EXHIBIT 10.23
EXECUTION COPY
GEOCITIES
PREFERRED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of October 6, 1997, by and among GeoCities, a
California corporation (the "Company"), and the several purchasers named in
Schedule I hereto (such purchasers being sometimes hereafter called individually
a "Schedule I Purchaser" and collectively the "Schedule I Purchasers"); the
Schedule I Purchasers, together with any Additional Purchasers (as defined
below) are sometimes hereinafter referred to collectively as the "Purchasers").
The parties hereby agree as follows:
1. Authorization and Sale of the Shares
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1.1 Authorization; Filing of Restated Articles of Incorporation. The
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Company has authorized the issuance and sale pursuant to the terms and
conditions hereof of up to 2,857,142 shares of its Series E Preferred Stock (the
"Preferred Shares"), having the rights, restrictions, privileges and preferences
as set forth in the form of the Third Amended and Restated Articles of
incorporation of the Company (the "Restated Articles") attached hereto as
Exhibit A. The Company shall adopt and file the Restated Articles the Secretary
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of State of California on or before the First Closing Date (as defined below).
1.2 Sale and Issuance of the Initial Preferred Shares. Subject to the
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terms and conditions hereof, at the First Closing (as determined below), the
Company will issue and sell to each Schedule I Purchaser and each Schedule I
Purchaser will purchase from the Company the number of Preferred Shares set
forth opposite the name of such Purchaser on Schedule I hereto (said aggregate
number of shares being herein collectively called the "Initial Preferred
Shares") for the purchase price of $7.00 per share.
1.3 Sale and Issuance of the Additional Preferred Shares. At the Second
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closing (as defined below), subject to the terms and conditions hereof, the
Company shall issue and sell some or all of the remaining Preferred Shares, for
the purchase price of $7.00 per share, to one or more strategic investors
mutually satisfactory to the Company, on the one hand, and all of the Schedule I
Purchasers, on the other hand, and/or to some or all of the Schedule I
Purchasers, in such amounts as shall be agreed upon by the Company, on the one
hand, and all of the Schedule I Purchasers, on the other hand. The Preferred
Shares purchased at the Second Closing are referred to as the "Additional
Preferred Shares"; the Initial Preferred Shares and the Additional Preferred
Shares are hereinafter at times collectively referred to as the "Preferred
Shares". The Additional Preferred Shares shall be issued on the terms and
subject to the conditions of this Purchase Agreement, provided that each
purchaser of Additional Shares (the "Additional Purchasers") shall execute and
deliver to the Company and the Schedule I Purchasers a written instrument, in
form and substance which such Additional Purchaser shall agree to be bound by
the provisions of this Agreement and the Rights Agreement and be entitled to the
rights and benefits, and subject to the obligations, of a Purchaser hereunder
and an Investor thereunder.
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2. Closing Dates; Delivery
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2.1 Closing Date. Each of the closings of the purchase and sale of the
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Preferred Shares hereunder (individually a "Closing" and collectively the
"Closings") shall be held at the offices of the Company on the dates hereinafter
provided:
(a) The First Closing for the purchase and sale of Preferred
Shares to the Schedule I Purchasers in the respective amounts set forth on
Schedule I (the "First Closing") shall be held on October 8, 1997, or on such
other date as the Purchasers and the Company may agree (the "First Closing
Date").
(b) The Second Closing for the purchase and sale of Additional
Preferred Shares to the Additional Purchasers shall be held at such date and
time as may be mutually agreed upon between the Additional Purchasers and the
Company (the "Second Closing") provided that the Second Closing shall not be
later than October 31, 1997 (the "Second Closing Date").
2.2 Delivery. Subject to the terms of this Agreement, payment at each
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Closing for the Preferred Shares purchased at such Closing shall be by cashier's
check or wire transfer for the account of the Company. Each Purchaser shall pay
that amount for the Preferred Shares being acquired by such Purchaser at such
Closing as set forth in Schedule I hereof or in the schedule to be prepared in
respect of the Additional Purchasers. At each Closing, the Company will deliver
to each Purchaser one or more certificates representing the Preferred Shares
purchased by such Purchaser at such Closing, in such denominations as may be
requested by such Purchaser.
3. Representations and Warranties of the Company. The Company hereby
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represents and warrants to the Purchasers that, except as set forth on a
Schedule of Exceptions attached hereto as Exhibit B, which exceptions shall be
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deemed to be representations and warranties as if made hereunder:
3.1 Organization and Standing; Articles and Bylaws. The Company is a
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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 businesses as now conducted and as proposed to be conducted
Company is qualified or licensed to do business as a foreign corporation in all
jurisdictions where such qualification or licensing is required, except where
the failure to so qualify would not have a material adverse effect upon the
Company. Copies of the Company's Articles of Incorporation and Bylaws, each as
amended to date, and minutes and consents of shareholders and of the Board of
Directors are available for inspection at the Company's offices and have been
previously provided to special counsel for the Purchasers.
3.2 Corporate Power. The Company has now, or will have at the First
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Closing, all requisite corporate power necessary for the authorization,
execution and delivery of this Agreement, the Second Amended and Restated Rights
Agreement in the form attached hereto as Exhibit C (the "Rights Agreement"), to
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sell and issue the Preferred Shares and to issue up to the maximum number of
shares of Common Stock, S0.005 par value per share (the
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"Common Stock"), issuable upon conversion of the Preferred Shares. This
Agreement and the Rights Agreement are valid and binding obligations of the
Company, enforceable in accordance with their terms, except as the same may be
limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium, usury and other laws of general application affecting the
enforcement of creditors' rights.
3.3 Subsidiaries. The Company does not control, directly or
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indirectly, any other corporation, association or business entity.
3.4 Capitalization. The authorized capital stock of the Company is
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20,000,000 shares of Common Stock and 11,579,786 shares of Preferred Stock, of
which 1,554,000 shares have been designated Series A Preferred Stock, 1,450,000
shares have been designated Series B Preferred Stock, 600,000 have been
designated Series C Preferred Stock, 5,118,644 shares have been designated
Series D Preferred Stock and 2,857,142 shares have been designated Series E
Preferred Stock. There are issued and outstanding 1,554,000 shares of Series A
Preferred Stock, 1,450,000 shares of Series B Preferred Stock, 600,000 shares of
Series C Preferred Stock, 5,084,746 shares of Series D Preferred Stock and
1,309,750 shares of Common Stock. The holders of record of the presently issued
and outstanding Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Common Stock immediately prior to
the First Closing are as set forth on Exhibit D-1. All such issued and
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outstanding shares have been authorized and validly issued, are fully paid and
nonassessable, and were issued in compliance with all applicable state and
federal laws concerning the issuance of securities. There are no outstanding
rights, options, warrants, conversion rights or agreements for the purchase or
acquisition from the Company of any shares of its capital stock except that (i)
the Company has offered for sale shares of Common Stock to those employees,
officers, directors and consultants of the Company, and in such amounts, as set
forth on Exhibit D-2 which Exhibit D-2 also lists those shares described in
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(iii) and (iv) hereinbelow; (ii) ,777,500 shares of Common Stock have been
reserved for issuance pursuant to the Company's 1997 Stock Option Plan or
otherwise pursuant to grants approved by the Company's Board of Directors; (iii)
500,000 shares of Common Stock have been reserved for issuance to CMG @Ventures
pursuant to an option previously granted to it; (iv) 500,000 shares of Common
Stock have been reserved for issuance to Xxxxx Xxxxxxx and certain other persons
pursuant to options previously granted to them (the "Founders Options"); (v)
33,898 shares of Series D Preferred Stock have been reserved for issuance to
Cupertino Bank pursuant to a warrant issued to it; (vi) 44,444 shares of Common
Stock have been reserved for issuance to Comerica Bank pursuant to a warrant
issued or to be issued to it; (vii) 8,722,644 shares of the Company's Common
Stock have been reserved for issuance upon conversion of the Series A Preferred
Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series
D Preferred Stock; and (vii) 2,857,142 shares of the Company's Common Stock
have been reserved for issuance upon conversion of the Series E Preferred Stock.
