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Exhibit 10.18
NET.GENESIS CORP.
SERIES F CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
This Series F Convertible Preferred Stock Purchase Agreement is entered
into on this 10th day of June, 1999 by and among net.Genesis Corp., a Delaware
corporation (the "Company"), and the Persons listed on Exhibit 2.01A hereto, as
amended (each such Person being hereinafter sometimes referred to individually
as a "Purchaser" and all such Persons being hereinafter sometimes referred to
collectively as the "Purchasers").
In consideration of the mutual promises, representations, warranties,
covenants and conditions set forth in this Agreement, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01 Certain Definitions. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Agreement" shall mean this Series F Convertible Preferred Stock
Purchase Agreement, as from time to time amended and in effect between the
parties hereto.
"Board of Directors" shall mean the then present members of the Board
of Directors of the Company.
"Charter" shall mean the Fifth Amended and Restated Certificate of
Incorporation of the Company in the form of Exhibit 2.01B hereto, as amended
from time to time.
"Closing" shall have the meaning assigned to that term in Section
2.03(a) hereto.
"Company" shall mean and include net.Genesis Corp., a Delaware
corporation, and its successors and assigns.
"Company's Auditors" shall mean the firm of independent public
accountants employed by the Company from time to time to conduct its annual
audit, which firm shall be a "Big Five" accounting firm or such other accounting
firm acceptable to the holders of at least fifty-five (55%) percent of the
Purchased Shares.
"Common Stock" shall mean (a) the Company's Common Stock, $.001 par
value per share, as authorized on the date of this Agreement, (b) any other
capital stock of any class or classes (however designated) of the Company,
authorized on or after the date hereof, the holders of which shall have the
right either to all or to a share of the balance of current dividends and
liquidating distributions after the preference of the Preferred Stock, or the
holders of which shall ordinarily, in the absence of contingencies, be entitled
to vote for the election of a majority of directors of the Company (even
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though the right so to vote has been suspended by the happening of such a
contingency), and (c) any other securities into which or for which any of the
securities described in (a) or (b) may be converted or exchanged pursuant to a
plan of recapitalization, reorganization, merger, sale of assets or otherwise.
"Consolidated" when used with reference to any term defined herein
shall mean that term as applied to the accounts of the Company and its
Subsidiaries consolidated in accordance with generally accepted accounting
principles after eliminating intercompany items and minority interests.
"Conversion Shares" shall have the meaning assigned to that term in
Section 2.01 hereof.
"Counsel to the Company" shall mean Xxxxx, Xxxx & Xxxxx LLP.
"ERISA" shall have the meaning assigned to that term in Section 4.12
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, or any
similar federal statute, and the rules and regulations of the Securities and
Exchange Commission (or of any other Federal agency then administering the
Exchange Act) thereunder, all as the same shall be in effect at the time.
"Indebtedness" shall mean all obligations, contingent and otherwise,
which should, in accordance with generally accepted accounting principles
consistently applied, be classified upon the obligor's balance sheet as
liabilities, but in any event including, without limitation, liabilities secured
by any mortgage or security interest on real or personal property owned or
acquired subject to such mortgage or security interest, whether or not the
liability secured thereby shall have been assumed, and also including, without
limitation, (a) all guaranties, endorsements and other contingent obligations in
respect of Indebtedness of others, whether or not the same are or should be so
reflected in said balance sheet, except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business, and (b) the present value of any lease payments due under
leases required to be capitalized in accordance with applicable Statements of
Financial Accounting Standards, determined by discounting all such payments at
the interest rate determined in accordance with applicable Statements of
Financial Accounting Standards.
"Issue Price" shall mean $3.32, which is the price per share at which
the Purchased Shares are being issued hereunder.
"Key Employee" shall mean and include, the President and the Chief
Executive Officer, any Vice-President, the Treasurer and the Chief Financial
Officer of the Company or any Subsidiary, or any person who is not an officer of
the Company or any Subsidiary and is in charge of one or more of the following
functions: sales, marketing, production, or engineering and technical
development or any other position or employee so designated by the Board of
Directors of the Company.
"Person" shall mean an individual, corporation, partnership, joint
venture, trust, limited liability company, unincorporated organization, or
similarly entitled, or a government or any agency or political subdivision
thereof.
"Preferred Stock" shall mean the Series F Convertible Preferred Stock,
$.001 par value, of the Company, the rights, preference and other terms and
conditions of which are set forth in Exhibit 2.01B hereto.
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"Purchased Shares" shall have the meaning assigned to that term in
Section 2.01 hereof.
"Purchasers" shall mean and include the Persons listed on Exhibit 2.01A
hereto.
"Purchasers' Special Counsel" shall mean Xxxxxx, Godward LLP.
"Qualified Public Offering" shall mean and include the closing of a
firmly underwritten public offering pursuant to an effective registration
statement under the Securities Act covering the offer and sale of Common Stock
for the account of the Company from which the aggregate net proceeds to the
Company are at least $20,000,000 and the price per share of such Common Stock is
not less than $6.64 (such amount to be equitably adjusted whenever there is a
stock split, combination, stock dividend, reclassification or similar event
affecting the Common Stock).
"Securities Act" shall mean the Securities Act of 1933, or any similar
Federal statute, and the rules and regulations of the Securities and Exchange
Commission (or of any other Federal agency then administering the Securities
Act) thereunder, all as the same shall be in effect at the time.
"Series A Preferred Stock" shall mean the Series A Preferred Stock,
$.001 par value, of the Company, the rights and privileges of which are set
forth in the Charter.
"Series B Preferred Stock" shall mean the Series B Preferred Stock,
$.001 par value, of the Company, the rights and privileges of which are set
forth in the Charter.
"Series C Preferred Stock" shall mean the Series C Preferred Stock,
$.001 par value, of the Company, the rights and privileges of which are set
forth in the Charter.
"Series D Preferred Stock" shall mean the Series D Preferred Stock,
$.001 par value, of the Company, the rights and privileges of which are set
forth in the Charter.
"Series E Preferred Stock" shall mean the Series E Preferred Stock,
$.001 par value, of the Company, the rights and privileges of which are set
forth in the Charter.
"Stock Option Plans" shall mean (i) the 1995 Stock Option Plan of the
Company presently providing for the issuance of, or grant of options to
purchase, up to 4,000,000 shares of Common Stock on the date hereof to officers,
directors, employees of and consultants to the Company and any amendment thereto
and/or (ii) any other plan, and any amendment thereto, providing for the
issuance of capital stock or options to purchase capital stock to any such
Persons.
