hereafter that would cause the loss of
such exemption.
2.8 Litigation. There is no action, suit, proceeding or known
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investigation pending or, to the Company's knowledge, currently threatened
against the Company that questions the validity of this Agreement or the Amended
and Restated Investors' Rights Agreement, or the right of the Company to enter
into such agreements, or to consummate the transactions contemplated hereby or
thereby, or that might result, either individually or in the aggregate, in any
material adverse changes in the assets, condition, affairs or prospects of the
Company, financially or otherwise, or any change in the current equity ownership
of the Company, nor is the Company aware that there is any basis for the
foregoing. The foregoing includes, without limitation, actions, suits,
proceedings or investigations pending or threatened (or any basis therefor known
to the Company) involving the prior employment of any of the Company's
employees, their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or that the Company intends to initiate.
2.9 Proprietary Information and Inventions Agreements. Each
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employee and officer of the Company, and each consultant who has had access to
confidential or proprietary information of the Company, has executed a
Proprietary Information and Inventions Agreement or a non-disclosure agreement.
The Company is not aware that any of its employees, officers or consultants are
in violation thereof, and the Company will use its best efforts to prevent any
such violation.
2.10 Patents and Trademarks. The Company has sufficient title and
----------------------
ownership of or licenses to all patents, trademarks, service marks, trade names,
copyrights, trade secrets, information, proprietary rights and processes
necessary for its business as now conducted and as proposed to be conducted
without any violation or infringement of the rights of others, except for such
items as have yet to be conceived or developed or that are expected to be
available for licensing on reasonable terms from third parties. The Company has
no patents or pending patent applications. There are no outstanding options,
licenses, or agreements of any kind relating to the foregoing, nor is the
Company bound by or a party to any options, licenses or agreements of any kind
with respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, proprietary rights and processes of any
other person or entity. The Company has not received any communications alleging
that the Company has violated or, by
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conducting its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary 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 his or her best efforts to promote the interests of
the Company or that would conflict with the Company's business as proposed to be
conducted. Neither the execution nor delivery of this Agreement or the Amended
and Restated Investors' Rights 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 best of 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, covenant or instrument under which any
of such employees is now obligated. The Company does not believe it is necessary
to utilize any inventions of any of its employees (or people it currently
intends to hire) made prior to or outside the scope of their employment by the
Company. To the best knowledge of the Company, all data, information, ideas,
concepts, know-how and materials that the Company treats as trade secrets, and
all other confidential information and intellectual property rights of the
Company, are not part of the public domain or knowledge, nor, to the best
knowledge of the Company, have they been used, divulged or appropriated for the
benefit of any person other than the Company or otherwise to the detriment of
the Company.
2.11 Compliance with Other Instruments. The Company is not in
---------------------------------
violation or default of any provision of its Restated Certificate or Bylaws, or
of any instrument, judgment, order, writ, decree or contract to which it is a
party or by which it is bound. The Company has complied in all material respects
with all federal, state, local or foreign statutes, rules and regulations and
orders applicable to the Company, except where the failure to comply would not
have a material adverse effect on the business, properties or financial
condition of the Company. The execution, delivery and performance of this
Agreement and the Amended and Restated Investors' Rights Agreement, and the
consummation of the transactions contemplated hereby and thereby will not result
in any such violation or be in conflict with or constitute, with or without the
passage of time and giving of notice, either a default under any such provision,
instrument, judgment, order, writ, decree or contract or an 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 operations or any of its assets or properties.