Except as provided in the rights Agreement, the Company is not a party or
subject to any agreement or understanding between any persons or entities which
affects or relates to the voting or giving of written consents with respect to
any securities or by any director of the Company.
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3.5 Authorization.
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(a) Corporate Action. All corporate action on the part of the
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Company, its officers, directors and shareholders necessary for the execution
and delivery of this Agreement and the Rights Agreement, the sale and the
issuance of the Preferred Shares, the issuance of the Common Stock issuable upon
conversion of the Preferred Shares (the "Common Shares") and the performance of
the Company's obligations hereunder and under the Rights Agreement has been
taken or will be taken prior to the First Closing.
(b) Valid Issuance. The Preferred Shares, when issued in
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compliance with the provisions of this Agreement, and the Common Shares, when
issued upon conversion of the Preferred Shares in accordance with the provisions
of the Restated Articles, will be validly issued and outstanding, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided, however,
that all such shares may be subject to restrictions on transfer under state
and/or federal securities laws as set forth herein, and as may be required by
future changes in such laws. The rights, preferences, privileges and
restrictions of the Preferred Shares are as set forth in the Restated Articles.
(c) No Preemptive Rights. Other than as provided in the Rights
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Agreement, no person has any right of first refusal or any preemptive rights in
connection with the issuance of the Preferred Shares, the issuance of the Common
Shares upon conversion of the Preferred Shares or any future issuances of
securities by the Company.
3.6 Proprietary Rights.
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(a) Exhibits E-1 and E-2 contain, respectively, an accurate and
complete description of all registered and unregistered trademarks and
tradenames in or related to the Company Products, and a list of all licenses and
other agreements relating thereto. Exhibit E-3 sets forth a list of all licenses
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and other agreements with third parties (the "Third Party Licenses") relating to
any software, copyrights, technology, know-how or processes that the Company has
licensed or is otherwise authorized by such third parties to use, market,
distribute or incorporate into products distributed by the Company (such
software, technology, know-how and processes are collectively referred to as the
"Third Party Technology"). The Company (i) owns all right, title and interest in
and to or has obtained licenses to use all technology, intellectual property,
software tools, copyrights, know-how, processes, patents, trademarks, trade
secrets, tradenames and other proprietary rights (collectively, "Rights") used
in or necessary for the conduct of its business as conducted to the date hereof
(the "Business") and (ii) will, prior to entering areas of new business
currently being contemplated, own or obtain all Rights used in or necessary for
the conduct of its business as so contemplated, including without limitation
(with respect to both clauses (i) and (ii) above), the technology and all
proprietary rights developed or discovered in connection with or contained in
the Company's products (the "Company Products"), free and clear of all
liabilities, charges, liens, pledges, mortgages, restrictions, adverse claims,
security interests, rights of others and encumbrances (including, without
limitation, distribution rights) (all of which are referred to as "Proprietary
Rights"). The foregoing representation and warranty as it relates to Third Party
Technology is limited to the Company's interest pursuant to the Third Party
Licenses, all of which are valid and enforceable and in full force and effect
and which grant the Company such right to Third Party Technology
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as are employed in or necessary to the Business of the Company as conducted or
proposed to be conducted. All of the Company's registered patents, trademarks
and copyrights in any of the Company Products and applications therefor, if any,
are valid and in full force and effect, and consummation of the transactions
contemplated hereby will not alter or impair any such rights. No claims have
been asserted against the Company (and to the best knowledge of the Company
there are no claims which are likely to be asserted against the Company or which
have been asserted against others) by any person challenging the Company's use
or distribution of any patents, trademarks, tradenames, copyrights, trade
secrets, software, technology, know-how or processes utilized by the Company
(including, without limitation, the Third Party Technology) or challenging or
questioning the validity or effectiveness of any license or agreement relating
thereto (including, without limitation, the Third Party Licenses). To the best
knowledge of the Company, none of the Company Products nor the use of any
patents, trademarks, tradenames, copyrights, software, technology, know-how or
processes by the Company in its current Business infringes on the rights of,
constitutes misappropriation of, or in any way involves unfair competition with
respect to, any proprietary information or intangible property right of any
third person or entity, including without limitation, any patent, trade secret,
copyright, trademark or tradename.
(b) The Company has not granted any third party any right to
manufacture, reproduce, distribute, market or exploit any of the Company
Products or any adaptations, Translations or derivative works based on the
Company Products or any portion thereof. Except with respect to the rights of
third parties to the Third party Technology, no third party has any right to
manufacture, reproduce, distribute, market or exploit any works or materials of
which any of the Company Products are a "derivative work" as that term is
defined in the United States Copyright act, Title 17, U.S.C. Section 101.
(c) All designs, drawings, specifications, source code, object
code, documentation, flow charts and diagrams incorporating, embodying or
reflecting any of the Company Products (the "Company Components"), if any,
constitute original creations of and were written, developed and created solely
and exclusively by employees of the Company without the assistance of any third
party or entity or were created by third parties who assigned ownership of their
rights to the Company in valid and enforceable consultant confidentiality and
invention assignment agreements. The Company has at all times used commercially
reasonable efforts to treat the Company Products and the Company Components as
containing trade secrets and has not disclosed or otherwise dealt with such
items in such a manner as to cause the loss of such trade secrets by release
into the public domain.
(d) No employee of the Company is in violation of any term of any
employment contract, patent disclosure agreement, confidentiality agreement or
any other contract or agreement relating to the relationship of any such
employee with the Company or, to the best knowledge of the Company, any other
party because of the nature of the business conducted by the Company or proposed
to be conducted by the Company.