"Stockholder Agreement" shall mean that certain Amended and Restated
Stockholder Agreement dated as of November 14, 1995, as amended, by and among
Xxxxx Xxxxxxxx, Xxxx Xxxxxxx, Xxxxxxx Xxxxxx, the persons set forth on Exhibits
A and B thereto, the signatories to any amendment thereto and the Company.
"Subsidiary" or "Subsidiaries" shall mean any corporation, 50% or more
of the outstanding voting stock of which shall at the time be owned by the
Company or by one or more Subsidiaries, or any other entity or enterprise, 50%
or more of the equity of which shall at the time be owned by the Company or by
one or more Subsidiaries.
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"Wholly-Owned Subsidiary" or "Wholly-Owned Subsidiaries" shall mean any
corporation, 100% of the outstanding voting stock of which shall at the time be
owned by the Company or by one or more Wholly-Owned Subsidiaries, or any other
entity or enterprise, 100% of the equity of which shall at the time be owned by
the Company or by one or more Wholly-Owned Subsidiaries.
1.02 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles, and all other financial data submitted pursuant to this Agreement
shall be prepared and calculated in accordance with such principles.
ARTICLE II
PURCHASE, SALE AND TERMS OF SHARES
2.01 The Purchased Shares. The Company has authorized the issuance and
sale of up to 6,627,000 shares (the "Purchased Shares") of the previously
authorized but unissued shares of its Preferred Stock to the Persons and in the
respective amounts set forth in Exhibit 2.01A hereto. The designation, rights,
preferences and other terms and conditions relating to the Preferred Stock shall
be as set forth in Exhibit 2.01B hereto. Any shares of Common Stock issuable
upon conversion of the Purchased Shares, and such shares when issued, are herein
referred to as the "Conversion Shares".
2.02 Reservation of Shares. The Company has authorized and reserved and
covenants to continue to reserve, free of preemptive rights and other
preferential rights, a sufficient number of its previously authorized but
unissued shares of Common Stock to satisfy the rights of conversion of the
holders of the Purchased Shares.
2.03 Purchase and Sale of Purchased Shares.
(a) The Closing. The Company agrees to issue and sell to the
Purchasers, and, subject to and in reliance upon the representations,
warranties, terms and conditions of this Agreement, the Purchasers,
severally but not jointly, agree to purchase at the Issue Price all,
and not less than all, of the Purchased Shares for the purchase prices
and in the amounts set forth opposite their respective names in Exhibit
2.01A hereto. Such purchase and sale shall take place at a closing (the
"Closing") to be held at the offices of Xxxxx, Xxxx & Xxxxx LLP Xxx
Xxxx Xxxxxx Xxxxxx, Xxxxxx, XX 00000, on June 10, 1999 at 10:00 a.m. or
on such other date and at such time as may be mutually agreed upon by
the Company and a majority in interest of the Purchasers. At the
Closing the Company will issue and deliver certificates, dated as of
the Closing, evidencing the Purchased Shares sold at such Closing
registered in the name of Purchasers or their nominees, all in the
amounts set forth opposite their respective names in Exhibit 2.01A
hereto against delivery of checks payable to the order of the Company
or transfer by wire transfer in immediately available federal funds to
the account of the Company in payment of the full purchase price for
the Purchased Shares.
(b) Use of Proceeds. The Company agrees to use the proceeds
from the issuance and sale of the Purchased Shares to fund operating
losses, to purchase capital equipment necessary for Company operations,
and for general working capital of the Company.
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2.04 Representations by the Purchasers. All representations and
warranties of the Purchasers in this Section 2.04 are made severally and not
jointly as follows:
(a) Each Purchaser represents that it is acquiring the
Purchased Shares and any Conversion Shares for its own account and for
the purpose of investment and not with a view to distribution or resale
thereof; subject, nevertheless, to the condition that the disposition
of the property of each Purchaser shall at all times be within its
control, subject to applicable law and contractual restrictions. Each
Purchaser which is not an individual further represents and warrants
that it was not organized for the specific purpose of acquiring the
Purchased Shares. Each Purchaser further represents and warrants that
such Purchaser is (or, in the case of a partnership, it and all of its
partners are) an "accredited investor" for purposes of the Securities
Act (unless otherwise indicated on Exhibit 2.01A hereto) and Regulation
D thereunder and warrants that it has knowledge and experience in
financial and business matters such that it is capable of evaluating
the merits and risks of the investment to be made hereunder, and that
such Purchaser is financially able to undertake the risks involved in
such an investment. Each Purchaser further acknowledges that it has had
a full opportunity to request from the Company and to review and has
received all information which it deems relevant in making an informed
and knowledgeable decision to purchase the Purchased Shares being
purchased by it hereunder. Each Purchaser understands and agrees that
(i) the Purchased Shares and the Conversion Shares have not been
registered under the Securities Act by reason of their issuance in a
transaction exempt from the registration requirements of the Securities
Act pursuant to Section 4(2) or Regulation D promulgated thereunder,
(ii) the Purchased Shares and the Conversion Shares must be held
indefinitely unless a registration statement covering such shares is
effective under the Securities Act or unless an exception from
registration under such Act is available, (iii) the Purchased Shares
and the Conversion Shares will bear a legend to that effect and (iv)
the Company will make a notation on its transfer books to such effect.
Each Purchaser not an Accredited Investor makes the representations in
this Section 2.04 except as to his status as an Accredited Investor.
(b) The principal office or residence of each Purchaser, and
the place at which the decision to participate in this Agreement and
the transactions contemplated hereby was made is located at the address
appearing below such Purchaser's name on Exhibit 2.01A hereto. Each
Purchaser which is not an individual and whose address appearing below
such Purchaser's name on Exhibit 2.01A is located in Massachusetts
further represents that it is an "institutional buyer" as that term is
used in Section 402 (b) (8) of the Massachusetts Uniform Securities
Act.
(c) Each Purchaser represents and warrants that this Agreement
and all transactions contemplated hereunder have been duly authorized
by all necessary action on its part and that this Agreement has been
duly executed and delivered by it or on its behalf and is a valid and
binding agreement enforceable against it in accordance with its terms.
(d) Each Purchaser represents that no person, firm or
corporation has or will have, as a result of any act or omission by
such Purchaser, any right, interest or valid claim against the Company
for any commission, fee or other compensation as a finder or broker, or
in any similar capacity, in connection with the transactions
contemplated by this Agreement.