2.12 Agreements; Action.
------------------
(a) Except for agreements explicitly contemplated hereby and
the Amended and Restated Investors' Rights Agreement, there are no agreements,
understandings or proposed transactions between the Company and any of its
officers, directors, affiliates, 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 by which it is bound that may involve (i) obligations
(contingent or otherwise) of, or payments to the Company in excess of, $200,000,
or (ii) the license of any patent, copyright, trade secret or
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other proprietary right to or from the Company (other than the license of the
Company's or generally available shrinkwrap software and products in the
ordinary course of business), or (iii) provisions restricting or affecting the
development, manufacture or distribution of the Company's products or services,
or (iv) indemnification by the Company with respect to infringements of
proprietary rights. The Company is not a party to any written or oral (a)
contract with any labor union; (b) contract for the future purchase of fixed
assets or for the future purchase of materials, supplies or equipment in excess
of normal operating requirements, in excess of $100,000 per annum for all such
contracts; (c) contract for the employment of any officer, employee or other
person or any contract with any person on a consulting basis; (d) agreement or
indenture relating to the borrowing of money; (e) lease or agreement under which
the Company is lessee of or holds or operates any property, real or personal,
owned by any other party, in excess of $100,000 per annum for all such
contracts; (f) lease or agreement under which the Company is lessor of or
permits any third party to hold or operate any property, real or personal, owned
or controlled by the Company, in excess of $100,000 per annum for all such
contracts; (g) contract, agreement or commitment under which the Corporation is
obligated to pay any broker's fees, finder's fees or any such similar fees, to
any third party other than for the hiring of employees; or (h) other contract,
agreement, arrangement or understanding which is material to the business of the
Company. The Company is not a party to any term sheet, memorandum or letter of
understanding which could lead to any such contract, agreement, arrangement,
understanding or commitment.
(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 individually in excess of $200,000 or, in the case of
indebtedness and/or liabilities individually less than $200,000, in excess of
$300,000 in the aggregate, (iii) made any loans or advances to any 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.
(d) For the purposes of subsections (b) and (c) above, 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 the individual minimum dollar amounts of
such subsections.
(e) The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under its
Restated Certificate of Incorporation or Bylaws that adversely affects its
business as now conducted or as proposed to be conducted, its properties or its
financial condition.
(f) The Company has not engaged in the past three (3) months in
any discussion (i) with any representative of any corporation or corporations
regarding the consolidation or merger of the Company with or into any such
corporation or corporations, (ii) with any corporation, partnership, association
or other business entity or any individual regarding the sale, conveyance or
disposition of all or substantially all of the assets of the Company or a
transaction or series of related transactions in which more than fifty percent
(50%) of the voting
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power of the Company is disposed of, or (iii) regarding any other form of
acquisition, liquidation, dissolution or winding up of the Company.
2.13 Related Party Transactions. No employee, officer, or director of
--------------------------
the Company or member of his or her immediate family is indebted to the Company,
nor is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the best of the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company, except
that employees, officers, or directors of the Company and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company. No member of the immediate family of any officer or director
of the Company is directly or indirectly interested in any material contract
with the Company.
2.14 Permits. The Company has all franchises, permits, licenses, and
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any similar authority 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 the
Company believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. The
Company is not in default in any material respect under any of such franchises,
permits, licenses, or other similar authority.
2.15 Environmental and Safety Laws. To the best of its knowledge, the
-----------------------------
Company has complied with all applicable statutes, laws and regulations relating
to the environment or occupational health and safety, and to the best of its
knowledge, no material expenditures are or will be required in order to comply
with any such existing statute, law or regulation.
2.16 Manufacturing and Marketing Rights. The Company has not granted
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rights to manufacture, produce, assemble, license, market, or sell its products
to any other person and is not bound by any agreement that affects the Company's
exclusive right to develop, manufacture, assemble, distribute, market or sell
its products.
2.17 Disclosure. The Company has fully provided the Investor with all
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the information that the Investor has requested for deciding whether to purchase
the Series E Preferred Stock and all information that the Company believes is
reasonably necessary to enable the Investor to make such decision. Neither this
Agreement, the Amended and Restated Investors' Rights Agreement, nor any other
statements or certificates made or delivered in connection herewith or therewith
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements herein or therein not misleading.
2.18 Offerees. The Company has not, either directly or through any
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agent, broker or finder, offered any securities exercisable for or convertible
into Common Stock or Preferred Stock or any security or securities similar to
any thereof, for sale to, or solicited any offers to buy any securities
exercisable for or convertible into Common Stock or Preferred Stock, or any such
similar security or securities from, or otherwise approached or negotiated in
respect thereof with, any person or entity other than the Investor, other
"accredited investors" (as that
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term is defined in Regulation D promulgated under the Securities Act) who have
not invested under this Agreement and employees, directors and consultants of
the Company, except for offers, solicitations or other actions that would not,
under applicable law, be integrated with the sale of the Series E Preferred
Stock hereunder.
2.19 Registration Rights. Except as provided in the Amended and
-------------------
Restated Investors' Rights Agreement, the Company has not granted or agreed to
grant any registration rights, including piggyback rights, to any person or
entity.