(e) Notwithstanding the foregoing, the Company states and the
Purchasers acknowledge and agree that the Company is a service provider on the
electronic network commonly known as the Internet, and that the Business is
unique in that the Company has not created, nor does it own, the content of each
Personal Home Page and third-party
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advertising that may be found within the Company Products ("Excluded Rights").
The parties agree that the term Proprietary Rights does not include, and the
Company hereby disclaims the representations and warranties of this Section 3.6
(except for the representation in Section 3.6(a) as to assertion of claims
against the Company or claims which to the knowledge of the Company are likely
to be asserted) as to Excluded Rights found within the Company Products.
Personal Home Pages are subject to the Company's Personal Home Page Policy, and
Company's rights as to the Personal Home Pages are set forth in the Personal
Home Page Policy (a copy of which has been provided to special counsel to the
Purchasers). The Company does not own or control the content of any Personal
Home Page, except as see forth in the Personal Home Page Policy. The Purchasers
further acknowledge and agree that the Internet is global in scope, and that the
representations and warranties of the Company made in this Section 3.6 are
limited to the laws of the United States. The Company is unaware, however, of
any third party having rights in the Proprietary Rights under the laws of any
foreign jurisdiction that are superior to those of the Company, or of any
violation by the Company of the laws of any foreign jurisdiction.
3.7 Compliance with Other Instruments, None Burdensome, etc. The
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Company is not in violation of any term of its Restated Articles or Bylaws, nor
is the Company in violation of or in default in any material respect under the
terms of any mortgage, indenture, contract, agreement, instrument, judgment or
decree, the violation of which would have a material adverse effect on the
Company, and to the best knowledge of the Company is not in violation of any
order, statute, rule or regulation applicable to the Company. The execution,
delivery and performance of and compliance with this Agreement or the Rights
Agreement, [he issuance and sale of the Preferred Shares and the issuance of the
Common Shares upon conversion of the Preferred Shares will not (a) result in any
such violation, or (b) be in conflict with or constitute a default under any
such term, or (c) result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company
pursuant to any such term. To the best knowledge of the Company, there is no
such term which adversely affects, or in the future may materially adversely
affect, the business, prospects, conditions, affairs or operations of the
Company or any of its properties or assets.
3.8 Proprietary Agreements. Each officer, director, employee and
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consultant of the Company has executed an agreement regarding confidentiality
and proprietary information, the form of which has been approved by special
counsel to the Purchasers. The Company is not aware that any of its officers,
directors or employees is in violation thereof and will use its best efforts to
prevent any such violation. Xxxxx Xxxxxxx and Xxxx Xxxxxx and other key
technical employees have executed an agreement regarding the assignment of
inventions, the form of which has been approved by special counsel to the
Purchasers. The Company is not aware that any of its officers, directors or
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 conducted or as proposed to
be conducted or that would prevent any such employee from assigning inventions
to the Company. Neither the execution nor delivery of this Agreement or the
Rights Agreement, nor the carrying on of the Company's business as proposed,
will, to the Company's best 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 that it is or
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will be necessary for the Company to utilize any inventions of any of its
employees made prior to their employment by the Company.
3.9 Litigation, etc. There is no action, proceeding or investigation
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pending against the Company or its officers or directors, or to the best
knowledge of the Company, against employees or consultants of the Company (or,
to the best knowledge of the Company, any basis therefor or threat thereof): (1)
which might result, either individually or in the aggregate, in (a) any material
adverse change in the business, prospects, conditions, affairs or operations of
the Company or in any of its properties or assets, or (b) any material
impairment of the right or ability of the Company to carry on its business as
now conducted or as proposed to be conducted, or (c) any material liability on
the part of the Company; or (2) which questions the validity of this Agreement,
the Rights Agreement or any action taken or to be taken in connection herewith,
including in each case, without limitation, actions pending or threatened
involving the prior employment of any of the Company's employees, the use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of its former employees, or their obligations under
any agreements with prior employers. The Company is not a party to 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 which the Company currently
intends to initiate.
3.10 Governmental Consent, etc. No consent, approval or authorization
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of or designation, registration, declaration or filing with any governmental
authority on the part of the Company is required in connection with: (a) the
valid execution and delivery of this Agreement or the Rights Agreement, or (b)
the offer, sale or issuance of the Preferred Shares, or the issuance of the
Common Shares issuable upon conversion of the Preferred Shares, or (c) the
obtaining of the consents, permits and waivers specified in subsection 5.1(b)
hereof, except the filing of the Restated Articles and, if required, filings or
qualifications under the California Corporate Securities Law of 1968 (the "Law")
or other applicable blue sky laws, which filings or qualifications, if required,
will have been timely filed or obtained after the sale of the Preferred Shares.
3.11 Offering. In reliance on the representations and warranties of
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the Purchasers in Section 4 hereof, the offer, sale and issuance of the
Preferred Shares in conformity with the terms of this Agreement will not result
in a violation of the requirements of Section 5 of the Securities Act of 1933,
as amended (the "Securities Act") or the qualification or registration
requirements of the Law or other applicable blue sky laws.
3.12 Taxes. The Company has filed all tax returns that are required
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to have been filed with appropriate federal, state, county and local
governmental agencies or instrumentalities, except where the failure to do so
would not in the aggregate result in additional liability totaling $25,000 or
more. The Company has paid or established reserves for all income, franchise and
other taxes, assessments, governmental charges, penalties, interest and fines
due and payable by it on or before the First Closing. There is no pending
dispute with any taxing authority relating to any of such returns and the
Company has no knowledge of any proposed liability for any tax to be imposed
upon the properties or assets of the Company. There is no tax lien, whether
imposed by any federal, state or local taxing authority, outstanding against the
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assets, properties or business of the Company. Neither the Company nor any of
its present or former shareholders has ever filed an election pursuant to
Section 1362 of the Internal Revenue Code of 1986, as amended (the "Code"), that
the Company be taxed as an S corporation.
3.13 Title. The Company owns its property and assets free and clear
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of all liens, mortgages, loans or encumbrances except liens for current taxes,
and such encumbrances and liens which 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 leased by the Company, the
Company is in compliance with such leases and holds valid leasehold interests
free and clear of any liens, claims or encumbrances.
3.14 Material Contracts and Commitments. All of the contracts,
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mortgages, indentures, agreements, instruments and transactions to which the
Company is a party or by which it is bound (including purchase orders to the
Company or placed by the Company) which involve obligations of, or payments to,
the Company in excess of Five Thousand Dollars ($5,000) and all agreements
between the Company and its officers, directors, consultants and employees are
either (i) attached as exhibits to this Agreement, or (ii) set forth on the list
attached hereto as Exhibit F (the "Contracts"), copies of which have either been
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delivered to special counsel to the Purchasers or will be delivered to them upon
request. All of the material provisions of the Contracts are valid, binding and
in full force and effect and enforceable by the Company in accordance with their
respective terms, subject to the effect of applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium, usury or other laws of
general application relating to or affecting enforcement of creditors' rights
and rules or laws concerning equitable remedies. The Company is not in material
default under any of such Contracts. To the best knowledge of the Company, no
other party to any of the Contracts is in material default thereunder.