ARTICLE III
CONDITIONS TO PURCHASERS' OBLIGATIONS
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The obligation of each Purchaser to purchase and pay for the Purchased
Shares at the Closing is subject to the following conditions:
3.01 Representations and Warranties. Each of the representations and
warranties of the Company set forth in Article IV hereof, shall have been true
in all material respects when made and shall be true in all material respects as
of the date of the Closing.
3.02 Documentation at Closing. The Purchasers shall have received prior
to or at the Closing all of the following, each in form and substance reasonably
satisfactory to the Purchasers and Purchasers' Special Counsel, and all of the
following events shall have occurred prior to or simultaneous with the Closing
hereunder.
(a) A copy of all Charter documents of the Company certified
by the Secretary of State of Delaware; a certified copy of the
resolutions of the Board of Directors and the stockholders of the
company evidencing approval of this Agreement, the restatement of the
Charter, the authorization for issuance of the Purchased Shares and
other matters contemplated hereby; a certified copy of the By-laws of
the Company; and certified copies of all documents evidencing other
necessary corporate or other action and governmental approvals, if any,
with respect to this Agreement and the Purchased Shares, in each case
certified by the Secretary or Assistant Secretary.
(b) An opinion of Counsel to the Company as to matters set
forth in Exhibit 3.02B hereto. In rendering such opinion, such counsel
may require and, to the extent they deem necessary or appropriate, may
rely upon, representations and warranties made in certificates of
officers of the Company and representations and warranties of the
Company and Purchasers contained herein.
(c) A certificate of the Secretary or an Assistant Secretary
of the Company stating the names of the officers of the Company
authorized to sign this Agreement, the certificates for the Purchased
Shares and the other documents or certificates to be delivered pursuant
to this Agreement by the Company or any of its officers, together with
the true signatures of such officers.
(d) A certificate from a duly authorized officer of the
Company stating that the representations and warranties of the Company
contained in Article IV hereof or otherwise made by the Company in
writing in connection with the transactions contemplated hereby are
true and correct in all material respects and that all conditions
required to be performed by the Company prior to or at the Closing have
been performed in all material respects, and that no condition or event
has occurred or is continuing or will result from the execution and
delivery of this Agreement or the issuance of the Purchased Shares
which constitutes an event of default or would constitute an event of
default but for the requirement that notice be given or time elapse or
both.
(e) The Second Amended and Restated Stockholder Agreement in
the form and substance set forth in Exhibit 3.02E hereto (the "Second
Amended and Restated Stockholder Agreement"), shall have been executed
by the parties named therein.
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(f) Employee Confidentiality, Non-competition and Intellectual
Property Assignment Agreements in or substantially in the form and
substance set forth in Exhibit 3.02F hereto shall have been executed by
the Company and each Key Employee.
(g) The Third Amended and Restated Registration Rights
Agreement in the form and substance set forth in Exhibit 3.02G hereto
shall have been executed by the Company and the parties named therein.
(h) The Board of Directors of the Company shall consist of not
more than eight (8) members, as specified in the Second Amended and
Restated Stockholder Agreement.
(i) The Company shall have executed and delivered to
BankAmerica Ventures a Size Status Declaration on SBA Form 480 and an
Assurance of Compliance on SBA Form 652, and shall have provided to
BankAmerica Ventures the information requested by BankAmerica Ventures
necessary for the preparation by BankAmerica Ventures of a Portfolio
Financing Report on SBA Form 1031.
(j) The Company shall have performed all its other covenants
and agreements in all material respects set forth in this Agreement.
3.03 Consents, Waivers, etc.. Prior to the Initial Closing, the Company
shall have obtained all material consents or waivers, if any, necessary to
execute and deliver this Agreement, issue the Purchased Shares and to carry out
the transactions contemplated hereby and thereby, and all such consents and
waivers shall be in full force and effect. All corporate and other action and
governmental filings necessary to effectuate the terms of this Agreement, the
Purchased Shares and other agreements and instruments executed and delivered by
the Company in connection herewith shall have been made or taken, except for any
post-sale filing that may be required under federal and state securities laws,
as to which filing the Company agrees to make promptly after such Closing. In
addition to the documents set forth above, the Company shall have provided the
Purchasers any other information or copies, of documents that they may
reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES BY THE COMPANY
The Company represents and warrants as follows:
4.01 Organization and Standing of the Company. The Company is a duly
organized and validly existing corporation in good standing under the laws of
the jurisdiction in which it is organized and has all requisite corporate power
and authority for the ownership and operation of its properties and for the
carrying on of its business as now conducted. The Company is duly licensed or
qualified and in good standing as a foreign corporation authorized to do
business in The Commonwealth of Massachusetts and in each other jurisdiction in
which the nature of the business transacted by it or the character of the
properties owned or leased by it requires such licensing or qualification,
unless the failure to so qualify does not and will not have a material adverse
effect on the business operations or financial condition of the Company.
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4.02 Corporate Action. The Company has all necessary corporate power
and has taken all corporate action required for the due authorization, execution
and delivery of this Agreement and any other agreements and instruments executed
in connection herewith and for the due authorization, issuance and delivery of
the Purchased Shares, and this Agreement and any such other agreements are
valid, binding and enforceable against the Company in accordance with their
terms. Sufficient shares of authorized but unissued Common Stock of the Company
have been reserved by appropriate corporate action in connection with the
prospective conversion of the Purchased Shares. The issuance of the Purchased
Shares, and the issuance of the Conversion Shares upon the conversion of the
Purchased Shares, are not subject to preemptive or other preferential rights, or
similar statutory or contractual rights, either arising pursuant to any
agreement or instrument to which the Company is a party or which are otherwise
binding upon the Company.
4.03 Governmental Approvals. All authorizations, consents, approvals,
licenses, exemptions from or filings, or registrations with any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, necessary for, or in connection with, the offer, issuance,
sale, execution or delivery by the Company, or for the performance by it of its
obligations under, this Agreement, the agreements referred to in Article III
hereof or the Purchased Shares shall have been made prior to, and shall be
effective as of, the Initial Closing (except for any post-sale filings that may
be required under federal or state securities laws, which will be filed by the
Company in a timely manner).