2.20 Corporate Documents. Except for amendments necessary to satisfy
-------------------
representations and warranties or conditions contained herein (the form of which
amendments has been approved by the Investors), the Restated Certificate and
Bylaws of the Company are in the form attached to the certification by the
Company's Secretary pursuant to Section 4.5 hereof.
2.21 Title to Property and Assets. The Company owns its property and
----------------------------
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens that arise in the ordinary course of business and do
not materially impair the Company's ownership or use of such property or assets.
With respect to the property and assets it leases, the Company is in compliance
with such leases and, to the best of its knowledge, holds a valid leasehold
interest free of any liens, claims or encumbrances.
2.22 Financial Statements. The Company has delivered to the Investor
--------------------
its audited financial statements (balance sheet and statement of operations) as
at and for the year ended December 31, 1998 and unaudited financial statements
for the three-month period ended March 31, 1999 (the "Financial Statements").
The Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods covered thereby. The Financial Statements fairly present the financial
condition and operating results of the Company as of the dates, and for the
periods, indicated therein, subject to normal year-end audit adjustments. Except
as set forth in the Financial Statements, the Company has no material
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business subsequent to March 31, 1999 and (ii) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under generally accepted accounting principles to be reflected in
the Financial Statements, which, in both cases, individually or in the
aggregate, are not material to the financial condition or operating results of
the Company. Except as disclosed in the Financial Statements, the Company is not
a guarantor or indemnitor of any indebtedness of any other person, firm or
corporation. The Company maintains and will continue to maintain a standard
system of accounting established and administered in accordance with generally
accepted accounting principles.
2.23 Changes. Since March 31, 1999, there has not been any adverse
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change in the assets, liabilities, financial condition or operating results of
the Company from that reflected in the Financial Statements, except changes in
the ordinary course of business that have not been, in the aggregate, materially
adverse.
2.24 Employee Benefit Plans. The Company does not have any Employee
----------------------
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
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2.25 Tax Returns, Payments and Elections. The Company has filed all
-----------------------------------
tax returns and reports (including information returns and reports) as required
by law. These returns and reports are true and correct in all material respects.
The Company has paid all taxes and other assessments due, except those contested
by it in good faith that are listed in the Schedule of Exceptions. The provision
for taxes of the Company as shown in the Financial Statements is adequate for
taxes due or accrued as of the date thereof. The Company has not elected
pursuant to the Internal Revenue Code of 1986, as amended (the "Code"), to be
treated as a Subchapter S corporation pursuant to Section 1362(a) of the Code,
nor has it made an election pursuant to Section 341(f) of the Code, nor has it
made any other elections pursuant to the Code (other than elections that relate
solely to methods of accounting, depreciation or amortization) that would have a
material adverse effect on the Company, its financial condition, its business as
presently conducted or proposed to be conducted or any of its properties or
material assets. The Company has never had any tax deficiency proposed or
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.
None of the Company's federal income tax returns and none of its state income or
franchise tax or sales or use tax returns has ever been audited by governmental
authorities. Since the date of the Financial Statements, the Company has not
incurred any taxes, assessments or governmental charges other than in the
ordinary course of business and the Company has made adequate provisions on its
books of account for all taxes, assessments and governmental charges with
respect to its business, properties and operations for such period. The Company
has withheld or collected from each payment made to each of its employees, the
amount of all taxes (including, but not limited to, federal income taxes,
Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes)
required to be withheld or collected therefrom, and has paid the same to the
proper tax receiving officers or authorized depositories. The Company is not
party to any contract, arrangement or understanding that could obligate the
Company to make a payment to an individual that would be a "parachute payment"
to a "disqualified individual," as those terms are defined in Section 280G of
the Code, without regard to whether such payment might constitute reasonable
compensation for personal services performed or to be performed in the future.
2.26 Insurance. The Company has in full force and effect fire and
---------
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed.
2.27 Minutes. The minutes of the Company provided to the Investor
-------
contain a complete summary of all meetings of directors and stockholders since
the time of incorporation and reflect all transactions referred to in such
minutes accurately in all material respects.