3.15 Registration Rights. Other than as granted pursuant to the
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Rights Agreement, the Company has not granted or agreed to grant any rights to
register, as that term is defined in the Rights Agreement, including piggyback
registration rights, to any person or entity.
3.16 Certain Transactions. The Company is not indebted, directly or
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indirectly, to any of its officers, directors or shareholders or to their
spouses or children, in any amount whatsoever; and none of said officers,
directors or shareholders, or any member of their immediate families, are
indebted to the Company or (to the best of the Company's knowledge, in the case
of shareholders) have 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 (except as a holder of securities of a corporation whose
securities are publicly traded and which is subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") to the extent of owning not more than two percent (2%) of the issued and
outstanding securities of such corporation). No such officer, director or
shareholder, or any member of their immediate families, is, directly or
indirectly, interested in any material contract with the Company. The Company
is not a guarantor or indemnitor of any liability or indebtedness of any other
person, firm or corporation.
3.17 Corporate Documents; Minute Books. Except for amendments
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necessary to satisfy representations and warranties or conditions contained
herein (the form of which
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amendments has been approved by the Purchasers), the Restated Articles and
Bylaws of the Company are in the form previously provided to special counsel to
the Purchasers. The minute books of the Company previously provided to special
counsel to the Purchasers contain a complete summary of all meetings of
directors and shareholders since the time of incorporation of the Company.
3.18 Financial Statements. The Company has delivered to the
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Purchasers copies of the Company's unaudited balance sheet as of July 31, 1997
(the "Company Balance Sheet") and statements of income, changes in shareholders'
equity and cash flow for the period then ended. All such financial statements
(collectively, the "Company Financial Statements") are complete and in
accordance with the books and records of the Company and present fairly and
disclose the financial position of the Company as of their respective dates and
the results of operations for the period covered thereby. The Company Financial
Statements have been prepared in accordance with generally accepted accounting
principles consistently applied during the periods covered thereby, except for
the absence of footnotes and year-end adjustments. Since July 31, 1997, there
has been no Material Adverse Change (as defined herein) in the Company's assets
or liabilities, or in the Business or condition, financial or otherwise, of the
properties or results of operations. "Material Adverse Change" means any change
in, or effect on, the Business (i) that is or is reasonably likely to be
materially adverse to the results of the Operations Or the financial condition
of the Company or the Business or (ii) that requires or is reasonably likely to
require the expenditure of Fifteen Thousand Dollars ($15,000) or more,
individually or in the aggregate.
3.19 Subsequent Events. Except as set forth on the Schedule of
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Exceptions, since July 31, 1997, the Company has not (i) issued any stock, bond
or other corporate security, (ii) borrowed any amount or incurred or become
subject to any liability (absolute, accrued or contingent), except liabilities
under contracts entered into in the ordinary course of business, (iii)
discharged or satisfied any lien or encumbrance or incurred or paid any
obligation or liability (absolute, accrued or contingent), other than current
liabilities shown on the Company Financial Statements and current liabilities
incurred since the date of the Company Financial Statements in the ordinary
course of business, (iv) declared or made any payment or distribution to
shareholders or purchased or redeemed any shares of its capital stock or other
securities, (v) mortgaged, pledged or subjected to lien any of its assets,
tangible or intangible, other than liens for current real property taxes not yet
due and payable, (vi) sold, assigned or transferred any of its tangible assets
except for fair value in the ordinary course of business, or canceled any debt
or claim, except for fair value in the ordinary course of business, (vii) sold,
assigned, transferred or granted any license with respect to any patent,
trademark, trade name, service xxxx, copyright, trade secret or other intangible
asset, except pursuant to license or other agreements entered into in the
ordinary course of business, (viii) suffered any loss of property or waived any
right of substantial value whether or not in the ordinary course of business,
(ix) made any change in officer compensation, (x) made any material change in
the manner of business or operations of the Company, (xi) entered into any
transaction except in the ordinary course of business or as otherwise
contemplated hereby, or (xii) entered into any written or oral commitment to any
of the foregoing.
3.20 Employee Benefit Plans. The Company does not have any
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"employee benefit plan" as defined in the Employee Retirement Income Security
Act of 1974, as amended.
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3.21 Real Property Holding Corporation. The Company is not a "real
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property holding corporation" within the meaning of Section 897(c)(2) of the
Code.
3.22 Disclosure. No representation or warranty by the Company in this
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Agreement, or in any document or certificate furnished or to be furnished to the
Purchasers pursuant hereto or in connection with the transactions contemplated
hereby, when taken together, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
the statements made herein and therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that with regard to the
operating projections, dated September 19, 1997, which have been delivered to
the Purchasers and which supersede any prior projections that may have been
delivered to the Purchasers, the Company represents only that such projections
were prepared in good faith and that the Company reasonably believes there is a
reasonable basis for such projections. The Company has fully provided the
Purchasers with all the information which the Purchasers and their respective
counsel have requested for deciding whether to purchase the Preferred Shares and
all information that the Company believes is reasonably necessary to make such
decision. There is no material fact known to the Company that has not been
disclosed in this Agreement or in any other agreement, document or written
statement furnished by the Company to the Purchasers or their respective counsel
in connection with the transactions contemplated hereby or which materially
adversely affects or, in the Company's reasonable business judgment, could
materially adversely affect the business, properties, assets or condition
(financial or other) of the Company.
3.23 Insurance. The Company has in full force and effect fire and
---------
casualty insurance policies, with extended coverage, and insurance against other
hazards, risks and liabilities to persons and property, to the extent and in the
manner customary for companies in similar businesses similarly situated. All
premiums due and payable with respect to the policies maintained by the Company
have been paid.
3.24 Labor Agreements and Actions. The Company is not bound by or
subject to (and none of its assets or properties are bound by or subject to) any
contract, commitment or arrangement with any labor union, and no labor union has
requested or, to the best knowledge of the Company, 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 the best knowledge of
the Company threatened, which 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
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. Subject to general principles
related to wrongful termination of employees, the employment of each officer and
employee of the Company is terminable at the will of the Company.
3.25 Brokers. The Company has no contract, arrangement or
-------
understanding any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
10
3.26 Best Knowledge. For purposes of this Agreement, the Terms "to
--------------
the knowledge of the Company" and "to the best of the Company's knowledge" shall
mean to the knowledge of the Company after inquiry of each of Xxxxx Xxxxxxx,
Xxxxx Xxxxxxxx, Xxxx Xxxxxx, Xxxx Xxxx, Xxx Xxx and Xx Xxxxxx.
3.27 Qualified Small Business. The Company qualifies as a
------------------------
"Qualified Small Business" as defined in Section 1202(d) of The Internal Revenue
Code of 1986, as amended (the "Code").
