NETZERO, INC.
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
MAY 10, 1999
TABLE OF CONTENTS
PAGE
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1. Purchase and Sale of Stock...........................................1
1.1 Restated Articles...........................................1
1.2 Sale and Issuance of Series D Preferred Stock...............1
1.3 Closing.....................................................1
2. Representations and Warranties of the Company........................1
2.1 Organization, Good Standing and Qualification...............1
2.2 Capitalization and Voting Rights............................1
2.3 Subsidiaries................................................3
2.4 Authorization...............................................3
2.5 Valid Issuance of Preferred and Common Stock................3
2.6 Governmental Consents.......................................3
2.7 Offering....................................................3
2.8 Litigation..................................................3
2.9 Proprietary Information and Employee Agreements.............4
2.10 Patents and Trademarks......................................4
2.11 Compliance with Other Instruments...........................5
2.12 Agreements; Action..........................................5
2.13 Related-Party Transactions..................................6
2.14 Permits.....................................................6
2.15 Environmental and Safety Laws...............................6
2.16 Disclosure..................................................6
2.17 Registration Rights.........................................6
2.18 Corporate Documents.........................................6
2.19 Title to Property and Assets................................6
2.20 Liabilities.................................................7
2.21 Changes.....................................................7
2.22 Employee Benefit Plans......................................8
2.23 Tax Returns, Payments and Elections.........................8
2.24 Insurance...................................................8
2.25 Labor Agreements and Actions................................8
2.26 Merger Negotiations.........................................8
2.27 Qualified Small Business Stock..............................8
3. Representations and Warranties of the Investors......................9
3.1 Authorization...............................................9
3.2 Purchase Entirely for Own Account...........................9
3.3 Disclosure of Information...................................9
3.4 Investment Experience.......................................9
3.5 Accredited Investor.........................................9
3.6 Restricted Securities.......................................9
3.7 Further Limitations on Disposition..........................9
3.8 Legends....................................................10
4. California Commissioner of Corporations.............................11
TABLE OF CONTENTS (CONTINUED)
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4.1 Corporate Securities Law...................................11
5. Conditions of Investors' Obligations at Closing.....................11
5.1 Closing....................................................11
6. Conditions of the Company's Obligations at Closing..................12
6.1 Closing....................................................12
7. Miscellaneous.......................................................12
7.1 Survival of Warranties.....................................12
7.2 Successors and Assigns.....................................12
7.3 Governing Law..............................................12
7.4 Counterparts...............................................13
7.5 Titles and Subtitles.......................................13
7.6 Notices....................................................13
7.7 Finder's Fee...............................................13
7.8 Expenses...................................................13
7.9 Amendments and Waivers.....................................13
7.10 Disputes...................................................13
7.11 Severability...............................................14
7.12 Aggregation of Stock.......................................14
7.13 Entire Agreement...........................................14
SCHEDULE A Investors
SCHEDULE OF EXCEPTIONS
EXHIBIT A Restated Articles of Incorporation
EXHIBIT B Amended Investors' Rights Agreement
EXHIBIT C Opinion of Counsel for the Company
EXHIBIT D Amended Voting Agreement
EXHIBIT E Amended Right of First Refusal and Co-Sale Agreement
EXHIBIT F List of Shareholders
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES D PREFERRED STOCK PURCHASE AGREEMENT is made as of
the 10th day of May, 1999, among NetZero, Inc., a California corporation (the
"Company"), and the investors listed on Schedule A hereto (the "Investors").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 RESTATED ARTICLES. The Company shall adopt and file with the
Secretary of the State of California on or before the Closing (as defined
below) the Amended and Restated Articles of Incorporation in the form
attached hereto as Exhibit A (the "Restated Articles").
1.2 SALE AND ISSUANCE OF SERIES D PREFERRED STOCK. Subject to the
terms and conditions of this Agreement, each Investor agrees to purchase at
the Closing, and the Company agrees to sell and issue to each such Investor
at the Closing, that number of shares of the Company's Series D Preferred
Stock (as defined below) set forth opposite each such Investor's name on
Schedule A for a purchase price of $2.76 per share.