2.28 Labor Agreements and Actions; Employee Compensation. The Company
---------------------------------------------------
is not bound by or subject to (and none of its assets or properties is bound by
or subject to) any written or oral, express or implied, contract, commitment or
arrangement with any labor union, and no labor union has requested or, to the
best of the Company's knowledge, has sought to represent any of the employees,
representatives or agents of the Company. There is no strike or other labor
dispute involving the Company pending, or to the best of the Company's
knowledge, threatened, that could have a material adverse effect on the assets,
properties, financial condition, operating results, or business of the Company
(as such business is presently conducted and as it is proposed to be conducted),
nor is the Company aware of any labor organization activity
-9-
involving its employees. 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. To the
best of its knowledge, the Company has complied in all material respects with
all applicable state and federal equal employment opportunity and other laws
related to employment. 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 employee
compensation agreement.
2.29 Section 83(b) Elections. To the best of the Company's knowledge,
-----------------------
all individuals who have purchased unvested shares of the Company's Common Stock
have timely filed or will timely file elections under Section 83(b) of the Code
and any analogous provisions of applicable state tax laws.
2.30 Real Property Holding Company. The Company is not currently, and
-----------------------------
has not been during the prior five years, a United States real property holding
corporation within the meaning of Section 897 of the Code and the Company has
filed with the Internal Revenue Service all statements, if any, with its United
States income tax returns which are required under Section 1.897-2(h) of the
Treasury Regulations.
2.31 Net Operating Loss Carryforward. The information contained in
-------------------------------
the Schedule of Exceptions or otherwise provided to counsel for the Investors
regarding the application of Section 382 of the Code to the Company's federal
net operating loss carryforward is true and correct to the best of the Company's
knowledge.
2.32 Brokers. The Company has no contract, arrangement or
-------
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
2.33 Significant Customers and Suppliers. No customer or supplier
-----------------------------------
that was or is significant to the Company has terminated, materially reduced or
threatened to terminate or materially reduce its purchases from or provision of
products or services to the Company, as the case may be.
2.34 Year 2000. The Company's proprietary software is capable of
---------
recording, storing, processing, calculating and displaying calendar dates
falling before, on and after January 1, 2000, without loss of functionality or
data integrity, except where the failure to do so could not reasonably be
expected to have a material adverse affect on the assets, properties, financial
condition, operating results or business of the Company. The foregoing does not
constitute a warranty or representation that the Company's software will be
capable of recording, storing, processing, calculating and displaying correct
calendar dates based on software supplied by or licensed from any party other
than the Company, or that the Company's software will properly interact with
such third party software.
2.35 Reliance. The foregoing representations and warranties are made
--------
by the Company with the knowledge and expectation that the Investor is placing
reliance thereon.
-10-
3. Representations and Warranties of the Investor. The Investor
---------------------------
hereby represents and warrants to the Company, for each Investor itself and only
for itself, that:
3.1 Authorization. The Investor has full power and authority to
-------------
enter into this Agreement and the Amended and Restated Investors' Rights
Agreement, and each such Agreement constitutes its valid and legally binding
obligation, enforceable in accordance with its terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies, and (iii) to the extent the
indemnification provisions contained in the Amended and Restated Investors'
Rights Agreement may be limited by applicable federal or state securities laws.
3.2 Purchase Entirely for Own Account. This Agreement is made with
---------------------------------
the Investor in reliance upon the Investor's representation to the Company,
which by the Investor's execution of this Agreement the Investor hereby
confirms, that the Series E Preferred Stock to be received by such Investor and
the Common Stock issuable upon conversion of the Series E Preferred Stock
(collectively, the "Securities") will be acquired for investment for the
Investor's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that the Investor has no present
intention of selling, granting any participation in, or otherwise distributing
the same. By executing this Agreement, the 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 Securities.
3.3 Disclosure of Information. The Investor represents that it has
-------------------------
had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series E Preferred
Stock, and the business, properties, prospects and financial condition of the
Company. The foregoing, however, does not limit or modify the representations
and warranties of the Company in Section 2 of this Agreement or the right of the
Investor to rely thereon.
3.4 Investment Experience. The Investor is an investor in securities
---------------------
of companies in the development stage and acknowledges that it is able to fend
for itself, can bear the economic risk of its investment, and has such knowledge
and experience in financial or business matters that it is capable of evaluating
the merits and risks of the investment in the Series E Preferred Stock. If other
than an individual, such Investor also represents it has not been organized for
the purpose of acquiring the Series E Preferred Stock.
3.5 Accredited Investor. The Investor is an "accredited investor"
-------------------
within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D, as presently in effect.