4. Representations and Warranties of the Purchasers and Restrictions on
--------------------------------------------------------------------
Transfer Imposed by the Securities Act.
--------------------------------------
4.1 Representations and Warranties by the Purchasers. Each Purchaser,
------------------------------------------------
severally and not jointly, represents and warrants to the Company as follows:
(a) Investment Intent. This Agreement is made with such
-----------------
Purchaser in reliance upon such Purchaser's representations to the Company,
evidenced by such Purchaser's execution of this Agreement, that such Purchaser
is acquiring the Preferred Shares and the Common Shares issuable upon conversion
of the Preferred Shares (collectively the "Securities") for investment for such
Purchaser's own account, for investment and not with a view to, nor for resale
in connection with, any distribution or public offering thereof within the
meaning of the Securities Act and the Law. Such Purchaser has the full right,
power and authority to enter into and perform this Agreement and the Rights
Agreement, and this Agreement and the Rights Agreement constitute valid and
binding obligations upon such Purchaser.
(b) Shares Not Registered. Such Purchaser understands and
---------------------
acknowledges that the offering of the Preferred Shares pursuant to this
Agreement will not be registered under the Securities Act or qualified under the
Law on the grounds that the offering and sale of securities contemplated by this
Agreement are exempt from registration under the Securities Act and exempt from
qualification pursuant to Section 25102(f) of the Law, land that the Company's
reliance upon such exemptions is predicated upon such Purchaser's
representations set forth in this Agreement. Such Purchaser acknowledges and
understands that the Securities must be held indefinitely unless the Securities
are subsequently registered under the Securities Act and qualified under the Law
or an exemption from such registration and such qualification is available.
(c) No Transfer. Such Purchaser covenants that in no event
-----------
will it dispose of any of the Securities (other than in conjunction with an
effective registration statement for the Securities under the Act or in
compliance with Rule 144 promulgated under the Act) unless and until (i) such
Purchaser shall have notified the Company of the proposed disposition and shall
have furnished the Company with a statement of the circumstances surrounding the
proposed disposition, and (ii) if reasonably requested by the Company, such
Purchaser shall have furnished the Company with an opinion of counsel reasonably
satisfactory in form and substance to the Company to the effect that (x) such
disposition will not require registration under the Securities Act and (y)
appropriate action necessary for compliance with the Securities Act, the Law and
any other applicable state, local or foreign law has been taken. It is agreed
that the Company will not require opinions of counsel for transactions made
pursuant to Rule 144.
11
(d) Permitted Transfers. Notwithstanding the provisions of
-------------------
subsection (c) above, no registration statement or opinion of counsel shall be
necessary for a transfer by a Purchaser to one or more partners or departing
partners of a Purchaser (in the case of a Purchaser that is a partnership), or
to one or more members or departing members of a Purchaser (in the case of a
Purchaser that is a limited liability company) or to an affiliated corporation
(in the case of a Purchaser that is a corporation), or to one or more affiliated
partnerships managed by such Purchaser, or in the case of Chase Venture Capital
Associates, L.P. to Salt Creek Ventures or an affiliate thereof, or to the
estate of any such partner or member or former partner or member, or the
transfer by gift, will or intestate succession of any partner or member to his
spouse or lineal descendants or ancestors, if the transferee agrees in writing
to be bound by the terms of this Agreement to the extent as if he were an
original Purchaser hereunder.
(e) Knowledge and Experience. Such Purchaser (i) has such
------------------------
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of its prospective investment in the Securities;
(ii) has the ability to bear the economic risks of such Purchaser's prospective
investment; (iii) has been furnished with and has had access to such information
as it has considered necessary to make a determination as to the purchase of the
Securities, together with such additional information as is necessary to verify
the accuracy of the information supplied; (iv) has had all questions which have
been asked by it satisfactorily answered by the Company; and (v) has not been
offered the Securities by any form of advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any such media.
(f) Not Organized to Purchase. Such Purchaser has not been
-------------------------
organized for the purpose of purchasing the Securities.
(g) Holding Requirements. Such Purchaser understands that if
--------------------
the Company does not (i) register its Common Stock with the Securities and
Exchange Commission ("SEC") pursuant to Section 12 of the Exchange Act, (ii)
become subject to Section 15(d) of the Exchange Act, (iii) supply information
pursuant to Rule 15c2-11 thereunder, or (iv) have a registration statement
covering the Securities (or a filing pursuant to the exemption from registration
under Regulation A of the Securities Act covering the Securities) under the
Securities Act in effect when such Purchaser desires to sell the Securities,
such Purchaser may be required to hold the Securities for an indeterminate
period. Such Purchaser also understands that any sale of the Securities that
might be made by such Purchaser in reliance upon Rule 144 under the Securities
Act may be made only in limited amounts in accordance with the terms and
conditions of that rule.
4.2 Legends. Each certificate representing the Securities may be
-------
endorsed with the following legends:
(a) Federal Legend. THE SECURITIES REPRESENTED BY THIS
--------------
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") AND ARE "RESTRICTED SECURITIES" AS DEFINED IN RULE 144
PROMULGATED UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR
OTHERWISE DISTRIBUTED EXCEPT (i) IN
12
CONJUNCTION WITH AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE
ACT OR (ii) IN COMPLIANCE WITH RULE 144, OR (iii) PURSUANT TO AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION OR COMPLIANCE IS
NOT REQUIRED AS TO SAID SALE, OFFER OR DISTRIBUTION.
(b) Other Legends. Any other legends required by the Law or
-------------
other applicable state blue sky laws.
The Company need not register a transfer of legended Securities, and may also
instruct its transfer agent not to register the transfer of the Securities,
unless the conditions specified in each of the foregoing legends are satisfied.
4.3 Removal of Legend and Transfer Restrictions. Any legend
-------------------------------------------
endorsed on a certificate pursuant to subsection 4.2(a) and the stop transfer
instructions with respect to such legended Securities shall be removed, and the
Company shall issue a certificate without such legend to the holder of such
Securities if such Securities are registered under the Securities Act and a
prospectus meeting the requirements of section 10 of the Securities Act is
available or if such holder satisfies the requirements of Rule 144(k) and, where
reasonably deemed necessary by the Company, the holder of the Securities
provides the Company with an opinion of counsel for such holder, reasonably
satisfactory to the Company, to the effect that (i) such holder meets the
requirements of Rule 144(k) or (ii) a public sale, transfer or assignment of
such Securities may be made without registration.
4.4 Rule 144. Such Purchaser is aware of the adoption of Rule 144
--------
by the SEC promulgated under the Securities Act, which permits limited public
resales of securities acquired in a nonpublic offering, subject to the
satisfaction of certain conditions. Such Purchaser understands that under Rule
144, the conditions include, among other things: the availability of certain
current public information about the issuer and the resale occurring not less
than one (1) year after the party has purchased and paid for the securities to
be sold.