1.3 CLOSING. The purchase and sale of the Series D Preferred Stock
(the "Closing") shall take place at the offices of Xxxxxxx, Xxxxxxx &
Xxxxxxxx LLP ("BPH"), 00 Xxxxxxxxxx Xxxxx, Xxxxxx, Xxxxxxxxxx, at 10:00 a.m.,
on May 13, 1999, or at such other time and place as the Company and Investors
mutually agree upon orally or in writing (the "Closing Date"). At the
Closing, the Company shall deliver to each Investor a certificate
representing the Series D Preferred Stock that such Investor is purchasing
against payment of the purchase price therefor by check or wire transfer;
provided, the Company may, at its sole discretion, accept subscriptions from
additional investors (who shall also be deemed Investors hereunder) and the
payment of all or part of the purchase price from any Investor within ten
(10) days of the Closing Date.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Investor that, except as set forth on a
Schedule of Exceptions (the "Schedule of Exceptions") furnished to each
Investor and counsel for the Investors, 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 California 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. The authorized capital
of the Company consists, or will consist immediately prior to the
Closing, of:
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(a) PREFERRED STOCK. Fifty Million (50,000,000) shares of
Preferred Stock (the "Preferred Stock"), of which (A) Seven Million Nine
Hundred Seventy Thousand Seven Hundred Forty-Eight (7,970,748) shares have
been designated Series A Preferred Stock (the "Series A Preferred Stock") and
of which Seven Million Five Hundred One Thousand Eight Hundred and Eighty-One
(7,501,881) shares are issued and outstanding; (B) Four Million Eight Hundred
Fifty Thousand (4,850,000) shares have been designated Series B Preferred
Stock (the "Series B Preferred Stock") of which Four Million Five Hundred
Sixty-Seven Thousand Nine Hundred Fifty-Eight (4,567,958) shares are issued
and outstanding; (C) Eighteen Million Four Hundred Fifty-Four Thousand
(18,454,000) shares have been designated Series C Preferred Stock (the
"Series C Preferred Stock") of which Eighteen Million Sixty-Six Thousand Five
Hundred Thirty-Nine (18,066,539) shares are issued and outstanding; and (D)
Thirteen Million (13,000,000) shares have been designated Series D Preferred
Stock (the "Series D Preferred Stock"), up to all of which may be sold
pursuant to this Agreement. The rights, privileges, preferences and
restrictions of the Series D Preferred Stock will be as stated in the
Company's Restated Articles.
(b) COMMON STOCK. One Hundred Million (100,000,000) shares of
common stock ("Common Stock"), of which Eighteen Million Six Hundred
Ninety-Seven Thousand Three-Hundred Eighty-Eight (18,697,388) shares are
issued and outstanding.
(c) SHAREHOLDERS. The outstanding shares of Common Stock and
Preferred Stock are owned by the shareholders and in the numbers specified in
Exhibit F hereto.
(d) VALID ISSUANCE. The outstanding shares of Common Stock and
Preferred Stock are all duly and validly authorized and issued, fully paid
and non-assessable, and were 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.
(e) Except for (A) the conversion privileges of the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock
and the Series D Preferred Stock, (B) the rights provided in the Amended
Investors' Rights Agreement (as defined in Section 2.4 below), (C) an
aggregate of ten million (10,000,000) shares of Common Stock reserved for
issuance under the Company's 1998 Stock Option Plan (the "1998 Option Plan")
and the Company's 1999 Stock Option Plan (the "1999 Option Plan"), of which
8,697,388 shares have been issued pursuant to the exercise of options, and
(D) contractual rights to sell and obligations to purchase 468,867 shares of
Series A Preferred Stock and 281,278 shares of Series B Preferred Stock,
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. Except for the Amended Voting
Agreement (as defined in Section 2.4 below), the Company is not a party or
subject to any agreement or understanding and, to the Company's knowledge,
there is no agreement or understanding between any persons and/or entities,
which affects or relates to the voting or giving of written consents with
respect to any security or by a director of the Company.