3.6 Restricted Securities. The Investor understands that the
---------------------
Securities it is purchasing are characterized as "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 such securities may be resold without
-11-
registration under the Act, only in certain limited circumstances. In this
connection, the Investor represents that it is familiar with SEC Rule 144, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.
3.7 Qualified Institutional Buyer. The Investor is a "qualified
institutional buyer" within the meaning of SEC Rule 144A, as presently in
effect.
3.8 Qualified Passive Investor. The Investor represents and warrants
to the Company that the voting securities of the Company are being acquired by,
and will be held by the Investor solely for the purpose of investment within the
meaning of Section 7A(c)(9) of the Xxxxxxx Act, and 16 C.F.R. Sections 801.1(j)
and 802.9, and that the Investor has no intention of participating in the
formulation, determination, or direction of the basic business decisions of the
Company.
3.9 Further Limitations on Disposition. Without in any way limiting
----------------------------------
the representations set forth above, the Investor further agrees not to make any
disposition of all or any portion of the Securities unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3 and the Amended and Restated Investors' Rights Agreement provided
and to the extent this Section and such agreement are then applicable, and:
(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) The Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, the Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of Paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an Investor that is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner or the transfer
by gift, will or intestate succession of any partner to his or her spouse or to
the siblings, lineal descendants or ancestors of such partner or his or her
spouse, if the transferee agrees in writing to be subject to the terms hereof to
the same extent as if he or she were an original Investor hereunder.
3.10 Legends. It is understood that the certificates evidencing the
-------
Series E Preferred Stock and the Common Shares may bear the following legend:
"These securities have not been registered under the Securities Act of
1933, as amended, or any state securities laws. They may not be sold,
offered for sale, pledged or hypothecated in the absence of a registration
statement in effect with respect to the securities under such Act and any
applicable state securities laws or pursuant to an
-12-
opinion of counsel satisfactory to the Company that such registration is
not required or unless sold pursuant to Rule 144 of such Act."
3.11 Investor's State of Residence. The Investor represents that, as
-----------------------------
of the Funding, it is a resident of the state listed as its address on Schedule
--------
A hereto.
-
4. Conditions of Investor's Obligations at Funding. The
-----------------------------------------------
obligations of the Investor under subsection 1.1(c) of this Agreement are
subject to the fulfillment on or before the Funding of each of the following
conditions, the waiver of which shall not be effective against the Investor if
the Investor does not consent thereto:
4.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true on and as of the
Funding with the same effect as though such representations and warranties had
been made on and as of the date of such Funding.
4.2 Performance. The Company shall have performed and complied with
-----------
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Funding.
4.3 Compliance Certificate. The President of the Company shall
----------------------
deliver to the Investor at the Funding a certificate stating that the conditions
specified in Sections 4.1 and 4.2 have been fulfilled and stating that there
shall have been no adverse change in the business, affairs, prospects,
operations, properties, assets or condition of the Company since March 31, 1999
("No Material Adverse Change").
4.4 Qualifications. All authorizations, approvals, or permits, if
--------------
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Funding.
4.5 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Funding and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Investor's counsel, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request. This may include, without limitation, good standing
certificates and certification by the Company's Secretary regarding the Restated
Certificate and Bylaws and Board of Director and stockholder resolutions
relating to this transaction.
4.6 Proprietary Information and Inventions Agreement. Each employee
------------------------------------------------
of the Company who has had access to confidential or proprietary information of
the Company, shall have entered into a Proprietary Information and Inventions
Agreement. Each consultant to the Company who has had access to confidential or
proprietary information of the Company, shall have entered into a proprietary
information and inventions agreement or a non-disclosure agreement with the
Company.
-13-
4.7 Opinion of Company Counsel. The Investor shall have received
--------------------------
from Day, Xxxxx & Xxxxxx LLP, counsel for the Company, an opinion, dated as of
the Funding, in form and substance reasonably acceptable to the Investor.
4.8 Amended and Restated Investors' Rights Agreement. The Company,
------------------------------------------------
the Founders, the Series B Investors, Series C Investors, Series D Investors,
Series E Investors (as named therein), Xxxxxxx X. Xxxxxxx and the Investor shall
have entered into the Amended and Restated Investors' Rights Agreement in the
form attached as Exhibit C hereto.
---------
4.9 Commercial Agreement. The Company and the Investor shall have
--------------------
entered into a Marketing Agreement in the form attached as Exhibit D hereto.