4.04 Litigation. There is no litigation or governmental proceeding or
investigation pending or, to the knowledge of the Company, threatened against
the Company affecting any of its properties or assets, or, to the knowledge of
the Company, after due inquiry, against any officer, Key Employee or principal
stockholder of the Company that might result, either in any case or in the
aggregate, in any material adverse change in the business, operations, affairs
or condition of the Company, or any of its properties or assets, or pending or,
to the knowledge of the Company, threatened against the Company that might call
into question the validity of this Agreement, the issuance of the Purchased
Shares, or any action taken or to be taken pursuant hereto or thereto. Neither
the Company nor, to the knowledge of the Company, after due inquiry, any
officer, Key Employee or principal stockholder of the Company or its
Subsidiaries, is in default with respect to any order, writ, injunction, decree,
ruling or decision of any court, commission, board or other government agency
that might result, either in any case or in the aggregate, in any material
adverse change in the business, operations, affairs or condition of the Company
or any of its properties or assets. The foregoing sentences include, without
limiting their generality, actions pending or threatened (or any basis therefor
known to the Company) involving the prior employment of employees of the Company
and the use in any of the Company's business of any information or techniques
allegedly proprietary to any of their former employers.
4.05 Certain Agreements of Officers and Employees.
(a) To the best of the Company's knowledge and belief, after
due inquiry, no employee of the Company is in violation of any material
term of any employment contract, patent disclosure agreement,
non-competition agreement, or any other contract or agreement or any
restrictive covenant relating to the right of any such officer or
employee to be employed by the Company because of the nature of the
business conducted by the Company or relating to the use of trade
secrets or proprietary information of others, and to the best of the
Company's knowledge and belief, the continued employment of the
Company's officers and employees do not subject the Company or the
Purchasers to any liability arising from such agreements.
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(b) To the Company's knowledge, no officers of the Company,
nor any Key Employees of the Company whose termination, either
individually or in the aggregate, would have a material adverse effect
on the Company, has any present intention of terminating his employment
with the Company.
(c) The Company is not a party to any collective bargaining
agreement and, to the best of its knowledge, after due inquiry, there
have been no pending labor problems involving collective disputes or
disturbances with any group of employees and, to the knowledge of the
Company, there have been no attempts to organize its employees by any
union or similar association.
4.06 Compliance with Other Instruments. The Company is in compliance in
all respects with the terms and provisions of this Agreement and of its charter
documents, as amended, and by-laws, as amended, and in all material respects
with the terms and provisions of each material mortgage, indenture, lease,
agreement and other instrument relating to obligations of the Company, and, to
the best of the Company's knowledge, of all material judgments, decrees,
governmental orders, statutes, rules or regulations by which it is bound or to
which its properties or assets are subject. Neither the execution and delivery
of this Agreement or the Purchased Shares, nor the consummation of any
transaction contemplated hereby or thereby, has constituted or resulted in or
will constitute or result (with or without the giving of notice or passage of
time) in a default or violation of any material term or provision in any of the
foregoing documents or instruments.
4.07 Federal Reserve Regulations. The Company is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
securities (within the meaning of Regulation G of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of the Purchased Shares
will be used to purchase or carry any margin security or to extend credit to
others for the purpose of purchasing or carrying any margin security or in any
other manner which would involve a violation of any of the regulations of the
Board of Governors of the Federal Reserve System.
4.08 Title to Assets. The company has good and marketable title in fee
to such of its fixed assets as are real property, and good title to all of its
other assets now carried on its books, including those reflected in the most
recent balance sheet of the Company described below in Section 4.10, or acquired
since the date of such balance sheet (except personal property disposed of since
said date in the ordinary course of business) free of any mortgages, pledges,
charges, liens, security interests or other encumbrances, except those indicated
in Exhibit 4.08 hereto and except for liens for current taxes not yet due and
payable and minor imperfections of title, if any, not material in nature or
amount and not materially detracting from the value or impairing the use of the
property subject thereto or impairing the operations of the Company. The Company
enjoys peaceful and undisturbed possession under all leases under which it is
operating and is in compliance in all material respects with all such leases,
and all said leases are valid and subsisting and in full force and effect.
4.09 Patents and Intellectual Property Rights. The Company owns or has
a valid right, or will be able to obtain at reasonable cost standard in the
industry the right, to use the patents, patent rights, licenses, trade secrets,
trademarks, trademark rights, trade names or trade name rights or franchises,
copyrights, inventions, and intellectual property rights material to the conduct
of its businesses as now operated (the "Company's Intellectual Property"); and
no claim is pending to the effect that the operations of the Company, and to the
Company's knowledge, the operations of the Company will not, conflict with valid
patents, patent rights, licenses, trade secrets, trademarks, trademark rights,
trade names or trade name rights or franchises, copyrights, inventions, and
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intellectual property rights of others. Except as set forth in Exhibit 4.09
hereto, and except for the payment of the customary fees for the right to use
commercially available software, the Company has no obligation to compensate any
Person for the use of any of the Company's Intellectual Property and has granted
to no Person any license or other rights to use in any manner any of the
Company's Intellectual Property, whether requiring the payment of royalties or
not.
4.10 Financial Information. The Company has furnished to the Purchasers
the audited balance sheet of the Company as of December 31, 1998 and the related
audited statements of income and statement of cash flows of the Company for the
twelve month period ended December 31, 1998 and the statement of changes in
redeemable preferred stock and stockholders' equity for the period ended
December 31, 1998. The Company has also furnished to the Purchasers the
unaudited balance sheet of the Company as of April 30, 1999 and the related
unaudited statements of operations and cash flows of the Company for four months
ended April 30, 1999, and the unaudited statement of stockholders' equity of the
Company for the period ended April 30, 1999. All such financial statements have
been prepared in accordance with generally accepted accounting principles
consistently applied (except that such unaudited financial statements do not
contain all of the required footnotes or period end adjustments not material in
the aggregate) and fairly present the financial position of the Company as of
December 31, 1998 and April 30, 1999, respectively, and the results of its
operations and cash flows for the year ended December 31, 1998 and the four
month period ended April 30, 1999, respectively. The Company does not have, and
has no reasonable grounds to know of, any material liability, contingent or
other, not adequately reflected in or reserved against in the aforesaid
financial statements. Since April 30, 1999 there has not been, except as set
forth in Exhibit 4.10, and except for changes in the ordinary course of business
which have not been materially adverse:
(a) Any material change in the assets, liabilities, financial
condition, or operations of the Company from that reflected in such
financial statements;
(b) Any change in the contingent obligations of the Company by
way of guaranty, endorsement, indemnity, warranty, or otherwise;
(c) Any damage, destruction, or loss, whether or not covered
by insurance, materially and adversely affecting the properties or
business of the Company;
(d) Any waiver or compromise by the Company of a valuable
right or of a material debt owed to it;
(e) Any loans made or promised by the Company to its
employees, officers, or directors other than travel advances made in
the ordinary course of business;
(f) Any increases in excess of ten (10%) percent in the
compensation of any of the Company's employees, officers, or directors
(but not including any options granted to any such persons);
(g) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
(h) Any issuance or sale by the Company of any shares of its
Common Stock or other securities other than option grants pursuant to
the Company's 1995 Stock Option Plan and option exercises pursuant to
such Stock Option Plan.