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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,
its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, the Amended and Restated Investors'
Rights Agreement in the form attached hereto as Exhibit B (the "Amended
Investors' Rights Agreement"), the Amended and Restated Right of First
Refusal and Co-Sale Agreement in the form attached hereto as Exhibit E (the
"Amended Right of First Refusal and Co-Sale Agreement"), and the Amended and
Restated Voting Agreement in the form attached hereto as Exhibit D (the
"Amended Voting Agreement") (collectively, the "Transaction Agreements"), the
performance of all obligations of the Company hereunder and thereunder, and
the authorization, issuance, sale and delivery of the Series D Preferred
Stock being sold hereunder has been taken or will be taken prior to the
Closing, and the Transaction Agreements 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 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 Investors' Rights Agreement may be limited by
applicable federal or state securities laws.
2.5 VALID ISSUANCE OF PREFERRED AND COMMON STOCK. The Series D
Preferred Stock that is being purchased by the Investors 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 the Transaction Agreements and under
applicable state and federal securities laws. The Common Stock issuable upon
conversion of the Series D Preferred Stock purchased under this Agreement has
been duly and validly reserved for issuance and, upon issuance in accordance
with the terms of the Restated Articles, will be duly and validly issued,
fully paid, and nonassessable and will be free of restrictions on transfer
other than restrictions on transfer under the Transaction Agreements 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 consummation of the
transactions contemplated by this Agreement, except for any filings required
by federal and state securities laws.
2.7 OFFERING. Subject in part to the truth and accuracy of each
Investor's representations set forth in Section 3 of this Agreement, the
offer, sale and issuance of the Series D Preferred Stock as contemplated by
this Agreement are exempt from the registration requirements of the Act.
2.8 LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company that
questions the validity of the Transaction Agreements or the right of the
Company to enter into such agreements, or to consummate the
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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. The
foregoing includes, without limitation, actions, suits, proceedings or
investigations pending or threatened 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 EMPLOYEE AGREEMENTS. Each employee,
officer and consultant of the Company has executed a Confidentiality and
Proprietary Agreement. To the Company's knowledge, without investigation, no
employee of the Company is in violation of any term of any employment
contract, non-disclosure agreement or any other similar contract or agreement
relating to the relationship of the employee with the Company, any former
employer or any other party.
2.10 PATENTS AND TRADEMARKS. 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. Except as disclosed in the Schedule of Exceptions, and
without having performed any investigation, the Company is not aware of any
violation or infringement by a third party of any of the Company's patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses
or other proprietary rights in a manner that could reasonably be expected to
materially and adversely affect the Company's business. To the Company's
knowledge, without investigation, the Company's businesses as now conducted
and as proposed to be conducted will not infringe or conflict with the rights
of others, including rights under patents, trademarks, service marks,
trademarks, service marks, trade names, copyrights, trade secrets, licenses
and other proprietary rights, in any manner that could reasonably be expected
to materially and adversely affect the Company's business. The Company has
not received any communications alleging that the Company has violated or, by
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 now conducted and as proposed to be conducted. Neither
the execution nor delivery of the Transaction Agreements, nor the carrying on
of the Company's business by the employees of the Company will, to the
Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated.
The Company does not believe it is or will be
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necessary to utilize any inventions of any of its employees (or people it
currently intends to hire) made prior to their employment by the Company.
2.11 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default in any material respect of any provision of its Restated
Articles or Bylaws, or in any material respect of any instrument, judgment,
order, writ, decree, mortgage, indebtedness, indenture or contract to which
it is a party or by which it is bound, or, to its knowledge, of any provision
of any federal or state statute, rule or regulation applicable to the
Company. The execution, delivery and performance of the Transaction
Agreements and the consummation of the transactions contemplated 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, mortgage,
indebtedness, indenture, or contract or an event that results in the creation
of any mortgage, pledge, 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 by the
Transaction Agreements, there are no agreements between the Company and any
of its officers, directors, affiliates, or any affiliate thereof.