4.10 Due Diligence and No Material Adverse Change. The Company shall
--------------------------------------------
have provided the Investor access to such information as the Investor has
reasonably requested in connection with its due diligence review and the
Investor shall have concluded its due diligence review of the Company to its
complete satisfaction and shall be reasonably satisfied that there has been No
Material Adverse Change.
5. Conditions of the Company's Obligations at Funding. The
--------------------------------------------------
obligations of the Company to the Investor under this Agreement is subject to
the fulfillment on or before the Funding of each of the following conditions by
the Investor:
5.1 Representations and Warranties. The representations and
------------------------------
warranties of the Investor contained in Section 3 shall be true on and as of the
Funding with the same effect as though such representations and warranties had
been made on and as of the Funding.
5.2 Qualifications. All authorizations, approvals, or permits, if
--------------
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Funding.
5.3 Commercial Agreement. The Company and the Investor shall have
--------------------
entered into a Marketing Agreement in the form attached as Exhibit D hereto.
6. Miscellaneous.
-------------
6.1 Survival of Warranties. The warranties, representations and
----------------------
covenants of the Company and the Investor contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Funding and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investor or the Company.
6.2 Successors and Assigns. Except as otherwise provided herein,
----------------------
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Securities). Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
-14-
6.3 Governing Law. This Agreement shall be governed by and
-------------
construed under the laws of the State of Connecticut as applied to agreements
among Connecticut residents entered into and to be performed entirely within
Connecticut.
6.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
6.6 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties. In the case of Investor, a copy of any notices to be delivered to
Investor shall also be delivered to General Counsel, Finance and Operations, at
the address indicated on the signature page hereof.
6.7 Finder's Fee. Each party represents that it neither is nor will
------------
be obligated for any finders' fee or commission in connection with this
transaction. The Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, partners,
employees, or representatives is responsible.
The Company agrees to indemnify and hold harmless the Investor from any
liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
6.8 Expenses. Irrespective of whether the Funding is effected, the
--------
parties hereto shall each pay all of the costs and expenses that it incurs with
respect to the negotiation, execution, delivery and performance of this
Agreement. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the Amended and Restated Investors'
Rights Agreement or the Restated Certificate, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
6.9 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Common Stock issuable or issued upon conversion of the Series
E Preferred Stock sold hereunder. Any amendment or waiver effected in accordance
with this paragraph shall be binding upon each holder of any securities
purchased
-15-
under this Agreement at the time outstanding (including securities into which
such securities are convertible), each future holder of all such securities, and
the Company.
6.10 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
6.11 Public Announcements. No information concerning this Agreement
--------------------
and the transactions contemplated herein shall be disclosed by either party
without the consent of the other party prior to or after the Funding, provided,
however, that a party may acknowledge the existence and general nature of this
Agreement without the consent of the other party. Nothing contained herein shall
prevent either party at any time from furnishing any information to the extent
required by judicial or administrative process or from issuing any release when
it believes in good faith and after consultation with the other party that it is
legally required to do so.
6.12 Aggregation of Stock. All shares of the Preferred Stock held or
--------------------
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
6.13 Entire Agreement. This Agreement and the documents referred to
----------------
herein constitute the entire agreement among the parties with respect to the
subject matter hereof and no party shall be liable or bound to any other party
in any manner by any warranties, representations, or covenants with respect to
such subject matter except as specifically set forth herein or therein.
6.14 Special Approval Rights of Series E Preferred Stockholders.
----------------------------------------------------------
Without limiting any right of the holders of the Series E Preferred Stock, the
Company shall not take any action that would alter or change the powers,
preferences or special rights of the shares of the Series E Preferred Stock
without the approval of a majority of the holders of the Series E Preferred
Stock.
[Signature Pages Follow]
-16-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
COMPANY
xxx.xxx, inc.
By: ____________________________________
Title: _________________________________
Address: 000 Xxxx Xxxxx Xxxxx
Xxx Xxxxx, XX 00000
INVESTOR
Staples, Inc.
By: ____________________________________
Title: _________________________________
Address:
-17-
SCHEDULE OF EXCEPTIONS
Schedule A
Schedule of Investors
Purchase Price
Name and Address Series E Shares Purchased of Series E Shares
---------------- ------------------------- -----------------
Staples, Inc. 177,665 $3,500,000.50