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(i) Any other event or condition of any character that has
materially and adversely affected the Company's business; or
(j) Any agreement or commitment by the Company to do any of
the things described in this Section 4.10.
4.11 Taxes. The Company has prepared and filed within the time
prescribed by law all federal, state and other tax returns required by law to be
filed by it, has paid all taxes shown to be due and all additional assessments,
including penalties and interest, received by it, and adequate provisions have
been made and are reflected in the Company's financial statements for all
current taxes and other charges to which the Company is subject and which are
not currently due and payable. None of the state, local or federal income tax
returns of the Company have been audited by, or are currently under audit by,
any state or local tax authority or by the Internal Revenue Service. The Company
knows of no additional assessments or adjustments pending or threatened for any
period. There are no tax liens upon the assets or property of the Company. The
Company has not granted any extension to any taxing authority of the limitation
period during which any tax liability may be asserted. All monies required to be
withheld by the Company from employees or collected from customers for income
taxes, social security and unemployment insurance taxes and sales, excise and
use taxes, and the portion of any such taxes to be paid by the Company to
governmental agencies or set aside in accounts for such purpose have been so
paid or set aside, or such monies have been approved, reserved against and
entered upon the books and financial statements of the Company. The Company does
not have in effect any tax election or consent for federal income tax purposes
under Sections 108, 341(f), 471, 1017, 1033 or 4977 of the Internal Revenue Code
of 1986, as amended.
4.12 ERISA. Except as set forth on Exhibit 4.12, the Company has no
employee benefit plan subject to ERISA; all such employee benefit plans listed
on Exhibit 4.12 are in full force and effect and in compliance with applicable
laws, and there are no funding deficiencies thereunder.
4.13 Contracts; Commitments. Except as set forth in Exhibit 4.13
hereto, the Company is not a party to (i) any employment or consulting contracts
(other than employment at will) (ii) or any contracts or commitments (or group
of related contracts or commitments) involving more than $50,000 or having a
term (including renewals or extensions optional with another party) of more than
one (1) year from the date thereof; all of the contracts and commitments listed
on Exhibit 4.13 are in full force and neither the Company nor, to the best
knowledge of the Company, any other party to any such contracts or commitments
is in default of any material covenant or obligation thereunder.
4.14 Transactions with Affiliates. There are no loans, leases, royalty
agreements or other continuing transactions between the Company, its
Subsidiaries, any of its or their customers or suppliers and any officer or
director of the Company (other than on-going employment obligations to Xxxxx
Xxxx) or any Person owning five (5%) percent or more of any class of capital
stock of the Company or any member of such officer, director or stockholder's
immediate family or any corporation or other entity controlled by such officer,
director or stockholder or a member of such officer, director or stockholder's
immediate family.
4.15 Assumptions or Guaranties of Indebtedness of other Persons. The
Company has not assumed, guaranteed, endorsed or otherwise become directly or
contingently liable on (including, without limitation, liability by way of
agreement, contingent or otherwise, to purchase, to provide funds for payment,
to supply funds to or otherwise invest in any debtor or otherwise to assure any
creditor against loss), any Indebtedness of any other Person.
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4.16 Investments in Other Persons. Other than advances in the ordinary
course of business to employees, which are not in the aggregate material, the
Company has not made any loan or advance to any Person which is outstanding on
the date of this Agreement, nor is it committed or obligated to make any such
loan or advance, nor does the Company have any Subsidiaries or own any capital
stock, assets comprising the business of, obligations of, or any interest in,
any Person except as set forth on Exhibit 4.16.
4.17 Disclosure. This Agreement, the financial statements described in
Section 4.10, and any other agreement, document, certificate or written
statement provided to the Purchasers by or on behalf of the Company are true and
correct in all material respects. There is no fact within the knowledge of the
Company which has not been disclosed herein or in writing by the Company to the
Purchasers, the disclosure of which is necessary to make the statements made
herein and therein not materially misleading and which materially adversely
affects, or in the future in the Company's opinion has a substantial possibility
to, insofar as the Company can now foresee, materially adversely affect the
business, properties, assets or condition, financial or other, of the Company.
Without limiting the foregoing, the Company has no knowledge or belief that
there exists any patent, invention, device, application or principle which would
materially adversely affect the condition, financial or otherwise, or the
business or operations of the Company.
4.18 Registration Rights. Except as provided in the Third Amended and
Restated Registration Rights Agreement set forth in Exhibit 3.02G hereto, no
Person has the right to demand or other rights to cause the Company to file any
registration statement under the Securities Act relating to any securities of
the Company, presently outstanding or that may be subsequently issued, or any
right to participate in any such registration statement. Except as provided in
the Second Amended and Restated Stockholder Agreement set forth in Exhibit 3.02E
hereto, the Company is not a party or subject to any agreement or understanding,
and, to the best of the Company's knowledge, there is no agreement or
understanding between any persons and/or entities, which affects or relates to
the voting or giving of written consents with respect to any security of the
Company.
4.19 Securities Act of 1933. The Company has complied and will comply
with all applicable federal or state securities laws in connection with the
issuance and sale of the Purchased Shares. Neither the Company nor anyone acting
on its behalf has offered or will offer to sell the Purchased Shares or similar
securities to, or solicit offers with respect thereto from, or enter into any
preliminary conversations or negotiations relating thereto with, any Person, so
as to bring the issuance and sale of the Purchased Shares under the registration
provisions of the Securities Act.
4.20 No Brokers or Finders. No Person has or will have, as a result of
the transactions contemplated by this Agreement, any right, interest or valid
claim against or upon the Purchasers or the Company for any commission, fee or
other compensation as a finder or broker other than commissions due Xxxxxxxxx &
Xxxxx, Inc. pursuant to a letter agreement dated February __, 1999 (the "H&Q
Commission"); and the Company agrees to indemnify and hold the Purchasers
harmless against any such commissions, fees or other compensation, including the
H&Q Commission.