5. Conditions to Closing.
---------------------
5.1 Conditions to Schedule I Purchasers' Obligations at the First
-------------------------------------------------------------
Closing. The obligation of each Schedule I Purchaser to purchase the Initial
-------
Preferred Shares to be purchased by it at the First Closing is subject to the
fulfillment to such Schedule I Purchaser's satisfaction, on or before the First
Closing Date, of the following conditions, any of which may be waived in
accordance with the provisions of Section 7.1 hereof:
(a) Representations and Warranties Correct; Performance of
------------------------------------------------------
Obligations. The representations and warranties made by the Company in Section 3
-----------
hereof shall be true and correct when made, and shall be true and correct in all
material respects on the First Closing Date with the same force and effect as if
they had been made on and as of said date. The Company's business and assets
shall not have been adversely affected in any material way prior to the First
Closing Date. The Company shall have performed in all material respects all
obligations and conditions herein required to be performed or observed by it on
or prior to the first Closing Date.
13
(b) Consents and Waivers. The Company shall have obtained in
--------------------
a timely fashion any and all consents, permits and waivers necessary or
appropriate for consummation of the transactions contemplated by this Agreement
(including without limitation waivers of preemptive rights).
(c) Board of Directors. The number of directors constituting
------------------
the entire Board of Directors shall continue to be fixed at seven and the
following persons shall continue to hold their positions as directors as of the
first Closing: Xxxxx Xxxxxxx and Xxxxxxx Xxxxxxx, as the directors elected by
the holders of Common Stock, Xxxxx Xxxxxxxxx and Xxxxx Xxxxx, as the directors
elected by the holders of Series A and Series B Preferred Stock, Xxxx Xxxxxxx
and Xxxxx Xxxxxxx, as the directors elected by the holders of Series D Preferred
Stock (the "Series D Directors") and Xxxxxxx Xxxxxx, as the director with
industry expertise elected by the holders of a majority of the Common Stock, the
Series A, Series B, Series C, Series D and Series E Preferred Stock, voting as a
single class on an as-converted basis.
(d) Filing of the Restated Articles. The Restated Articles
-------------------------------
shall have been filed with the Secretary of State of the State of California and
shall be in full force and effect.
(e) Rights Agreement. The Company, the Schedule I Purchasers
----------------
and the Founders of the Company (as defined in the Rights Agreement) shall have
executed the Rights Agreement in the form attached as Exhibit C hereto, which is
---------
designated therein as the Second Amended and Restated Rights Agreement.
(f) [Intentionally omitted.]
(g) [Intentionally omitted.]
(h) Compliance Certificate. The Company shall have delivered
----------------------
a Certificate, executed by the President of the Company, dated the Closing Date,
certifying to the fulfillment of the conditions specified in subsections (a),
(b), (d) and (e) of this Section 5.1.
(i) SBA Side Letter. Reference is made to the letter
---------------
agreement dated January 13, 1997, between the Company and Chase Venture Capital
Associates, L.P. ("CVCA"), regarding Small Business Administration matters (the
"SBA Letter"). The Company acknowledges and agrees that the representations and
warranties of the Company set forth in the SBA Letter are true and correct as of
the date hereof with respect to the sale of the Series E Preferred Stock to CVCA
and the use of the proceeds therefrom, and the Company agrees to comply with the
covenants and obligations of the Company therein with respect to the sale of
such Series E Preferred Stock.
(j) Opinion of Counsel. The Schedule I Purchasers shall have
------------------
received an opinion from Seyfarth, Shaw, Xxxxxxxxxxx & Xxxxxxxxx, the Company's
counsel, in substantially the form attached hereto as Exhibit G.
---------
5.2 Conditions to Purchasers' Obligations at the Second Closing. The
-----------------------------------------------------------
obligation of each Additional Purchaser to purchase the Additional Preferred
Shares to be purchased by it at the Second Closing is subject to the fulfillment
to such Additional Purchaser's
14
satisfaction, on or prior to the Second Closing Date, of the following
conditions, any of which may be waived in accordance with the provisions of
Section 7.1 hereof:
(a) Representations and Warranties Correct, Performance of
------------------------------------------------------
Obligations. The representations and warranties made by the Company in Section
-----------
3 hereof shall be true and correct when made, and shall be true and correct in
all material respects on the Second Closing Date with the same force and effect
as if they had been made on and as of said date. The Company's business and
assets shall not have been adversely affected in any material way prior to the
Second Closing Date. The Company shall have performed in all material respects
all obligations and conditions herein required to be performed or observed by it
on or prior to the Second Closing Date.
(b) Consents and Waivers. The Company shall have obtained in
--------------------
a timely fashion any and all consents, permits and waivers necessary or
appropriate for consummation of the transactions contemplated by this Agreement.
(c) Compliance Certificate. The Company shall have delivered a
Certificate, executed by the President of the Company, dated the Closing Date,
certifying to the fulfillment of the conditions specified in subsections (a) and
(b) of this Section 5.2.
(d) Opinion of Counsel. The Additional Purchasers shall have
------------------
received an opinion from Seyfarth, Shaw, Xxxxxxxxxxx & Xxxxxxxxx, the Company's
counsel, in substantially the form attached hereto as Exhibit G.
---------
5.3 Conditions to Obligations of the Company at the First Closing.
-------------------------------------------------------------
The Company's obligation to sell and issue the Initial Preferred Shares at the
First Closing is subject to the fulfillment to the satisfaction of the Company
on or prior to the First Closing Date of the following conditions, any of which
may be waived by the Company:
(a) Representations and Warranties Correct. The
--------------------------------------
representations and warranties made by the Schedule I Purchasers in Section 4
hereof shall be true and correct when made, and shall be true and correct on the
First Closing Date with the same force and effect as if they had been made on
and as of said date.
(b) Conditions Fulfilled. The conditions set forth in
--------------------
subsections (b), (d) and (e) of Section 5.1 shall have been fulfilled.
5.4 Conditions to Obligations of the Company at the Second Closing.
--------------------------------------------------------------
The Company's obligation to sell and issue the Additional Preferred Shares at
the Second Closing is subject to the fulfillment to the satisfaction of the
Company on or prior to the Second Closing Date of the following conditions, any
of which may be waived by the Company:
(a) Representations and Warranties Correct. The
--------------------------------------
representations and warranties made by the Additional Purchasers in Section 4
hereof shall be true and correct when made, and shall be true and correct on the
Second Closing Date with the same force and effect as if they had been made on
and as of said date.
15
(b) Conditions Fulfilled. The conditions set forth in
--------------------
subsection (b) of Section 5.2 shall have been fulfilled.
(c) Rights Agreement. The Additional Purchasers shall have
----------------
executed a written instrument, in form and substance satisfactory to the
Company, the Founders and the Schedule I Purchasers, by which the Additional
Purchasers become parties to the Rights Agreement.