(b) There are no agreements, instruments, contracts, 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, $100,000, or (ii) the license of any
material patent, copyright, trade secret or other proprietary right to or
from the Company. All the contracts and agreements listed in Sections
2.12(b)(i) and (ii) of the Schedule of Exceptions have been duly authorized
by the Company and, to the Company's knowledge, are binding and in full force
and effect in all material respects, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable
remedies. The Company has not received any written notice of an intention to
terminate any such contract or agreement from any of the other parties to
such contracts and agreements.
(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 individually in excess of $100,000, (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 in any
material respect.
(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.
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(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 Articles or Bylaws that is likely to materially and adversely affect
its business.
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 Company's knowledge, no employee or
officer 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 and officers 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 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
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 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 its knowledge, the Company is
not in violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to its knowledge, no
material expenditures are or will be required in order to comply with any
such existing statute, law or regulation.
2.16 DISCLOSURE. The Company has fully provided each Investor with
all the information that such Investor has requested for deciding whether to
purchase the Series D Preferred Stock. To its knowledge, neither the
Transaction Agreements 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.
2.17 REGISTRATION RIGHTS. Except as provided in the Amended
Investors' Rights Agreement, the Company has not granted or agreed to grant
any registration rights, including piggyback rights, to any person or entity.
2.18 CORPORATE DOCUMENTS. Except for amendments necessary to satisfy
representations and warranties or conditions contained herein, the Restated
Articles and Bylaws of the Company are in the form previously provided to
counsel for the Investors.
2.19 TITLE TO PROPERTY AND ASSETS. The Company has good and
marketable title to 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, individually or in the
aggregate, materially impair the Company's ownership or use of such
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property or assets. With respect to the property and assets it leases, the
Company is in compliance with such leases and, to its knowledge, holds a
valid leasehold interest free of any liens, claims or encumbrances.
2.20 LIABILITIES. The Company has made available to each Investor
its unaudited financial statements (balance sheet, income statement and
statement of cash flows) at and for the nine months ended March 31, 1999 (the
"Financial Statements"). Such Financial Statements have been prepared in good
faith in accordance with the books and records of the Company and fairly
present the financial position of the Company as of such date and the
financial results of the Company for such period, subject to normal year end
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, which, in both cases, individually or in the aggregate,
are not materially adverse to the financial condition or operating results of
the Company.
2.21 CHANGES. Since March 31, 1999, there has not been:
(a) any 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, which are not
individually or in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties,
financial condition, operating results, prospects or business of the Company;
(c) any waiver by the Company of a valuable right or of a
material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the
ordinary course of business and that is not material to the assets,
properties, financial condition, operating results or business of the Company;
(e) any material change in any compensation arrangement or
agreement with any employee;
(f) any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets;
(g) any resignation or termination of employment of any key
officer of the Company; and the Company, to its knowledge, does not know of
the impending resignation or termination of employment of any such officer;
(h) to the Company's knowledge, any other event or condition of
any character that is likely to materially and adversely affect the assets,
properties, financial condition, operating results or business of the
Company; or
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(i) any agreement or commitment by the Company to do any of the
things described in this Section 2.21.
2.22 EMPLOYEE BENEFIT PLANS. The Company does not have any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of
1974.
2.23 TAX RETURNS, PAYMENTS AND ELECTIONS. The Company has filed all
tax 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 Company has not elected pursuant to
the Internal Revenue Code of 1986, as amended (the "Code"), to be treated as
a Subchapter S corporation or a collapsible corporation pursuant to Section
1362(a) or 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 effect
on the Company, its business, financial condition, or any of its properties
or material assets.
2.24 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. The Company has in full force
and effect products liability and errors and omissions insurance in amounts
customary for companies similarly situated.
2.25 LABOR AGREEMENTS AND ACTIONS. 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 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 Company's knowledge, threatened, that is
likely to have a material adverse effect on the assets, properties, financial
condition, operating results, or business of the Company, nor is the Company
aware of any labor organization activity 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 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.
2.26 MERGER NEGOTIATIONS. The Company has not entered into
negotiations with any entity regarding the merger, consolidation or sale of
substantially all the assets of the Company.