4.21 Capitalization; Status of Capital Stock. At the Closing, the
Company will have a total authorized capitalization consisting of 41,686,887
shares, including 24,000,000 shares of Common Stock, $.001 par value per share,
of which 1,773,884 shares are issued and outstanding; 200,000 shares of Series
A-1 Convertible Preferred Stock, $0.001 par value per share, of which 200,000
shares are issued and outstanding; 101,430 shares of Series A-2 Convertible
Preferred Stock, $0.001 par
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value per share, of which 101,430 shares are issued and outstanding; 624,000
shares of Series A-3 Convertible Preferred Stock, $0.001 par value per share, of
which 624,000 shares are issued and outstanding; 776,718 shares of Series B
Convertible Preferred Stock, $0.001 par value per share, of which 776,717 shares
are issued and outstanding; and 3,000,000 shares of Series C Convertible
Preferred Stock, $0.001 par value per share of which 2,928,316 shares are issued
and outstanding; 5,900,000 shares of Series D Convertible Preferred Stock,
$0.001 par value per share, of which 5,899,999 are issued and outstanding;
279,739 shares of Series E Convertible Preferred Stock, $.001 par value, of
which none are outstanding; and 6,805,000 shares of Series F Convertible
Preferred Stock, $.001 par value, of which none are issued and outstanding. A
complete list of the currently issued and outstanding shares of capital stock of
the Company and the names in which such shares are registered is set forth in
Exhibit 4.21 hereto. All of the outstanding shares of capital stock of the
Company have been duly authorized and reserved for issuance, are validly issued
and are fully paid and nonassessable. All shares of capital stock issuable upon
exercise of outstanding options and warrants have been duly authorized and, when
issued in accordance with the terms of such options and warrants, will be
validly issued, and fully paid and nonassessable. The Purchased Shares, when
issued and delivered in accordance with the terms hereof, and the Conversion
Shares, when issued and delivered upon conversion of the Purchased Shares, will
be duly authorized, validly issued and fully paid and nonassessable. Except as
set forth in this Agreement and Exhibit 4.21 hereto, there are no options,
warrants or rights to purchase shares of capital stock or other securities
authorized, issued or outstanding, nor is the Company obligated in any other
manner to issue shares of its capital stock or other securities. Except as set
forth in Exhibit 4.21 hereto, there are no restrictions on the transfer of
shares of capital stock of the Company other than those imposed by relevant
state and federal securities laws. Except as set forth in the Stockholder
Agreement, no holder of any security of the Company is entitled to preemptive or
similar statutory or contractual rights, either arising pursuant to any
agreement or instrument to which the Company is a party or that are otherwise
binding upon the Company. The offer and sale of all shares of capital stock or
other securities of the Company issued before the Closing complied with or were
exempt from registration or qualification under all federal and state securities
laws. No securities of the Company have been issued prior hereto at a price
which would result in an increase in the number of shares of Common Stock
issuable upon conversion of any outstanding shares of any series or subseries of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or
Series D Preferred Stock pursuant to the provisions of Article Fourth, A, 5(e)
through (i) of the Charter.
4.22 Insurance. Exhibit 4.22 hereto contains a summary of the insurance
policies currently maintained by the Company. The Company has not suffered the
cancellation of any of its insurance, nor has the Company been denied insurance
which it has applied for or requested.
4.23 Books and Records. The books of account, ledgers, order books,
records and documents of the Company accurately and completely reflect all
material information relating to the business of the Company, the nature,
acquisition, maintenance, location and collection of each of its assets, and the
nature of all transactions giving rise to the obligations or accounts receivable
of the Company.
4.24 Environmental Matters. The Company has not generated, used,
stored, treated or disposed of any Hazardous Substances (as defined below) in
connection with the operations of its business, other than cleaning and/or
office supplies required in the ordinary course of the Company's operations. To
the Company's knowledge, the Company, the operation of its business, and any
real property that the Company owns, leases or otherwise occupies or uses (the
"Premises") are in material compliance with all applicable Environmental Laws
(as defined below) . For purposes of this Section,
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the term "Environmental Laws" shall mean any federal, state or local law,
ordinance or regulation pertaining to the protection of human health or the
environment, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Sections 9601, et seq.,
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Sections 11001, et
seq., and the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901,
et seq. For purposes of this Section, the term "Hazardous Substances" shall
include oil and petroleum products, polychlorinated biphenyls and any other
material classified as hazardous or toxic under any Environmental Laws.
4.25 Small Business Concern. The Company, together with its
"affiliates" (as that term is defined in Section 121.103 of Title 13 of the Code
of Federal Regulations (the "Federal Regulations")), is a "small business
concern" within the meaning of the Small Business Investment Act of 1958, as
amended (the "Small Business Act"), and Part 121 of Title 13 of the Federal
Regulations. The information delivered by the Company to BankAmerica Ventures on
SBA Forms 480, 652 and 1031 of the Small Business Administration (the "SBA")
delivered in connection herewith is accurate and complete. The Company is not
ineligible for financing by any SBIC Investor pursuant to Section 107.720 of
Title 13 of the Federal Regulations. The Company acknowledges that BankAmerica
Ventures is a Federal licensee under the Small Business Act.
4.26 Qualified Small Business Stock. As of the Closing: (i) the Company
will be an eligible corporation as defined in Section 1202(e)(4) of the Internal
Revenue Code of 1986, as amended (the "Code"), (ii) the Company will not have
made any purchases of its own stock during the one-year period proceeding the
Closing having an aggregate value exceeding 5% of the aggregate value of all its
stock as of the beginning of such period and (iii) the Company's aggregate gross
assets, as defined by Code Section 1202(d)(2), at no time between its inception
and through the Closing have exceeded or will exceed $50 million, taking into
account the assets of any corporations required to be aggregated with the
Company in accordance with Code Section 1202(d)(3).
4.27 Investment Company. The Company represents and warrants that it is
not an "investment company" or controlled by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended (the "1940 Act"). In
addition, the Company agrees that it shall not become an "investment company" or
a company "controlled" by an "investment company", within the meaning of the
1940 Act. In the event that the Company breaches the foregoing, the Company
shall forthwith notify the Purchasers and shall take immediate corrective action
to remedy such breach.
ARTICLE V
COVENANTS OF THE COMPANY
5.01 Affirmative Covenants of the Company Other Than Reporting
Requirements. Without limiting any other covenants and provisions hereof, the
Company covenants and agrees that, until a Qualified Public Offering, so long as
fifty percent (50%) of the Purchased Shares remain outstanding, it will perform
and observe the following covenants and provisions and will cause each
Subsidiary to perform and observe such of the following covenants and provisions
as are applicable to such Subsidiary:
(a) Payment of Taxes and Trade Debt. Pay and discharge all
taxes, assessments and governmental charges or levies imposed upon it
or upon its income or profits or business, or upon any properties
belonging to it, prior to the date on which penalties attach thereto,
and all lawful claims, which, if unpaid, might become a lien or charge
upon any properties of the
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Company, provided that the Company shall not be required to pay any
such tax, assessment, charge, levy or claim that is being contested in
good faith and by appropriate proceedings if the Company shall have set
aside on its books and shall have funded, in accordance with generally
accepted accounting principles, adequate reserves with respect thereto.