6. Affirmative Covenants of the Company. The Company hereby covenants and
------------------------------------
agrees as follows:
6.1 Financial Information. Until the consummation by the Company of
---------------------
a firm commitment public offering of securities with gross proceeds to the
Company of $20,000,000 or more and at a price per share equal to $7.00 or
higher, the Company will furnish to each Purchaser, so long as such Purchaser or
its permitted transferees (as described in Section 4.1(d)) own any of the
Preferred Shares or Common Shares issued upon conversion of the Preferred
Shares:
(i) as soon as practicable after the end of each fiscal year, and
in any event within 90 days thereafter, consolidated balance sheets of
the Company and its subsidiaries, if any, as at the end of such fiscal
year, and consolidated statements of operations and consolidated
statements of changes in financial position (or equivalent cash flow
statements if required by the Financial Accounting Standards Board) of
the Company and its subsidiaries, if any, for such year, prepared in
accordance with generally accepted accounting principles, all in
reasonable detail and certified by independent public accountants of
recognized national standing selected by the Company, and
(ii) as soon as practicable after the end of each month (except
the last month of the fiscal year), and in any event within 20 days
thereafter, consolidated balance sheets of the Company and its
subsidiaries, if any, as of the end of such month; and consolidated
statements of income (or equivalent cash flow statements if required
by the Financial Accounting Standards Board), for such month and for
the current fiscal year to date, prepared in accordance with generally
accepted accounting principles (except for required footnotes), all in
reasonable detail and signed, subject to changes resulting from year-
end audit adjustments, by the principal financial officer or chief
executive officer of the Company, and
(iii) as soon as practicable, but in no event later than 30 days
prior to the commencement of such fiscal year, an annual plan for each
fiscal year which shall include monthly capital and operating expense
budgets, cash flow statements, projected balance sheets and profit and
loss projections for each such month and for the end of the year,
itemized in such detail as the Board of Directors may reasonably
determine.
6.2 Conflicts of Interests. The Company shall use its best efforts
----------------------
to ensure that the Company's employees, during the term of their employment with
the Company, do not
16
engage in activities which would result in a conflict of interest with the
Company. The Company's obligations hereunder include, but are not limited to,
requiring that the Company's employees devote their primary productive time,
ability and attention to the business of the Company (provided, however, the
Company's employees may engage in other professional activity if such activity
does not materially interfere with their obligations to the Company), requiring
that the Company's employees enter into agreements regarding proprietary
information and confidentiality and inventions, and preventing the Company's
employees from engaging or participating in any business that is in competition
with the business of the Company.
6.3 Qualified Small Business. The Company shall use its best
------------------------
efforts to qualify as a "Qualified Small Business" as defined in Section 1202(d)
of the Code, and covenants that so long as the Preferred Shares are held by any
of CMG @Ventures, Chase Venture Capital Associates, L.P., The fl@tiron Fund LLC,
SOFTBANK Holdings Inc. or InnoCal, L.P. (or a transferee or assignee of any of
said Purchasers), it will use reasonable commercial efforts to cause the
Preferred Shares to qualify as Qualified Small Business Stock.
6.4 Proprietary Agreements. The Company will use its best efforts
----------------------
to prevent any employee from violating the confidentiality and proprietary
information agreement entered into between the Company and each of its
employees.
6.5 Payment of Dividends. The Company shall not pay dividends on or
--------------------
repurchase any shares of its Common Stock or Series C Preferred Stock so long as
the Preferred Shares are outstanding, except that the Company shall be entitled
to repurchase shares of its Common Stock and Series C Preferred Stock in
connection with the termination of an employee, director or consultant of the
Company or the proposed transfer by an employee, director or consultant of
shares of its Common Stock or Series C Preferred Stock, or pursuant to the terms
of the Rights Agreement.
6.6 Business Relationships. The Company shall not sell, license or
----------------------
enter into any business relationship, other than the purchase of goods or
services, with any Internet or World Wide Web technology or service provider
without the consent of the Company's Board of Directors.
6.7 Use of Proceeds. The Company shall use the proceeds from the
---------------
sale of the Preferred Shares for working capital.
6.8 Inspection. The Company shall permit each Purchaser, at such
----------
Purchaser's expense, to visit and inspect the Company's properties, to examine
its books of account and records and to discuss the Company's affairs, finances
and accounts with its officers, all at such reasonable times as may be requested
by the Purchaser; provided, however, that the Company shall not be obligated
pursuant to this Section 6.8 to provide access to any information which it
reasonably considers to be a trade secret or similar confidential information.
6.9 Reserve for Conversion Shares. The Company shall at all times
-----------------------------
reserve and keep available out of its authorized but unissued shares of Common
Stock, for the purpose of effecting the conversion of the Preferred Shares and
otherwise complying with the terms of this Agreement, such number of its duly
authorized shares of Common Stock as shall be sufficient to
17
effect the conversion of the Preferred Shares from time to time outstanding or
otherwise to comply with the terms of this Agreement. If at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of the Preferred Shares or otherwise to comply with the
terms of this Agreement, the Company will forthwith take such corporate action
as may be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes. The
Company will obtain any authorization, consent, approval or other action by or
make any filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Common Stock upon conversion of the Preferred Shares.
6.10 Key Person Insurance. The Company shall procure within 30 days
--------------------
following the First Closing and maintain in effect thereafter "key person" life
insurance policies, payable to the Company, on the life of Xxxxx Xxxxxxx (so
long as he remains an employee of the Company), in the amount of $2,000,000 (the
"Key Person Insurance"). The Company shall not cause or permit any assignment or
change in beneficiary and shall not borrow against any such policy. If requested
by Purchasers holding at least a majority of the outstanding Preferred Shares,
the Company will add one designee of the Purchasers as a notice parry for each
such policy and shall request that the issuer of each policy provide such
designee with ten (10) days' notice before such policy is terminated (for
failure to pay premiums or otherwise) or assigned or before any change is made
in the beneficiary thereof.
6.11 Transactions with Affiliates. Except for transactions
----------------------------
contemplated by this Agreement or as otherwise approved by the Board of
Directors, neither the Company nor any of its subsidiaries shall enter into any
transaction with any director, officer, employee or holder of more than 5% of
the outstanding capital stock of any class or series of capital stock of the
Company or any of its subsidiaries, member of the family of any such person, or
any corporation, partnership, trust or other entity in which any such person, or
member of the family of any such person, is a director, officer, trustee,
partner or holder of more than 5% of the outstanding capital stock thereof,
except for transactions on customary terms related to such person's employment.
6.12 Vesting and Repurchase of Reserved Employee Shares. Without the
--------------------------------------------------
unanimous approval of the members of the Compensation Committee (as defined in
Section 6.13 below), except for the previously granted Founders' Options and
options previously granted to Xxxxxxx Xxxxxxx and Xxxxxxx Xxxxxx to purchase
10,000 shares of Common Stock each, the Company shall not grant to any of its
employees, officers or directors options to purchase shares of Common Stock
unless (i) such options will become exercisable at a rate not in excess of 25%
per annum from the date of such grant and (ii) the shares issuable upon exercise
of such option are subject to repurchase, first by the Company and second, by
the holders of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock, rata, upon termination of
employment or upon the attempted transfer of such shares by a holder thereof.