2.27 QUALIFIED SMALL BUSINESS STOCK. To the best of the Company's
knowledge, the Series D Preferred Stock issued hereunder to the Investors
qualify as "qualified small business stock" as defined in Section 1202(c) of
the Internal Revenue Code of 1986, as amended as of the date hereof.
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3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor hereby
represents and warrants that:
3.1 AUTHORIZATION. Such Investor has full power and authority to
enter into the Transaction Agreements, and each such agreement constitutes
its valid and legally binding obligation, enforceable in accordance with its
terms.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
such Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Series D Preferred Stock to be received by such Investor
and the Common Stock issuable upon conversion thereof (collectively, the
"Securities") will be acquired for investment for such 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 such Investor has no present
intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, such Investor further
represents that such 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. Such 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 D Preferred
Stock and the business, properties, prospects and financial condition of the
Company.
3.4 INVESTMENT EXPERIENCE. Such 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 D
Preferred Stock. If other than an individual, Investor also represents it has
not been organized for the purpose of acquiring the Series D Preferred Stock.
3.5 ACCREDITED INVESTOR. Such 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. Such 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
registration under the Act only in certain limited circumstances. In this
connection, such 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 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, such 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, the Amended Investors' Rights Agreement and
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the Amended Voting Agreement provided and to the extent this Section and such
agreements 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) Such 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, such 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
securities 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) (i) Notwithstanding the provisions of paragraphs (a) and
(b) above, no such registration statement or opinion of counsel shall be
necessary for (i) 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, a 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 or (ii) a transfer to an
Affiliate (as such term is defined in Rule 12(b)(2) promulgated under the
Securities Exchange Act of 1934, as amended), 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.
3.8 LEGENDS. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. 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 OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS
SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS SET FORTH IN AN AMENDED AND RESTATED INVESTORS' RIGHTS
AGREEMENT, AN AMENDED AND RESTATED RIGHT OF FIRST REFUSAL AND CO-SALE
AGREEMENT AND AN AMENDED AND RESTATED VOTING AGREEMENT, COPIES OF WHICH MAY
BE OBTAINED BY ANY SHAREHOLDER, UPON REQUEST AND WITHOUT CHARGE, AT THE
PRINCIPAL OFFICES OF THE CORPORATION."
(c) Any legend required by the laws of the State of California,
including any legend required by the California Department of Corporations
and Sections 417 and 418 of the California Corporations Code.
10
4. CALIFORNIA COMMISSIONER OF CORPORATIONS.
4.1 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES THAT ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH
SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF
THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE
SALE IS SO EXEMPT.
5. CONDITIONS OF INVESTORS' OBLIGATIONS AT CLOSING.
5.1 CLOSING. The obligation of each Investor to purchase and pay for
the Series D Preferred Stock which the Investors have agreed to purchase on
the Closing Date is subject to the fulfillment on or before such Closing, of
each of the following conditions, any of which may be waived in whole or in
part by the Investors; provided, however, that no Investor shall have the
power to waive any condition for any other Investor:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of
the Closing with the same effect as though such representations and
warranties had been made on and as of the date of such Closing, unless the
representations contained in Section 2 are made as of a specific date.
(b) 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
Closing.
(c) COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to each Investor at the Closing a certificate stating that the
conditions specified in Section 5.1(a) and 5.1(b) have been fulfilled and
stating that there shall have been no material adverse change in the
business, affairs, operations, properties, assets or condition of the Company
since the date of the Financial Statements.
(d) 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 Closing.
(e) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
and all documents incident thereto shall be reasonably satisfactory in form
and substance to the Investors, and they shall have received all such
counterpart original and certified or other copies of such documents as they
may reasonably request.
11
(f) OPINION OF COMPANY COUNSEL. Each Investor shall have
received from Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, counsel for the Company, an
opinion, dated as of the Closing, in substantially the form attached hereto
as Exhibit C.
(g) TRANSACTION AGREEMENTS. The Company, the Investors
purchasing a majority of the Series D Preferred Stock to be purchased
hereunder and the other parties necessary to make the Transaction Agreements
effective shall have entered into the Transaction Agreements.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.