Pay when due, or in conformity with customary trade terms, all lease
obligations, all trade debt, and all other Indebtedness incident to the
operations of the Company, except such as are being contested in good
faith and by appropriate proceedings if the Company shall have set
aside on its books and shall have funded, in accordance with generally
accepted accounting principles, adequate reserves with respect thereto.
(b) Maintenance of Insurance. Maintain with responsible and
reputable insurance companies or associations insurance (i) in such
amounts and covering such risks as is usually carried by companies of
similar size engaged in similar businesses and owning similar
properties in the same general areas in which the Company operates, and
(ii) a three year life insurance on Xxxxx Xxxx in the amount of
$1,000,000, payable to the Company.
(c) Preservation of Corporate Existence. Preserve and maintain
its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified as
a foreign corporation in each jurisdiction in which such qualification
is necessary or desirable in view of its business and operations or the
ownership of its properties. Preserve and maintain all material
licenses and other rights to use patents, processes, licenses,
trademarks, trade names, inventions, intellectual property rights or
copyrights owned or possessed by it and necessary to the conduct of its
business.
(d) Compliance with Laws. Comply in all material respects with
all applicable laws, rules, regulations and orders of any governmental
authority, noncompliance with which could materially adversely affect
its business or condition, financial or otherwise, except non-
compliance being contested in good faith through appropriate
proceedings so long as the Company shall have set up and funded
sufficient reserves, if any, required under generally accepted
accounting principles with respect to such items.
(e) Keeping of Records and Books of Account. Keep adequate
records and books of account, in which complete entries will be made in
accordance with generally accepted accounting principles consistently
applied, reflecting all financial transactions of the Company, and in
which, for each fiscal year, all proper reserves for depreciation,
depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection within its business shall be made.
(f) Maintenance of Properties, etc. Maintain and preserve all
of its properties necessary or useful in the proper conduct of its
business, in good repair, working order and condition, ordinary wear
and tear excepted, and from time to time make all necessary and proper
repairs, renewals, replacements, additions and improvements thereto.
Comply with the provisions of all material leases to which the Company
is a party or under which the Company occupies property so as to
prevent any loss or forfeiture thereof or thereunder.
(g) New Developments. Cause technological or other proprietary
developments, inventions, discoveries or improvements by the Company's
employees to be fully documented in accordance with the prevailing
industrial professional standards, cause all Key Employees and
consultants of the Company to execute appropriate confidentiality,
nondisclosure, patent
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and technology assignment agreements to the Company and, where possible
and appropriate, to file and prosecute United States and foreign patent
and copyright applications relating to and protecting such developments
on behalf of the Company.
(h) Employee Confidentiality, Non-competition and Intellectual
Property Assignment. As a condition to employment, cause each Key
Employee now or hereafter employed by the Company promptly to execute
an agreement substantially in the form of Exhibit 3.02F hereto or in a
form approved by the Board of Directors.
(i) Visitation Rights. Permit any Purchaser which holds no
less than 250,000 Purchased Shares (for which purpose Purchasers
designated as "affiliates" on Schedule 2.01A will be aggregated and
considered one Purchaser) (so long as each such Purchaser holds not
less than 50% of its Purchased Shares and/or Conversion Shares) or any
legal or financial representative thereof periodically upon reasonable
notice during normal business hours upon reasonable notice to examine
the books and records of the Company at the Company's premises and
permit such Purchasers (or any general partners thereof) to meet, and
to discuss the business affairs, finances and accounts of the Company
with any of its officers or directors and independent accountants.
(j) Board of Directors; Indemnification. The Company shall use
its best efforts to hold at least four (4) meetings of the Board each
year and at least once every ninety (90) days, except as otherwise
agreed to by the Board. The Charter or by-laws of the Company shall at
all times provide for the indemnification of the Board to the full
extent provided by the law of the jurisdiction in which the Company is
organized. The Company shall promptly reimburse in full each director
of the Company who is not an employee of the Company for all his
reasonable out- of-pocket expenses incurred in attending each meeting
of the Board of Directors of the Company or any committee thereof.
5.02 Reporting Requirements. Until the occurrence of a Qualified Public
Offering, the Company will furnish (x) all the following to each Purchaser that
holds not less than 250,000 Purchased Shares and/or Conversion Shares (for which
purpose Purchasers designated as "affiliates" on Schedule 2.01A will be
aggregated and considered one Purchaser):
(a) As soon as available and in any event within one hundred
twenty (120) days after the end of each fiscal year of the Company, a
copy of the annual audit report for such year for the Company and its
Subsidiaries, including therein consolidated balance sheets of the
Company and its Subsidiaries as of the end of such fiscal year and
consolidated statements of income and retained earnings and of changes
in financial position of the Company and its Subsidiaries for such
fiscal year, setting forth in each case in comparative form the
corresponding figures for the preceding fiscal year, together with
supporting notes thereto, all duly certified by the Company's Auditors;
(b) As soon as available and in any event within thirty (30)
days after the end of each month, unaudited consolidated balance sheets
of the Company and its Subsidiaries as of the end of such month and
unaudited consolidated statements of income and retained earnings and
of changes in financial position of the Company and its Subsidiaries
for the month and the fiscal period ending with such month, setting
forth in each case in comparative form the corresponding figures for
(i) the corresponding periods of the prior fiscal year, and (ii) the
budget for such periods, all in reasonable detail and duly certified
(subject to year-end audit
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adjustments, none of which shall be material, individually or in the
aggregate) by the chief financial officer of the Company on the
Company's behalf as having been prepared in accordance with generally
accepted accounting principles consistently applied.
(c) As soon as available and in any event within forty-five
(45) days after the end of each fiscal quarter of the Company,
unaudited consolidated balance sheets of the Company and its
Subsidiaries as of the end of such quarter and unaudited consolidated
statements of income and retained earnings and of changes in financial
position of the Company and its Subsidiaries for the period ending with
such quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding period of the prior fiscal
year, all in reasonable detail and duly certified (subject to year-end
audit adjustments none of which shall be material, individually or in
the aggregate) by the chief financial officer on behalf of the Company
as having been prepared in accordance with generally accepted
accounting principles consistently applied.