6.13 Committees. The Company shall continue to maintain a
----------
Compensation Committee (the "Compensation Committee") and an Audit Committee
(the "Audit Committee") of the Board of Directors. Each of the Audit Committee
and the Compensation Committee shall at all times consist of three non-
management directors. The current members of the
18
Compensation Committee are Xxxx Xxxxxxx, Xxxxxxx Xxxxxx and Xxxxx Xxxxxxxxx. No
increase in compensation, bonuses or other remuneration shall be paid to, and no
capital stock of the Company shall be issued or granted to, any director or
executive officer of the company or any of its subsidiaries, without the
approval of the Compensation Committee. No employee stock option plan, employee
stock purchase plan, employee restricted stock plan or other employee stock plan
shall be established without the approval of the Compensation Committee. The
current members of the Audit Committee are Xxxxxxx Xxxxxx, Xxxxx Xxxxxxx and
Xxxxx Xxxxx. The Audit Committee shall select (subject to the approval of the
Board of Directors) and provide instructions to the Company's auditors and shall
approve the Company's annual audit prior to its issuance each year.
6.14 Board of Directors Meetings. The Company shall use its best
---------------------------
efforts to ensure that meetings of the Board of Directors are held at least six
times per year.
7. Miscellaneous.
-------------
7.1 Waivers and Amendments. With the written consent of the record
----------------------
holders of at least eighty percent (80%) of the Preferred Shares, the rights of
the holders of the Preferred Shares under this Agreement may be waived or
amended (either generally or in a particular instance), provided, however, that
no such waiver or amendment shall reduce the aforesaid proportion of Preferred
Shares, the holders of which are required to consent to any waiver or
supplemental agreement, without the consent of the record holders of all of the
Preferred Shares. Upon the effectuation of each such waiver or amendment, the
Company shall promptly give written notice thereof to the record holders of the
Preferred Shares who have not previously consented thereto in writing. Except to
the extent provided in this Section 7.1, this Agreement or any provision hereof
may be amended, waived, discharged or terminated only by a statement in writing
signed by the party against which enforcement of the amendment, waiver,
discharge or termination is sought.
7.2 Governing Law. This Agreement shall be governed in all
-------------
respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California.
7.3 Survival. The representations, warranties, covenants and
--------
agreements made herein shall survive the Closing of the transactions
contemplated hereby, notwithstanding any investigation made by the Purchasers.
All statements as to factual matters contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant hereto or in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder as of the dare of such
certificate or instrument.
7.4 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto. Without limiting the generality of the foregoing, all
representations, covenants and agreements benefiting the Purchasers shall inure
to the benefit of any and all subsequent holders from time ~0 rime of Preferred
Shares or Common Shares.
19
7.5 Entire Agreement. This Agreement and the other documents
----------------
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof and
they supersede, merge and render void every other prior written and/or oral
understanding or agreement among or between the parties hereto.
7.6 Notices, etc. All notices and other communications required or
------------
permitted hereunder shall be in writing and shall be delivered personally, via
facsimile, mailed by first class mail, postage prepaid, or delivered by courier
or overnight delivery, addressed (a) if to the Purchasers, at each of the
addresses listed on Schedule I or on the schedule to be prepared in respect of
the Additional Purchasers, as the case may be, or at such other or facsimile
number as the Purchasers shall have furnished to the Company in writing or (b)
if to the Company, at its address set forth at the beginning of this Agreement,
or at such other address as the Company shall have furnished to the Purchasers
in writing. Notices that are mailed shall be deemed received five (5) days after
deposit in the United States mail.
7.7 Severability. In case any provision of this Agreement shall be
------------
found by a court of law to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
7.8 Finder's Fees and Other Fees.
----------------------------
(a) The Company (i) represents and warrants that it has retained
no finder or broker in connection with the transactions contemplated by this
Agreement and, (ii) hereby agrees to indemnify and to hold the Purchasers
harmless from and against any liability for commission or compensation in the
nature of a finder's fee to any broker or other person or firm {and the costs
and expenses of defending against such liability or asserted liability) for
which the Company, or any of its employees or representatives, is responsible.
(b) Each Purchaser, severally and not jointly, (i) represents and
warrants that it has retained no finder or broker in connection with the
transactions contemplated by this Agreement and (ii) hereby agrees to indemnify
and ~0 hold the Company harmless from and against any liability for any
commission or compensation in the nature of a finder's fee to any broker or
other person or firm (and the costs and expenses of defending against such
liability or asserted liability) for which each of the Purchasers, or any of
their employees or representatives, are responsible.
7.9 Expenses. The Company and the Purchasers shall each bear their
--------
expenses and legal fees in connection with the consummation of this transaction.
7.10 Titles and Subtitles. The titles of the sections and subsections
--------------------
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
7.11 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
20
7.12 Delays or Omissions. No delay or omission to exercise any
-------------------
right, power or remedy accruing to the Company or to any holder of any
securities issued or to be issued hereunder shall impair any such right, power
or remedy of the Company or such holder, nor shall it be construed to be a
waiver of any breach or default under this Agreement, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any delay or omission to exercise any right, power or remedy or any waiver
of any single breach or default be deemed a waiver of any other right, power or
remedy or breach or default theretofore or thereafter occurring. All remedies,
either under this Agreement, or by law otherwise afforded to the Company or any
holder of any securities issued or to be issued hereunder, shall be cumulative
and not alternative.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GEOCITIES
By: /s/Xxxxx Xxxxxxx
------------------------------
Name: Xxxxx Xxxxxxx
Title: CEO
CMG @ VENTURES
By: /s/Xxxxx Xxxxxx
------------------------------
Name: Xxxxx Xxxxxx
Title: Managing Partner
SOFTBANK Holdings Inc.
By: /s/Xxxxxxx Xxx
------------------------------
Name: Xxxxxxx Xxx
Title: Vice President
CHASE VENTURE CAPITAL
ASSOCIATES, L.P.
By:Chase Capital Partners, L.P.
its General Partner
By: /s/Xxxxxx Xxxxxxx
------------------------------
Name: Xxxxxx Xxxxxxx
Title: General Partner
The fl@tiron Fund LLC
By: /s/Xxxxxx Xxxxxxx
------------------------------
Name: Xxxxxx Xxxxxxx
Title: Managing Partner
21
INNOCAL, L.P., a Delaware limited
partnership
By:InnoCal Associates, L.P.,
a Delaware limited partnership
By: /s/Xxxxx X. Xxxxxxx
------------------------------
Name: Xxxxx X. Xxxxxxx
Title: General Partner
INTEL CORPORATION
By: /s/Xxxxxx Xxxxxxx
------------------------------
Name: Xxxxxx Xxxxxxx
Title: Vice President and Treasurer
22