6.1 CLOSING. The obligation of the Company to sell and issue the
Series D Preferred Stock which the Company has agreed to issue on the Closing
Date is subject to the fulfillment on or before such Closing of each of the
following conditions, any of which may be waived in whole or in part by the
Company:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investors contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and
warranties had been made on and as of such Closing, unless the
representations contained in Section 3 are made as of a specific date.
(b) PAYMENT OF PURCHASE PRICE. The Investors shall have
delivered the purchase price specified in Section 1.2.
(c) 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 Closing.
7. MISCELLANEOUS.
7.1 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing for a period of one (1) year from the Closing Date and shall in no
way be affected by any investigation of the subject matter thereof made by or
on behalf of the Investors or the Company.
7.2 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.
7.3 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
12
7.4 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.
7.5 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.
7.6 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 Postal Service, 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.
7.7 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. Each 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 such Investor or any of its
officers, partners, employees, or representatives is responsible and the
Company agrees to indemnify and hold harmless each 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.
7.8 EXPENSES. Irrespective of whether the Closing is effected, the
Company shall pay all 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 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.
7.9 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 issued upon conversion of the Series D
Preferred Stock (assuming the conversion of the Series D Preferred Stock).
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any securities purchased 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.
7.10 DISPUTES. If the parties are unable, after good faith
negotiations, which each hereby covenants to undertake, to resolve any
dispute arising between them within fifteen (15) days after notice is given
of such dispute, then the dispute will be referred to arbitration (which the
parties agree is the exclusive means of resolving any such dispute) before
one (1) arbitrator in Los Angeles County, California, or any other place
mutually agreed upon by the
13
parties hereto, in accordance with the applicable rules then in effect of the
Judicial Arbitration and Mediation Service (the "JAMS Rules") (or any other
form of arbitration mutually acceptable to the parties). The determination
made in accordance with the JAMS Rules shall be delivered in writing to the
parties hereto and shall be final, binding and conclusive on the parties
hereto, and the amount of the claim, if any, determined to exist shall be a
valid claim and no further remedy shall be available to either party with
respect to such dispute and judgment may be entered upon such decision in
accordance with applicable law in any court having jurisdiction thereof. The
arbitration award shall include (i) a provision that the prevailing party in
such arbitration recover its costs relating to the arbitration and reasonable
attorneys' fees from the other party, (ii) the amount of such costs and fees,
and (iii) an order that the losing party pay the fees and expenses of the
arbitrator.
7.11 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.
7.12 AGGREGATION OF STOCK. All shares of Series D 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.
7.13 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall
be liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
14
SERIES D PREFERRED STOCK PURCHASE
AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY:
NETZERO, INC.
By: /s/ XXXX X. XXXXXXXX
-----------------------------------------
Xxxx X. Xxxxxxxx, Chief Executive Officer
Address: 0000 Xxxxxxxxx Xxxx
Xxxxxxxx Xxxxxxx, XX 00000
INVESTORS:
CPQ HOLDINGS, INC.
By: /s/ XXXXXXX X. XXXXXX
-----------------------------------------
Name:
-----------------------------------------
Its:
-----------------------------------------
Address: 00000 Xxxxx Xxxxxxx 000
XX 000000
Xxxxxxx, XX 00000
Attn: Office of General Counsel
with
copies to: Compaq Computer Corporation
00000 Xxxxx Xxxxxxx 000
XX 000000
Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx
15
SERIES D PREFERRED STOCK PURCHASE
AGREEMENT SIGNATURE PAGE
XXXXXX XXXXXX JURVETSON FUND V, L.P.
By: /s/ XXX XXXXXX
-----------------------------------------
Name:
-----------------------------------------
Its:
-----------------------------------------
Address: 000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxx, XX 00000
XXXXXX XXXXXX JURVETSON PARTNERS V, LLC
By: /s/ XXX XXXXXX
-----------------------------------------
Name:
-----------------------------------------
Its:
-----------------------------------------
Address: 000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxx, XX 00000
16
SERIES D PREFERRED STOCK PURCHASE
AGREEMENT SIGNATURE PAGE
FOUNDATION CAPITAL II, L.P.
BY: FOUNDATION CAPITAL MANAGEMENT II, LLC
By: /s/ XXXX X. XXXXXX
-----------------------------------------
Name:
-----------------------------------------
Its: Manager
Address: 00 Xxxxxx Xxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
FOUNDATION CAPITAL II ENTREPRENEURS FUND, LLC
BY: FOUNDATION CAPITAL MANAGEMENT II, LLC
By: /s/ XXXX X. XXXXXX
-----------------------------------------
Name:
-----------------------------------------
Its: Manager
Address: 00 Xxxxxx Xxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
FOUNDATION CAPITAL II PRINCIPALS FUND, LLC.
BY: FOUNDATION CAPITAL MANAGEMENT II, LLC
By: /s/ XXXX X. XXXXXX
-----------------------------------------
Name:
-----------------------------------------
Its: Manager
Address: 00 Xxxxxx Xxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
17
SERIES D PREFERRED STOCK PURCHASE
AGREEMENT SIGNATURE PAGE
IDEALAB! CAPITAL PARTNERS I-A, L.P.
By: /s/ XXXXXXX X. XXXXX
-----------------------------------------
Name:
-----------------------------------------
Its:
-----------------------------------------
Address: 000 Xxxx Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
IDEALAB! CAPITAL PARTNERS I-B, L.P.
By: /s/ XXXXXXX X. XXXXX
-----------------------------------------
Name:
-----------------------------------------
Its:
-----------------------------------------
Address: 000 Xxxx Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
-
IDEALAB! HOLDINGS, L.L.C.
By: /s/ XXXXXX XXXXXXXXX
-----------------------------------------
Name:
-----------------------------------------
Its:
-----------------------------------------
Address: 000 Xxxx Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
18
SERIES D PREFERRED STOCK PURCHASE
AGREEMENT SIGNATURE PAGE
CALIFORNIA EMERGING VENTURES, LLC
By: /s/ XXXXXXX X. XXXXXX
-----------------------------------------
Name:
-----------------------------------------
Its: Member and General Partner of Grove Street
Advisors, LLC, Manager for California
Emerging Ventures, LLC
Address: 00 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
19
SERIES D PREFERRED STOCK PURCHASE
AGREEMENT SIGNATURE PAGE
/s/ XXXXXXX X. XXXXXXXX
-----------------------------------------
XXXXXXX X. XXXXXXXX
Address: 0000 Xxxxxxxxx Xxxx
Xxxxxxxx Xxxxxxx, XX 00000
/s/ XXXX X. XXXXXXXX
-----------------------------------------
Xxxx X. Xxxxxxxx
Address: 00000 Xxxxxxxxx Xxxx
Xxxxxxx Xxxxx, XX 00000
/s/ XXXXX X. XXXX
-----------------------------------------
XXXXX X. XXXX
Address: 000 Xxxxxxx Xxxx
Xxx Xxxxxxx, XX 00000
/s/ XXXX XXXXXXXX
-----------------------------------------
XXXX XXXXXXXX
Address: 000 Xxxxxxxx Xxxxx
Xx Xxxxxx, XX 00000
20
SERIES D PREFERRED STOCK PURCHASE
AGREEMENT SIGNATURE PAGE
XXXXXXX, XXXXXXX & XXXXXXXX LLP
By: /s/ XXXXXX X. XXXXX
-----------------------------------------
Name:
-----------------------------------------
Its:
-----------------------------------------
Address: 00 Xxxxxxxxxx Xxxxx
Xxxxxx, XX 00000-0000
/s/ XXXX X. XXXXXXXX
---------------------------------------------
XXXX X. XXXXXXXX
Address:
---------------------------------------------
---------------------------------------------
/s/ XXXXXXX XXXXXXX
---------------------------------------------
XXXXXXX XXXXXXX
Address: ---------------------------------------------
---------------------------------------------
/s/ XXXXX XXXXX
---------------------------------------------
XXXXX XXXXX
Address:
---------------------------------------------
---------------------------------------------
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