(d) At the time of delivery of each annual statement, a
certificate, executed by the Company's Auditors (but only if they will
provide such a certificate without any additional fee beyond their
normal audit charges; otherwise, such certificate will be provided on
behalf of the Company by the Company's chief financial officer) stating
that they have caused Section 5.01(a) (insofar as it relates to payment
of federal and state income taxes) hereof to be reviewed and have no
knowledge of any default by the Company or any Subsidiary in the
performance or observance of any of the provisions of this Agreement or
the Purchased Shares or, if such Company's Auditors have such
knowledge, specifying such default and the nature thereof;
(e) Promptly after receipt, a copy of any written report
submitted to the Company by the Company's Auditors in connection with
an annual or interim audit of the books of the Company and its
Subsidiaries made by such Auditors;
(f) Promptly after the commencement thereof, notice of all
actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign, materially affecting the Company and the
Subsidiaries when considered as a whole of the type described in
Section 4.04 hereof;
(g) Prior to the commencement of each fiscal year of the
Company, a copy of the business plan (including development, operating
and strategic plans and objectives) and month by month budget for the
upcoming fiscal year (the "Annual Plan");
(h) Promptly after sending, making available, or filing the
same, all reports and financial statements that the Company or any
Subsidiary sends or makes available to the stockholders of the Company
or the Securities and Exchange Commission; and
(i) All other information respecting the business, properties
or the condition or operations, financial or otherwise, of the Company
or any of its Subsidiaries that any Purchaser may from time to time
reasonably request.
5.03 Confidentiality. Any confidential information obtained by any
holder of the Purchased Shares or Conversion Shares pursuant to this Agreement
shall be treated as confidential and shall not be disclosed to a third party
without the prior written consent of the Company, except that any Purchaser
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may disclose such information to its investment advisers, attorneys,
accountants, consultants and other professionals to the extent necessary to
obtain their services in connection with such Purchaser's investment in the
Company, and to its officers, directors, shareholders and/or partners, and
except further that such information shall not be deemed confidential for the
purpose of enforcement of this Agreement or valuation of the Purchased Shares or
Conversion Shares and said information shall not be deemed confidential after it
becomes publicly known through no fault of the recipient. Notwithstanding the
foregoing, a holder of Purchased Shares shall be authorized to disclose
confidential information of the Company pursuant to the requirement or request
of a governmental body with jurisdiction, to the extent such disclosure is
required by a valid and applicable statute, rule, regulation, order, decree,
judgment or similar act, and notice is given by such holder of Purchased Shares
to the Company of any such requirement or request, which notice is adequate to
enable the Company to seasonably seek an appropriate protective order or
exemption from such requirement or request. Notwithstanding the foregoing, a
holder of Purchased Shares may disclose confidential information of the Company
to a governmental regulatory authority having jurisdiction over such holder
incident to an investigation or examination of such holder's affairs by such
regulatory authority, without providing the notice to the Company required by
the preceding sentence, in circumstances where such notice cannot practicably be
provided.
5.04 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 Purchased 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 effect the
conversion of the Purchased 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 Purchased 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 Purchased Shares.
5.05 Small Business Administration Matters.
(a) The proceeds from the issuance and sale of the Series F
Preferred Stock will be used by the Company for working capital and
other general corporate purposes, which may include, without
limitation, one or more of the following as determined by the Company
in its sole discretion: administration, marketing obtaining capital and
other equipment and sales. The Company will provide to each Investor
identified as a licensed Small Business Investment Company on Exhibit
5.05 hereto (each an "SBIC Investor"), and to the Small Business
Administration (the "SBA"), reasonable access to the Company's books
and records for the purpose of confirming the use of proceeds by the
Company.
(b) For a period of one (1) year following the Closing, the
Company will not change the nature of its business activity if such
change would render the Company "ineligible" as provided in Section
107.720 of Title 13 of the Code of Federal Regulations (the "Federal
Regulations").
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(c) So long as any SBIC Investor holds any securities of the
Company, the Company will at all times comply with the
non-discrimination requirements of Sections 112, 113 and 117 of Title
13 of the Federal Regulations.
(d) The Company will promptly provide each SBIC Investor who
so requests in writing to the Company, specifying in such written
request the nature of such required information in reasonable detail,
such information as such SBIC Investor requests, in order to permit
such SBIC Investor to comply with such SBIC Investor's obligations
under the Small Business Act of 1958, as amended (the "Small Business
Act"), and the regulations promulgated thereunder and related thereto.
Any submission of financial information pursuant to this Section 5.05
shall be under cover of a certificate executed by the Company's
President, Chief Executive Officer, Chief Financial Officer or
Treasurer, certifying that such information (i) relates to the Company,
(ii) to the best of the Company's knowledge is accurate and (iii) if
applicable, has been audited by the Company's independent auditors.
(e) For purposes of this Agreement, a "Regulatory Problem"
means any set of facts or circumstances wherein both (i) it has been
asserted by any governmental regulatory agency with jurisdiction over
an SBIC Investor that such SBIC Investor is not entitled to hold, or
exercise any significant right with respect to equity securities of the
Company, including the Series A Preferred Stock or the currently
unissued Common Stock of the Company into which the Series A Preferred
Stock is convertible and (ii) such SBIC Investor reasonably determines
that such assertion is meritorious and that the solutions proposed by
such SBIC Investor are necessary to cure such regulatory violation by
such SBIC Investor. If an SBIC Investor determines that it has a
Regulatory Problem, it will so notify the Company and the other
Investors as soon as practicable in writing. After giving such notice,
such SBIC Investor will have the right to transfer its Series F
Preferred Stock, and/or the shares of Common Stock issuable upon
conversion of such Series F Preferred Stock, without regard to any
restrictions on transfer set forth in this Agreement or any other
agreement identified herien (collectively, the "Related Agreements") or
in the Company's Certificate of Incorporation or Bylaws, other than
restrictions related to securities laws, provided that the transferee
agrees to become a party to this Agreement and/or to such relevant
Related Agreements, and acknowledges that such securities will become
again, after such transfer to such transferee, bound by all then
relevant provisions relating to further transfer thereof by transferee,
and the Company will take all such actions as are reasonably requested
by such SBIC Investor in order to (i) effectuate and facilitate any
transfer by such SBIC Investor of any securities of the Company then
held by such SBIC Investor to any person designated by such SBIC
Investor, (ii) permit such SBIC Investor (or any of its affilites) to
exchange all or any portion of any voting security of the Company then
held by such SBIC Investor on a share-for-share basis for shares of a
nonvoting security of the Company as will be created by action of the
Board, and, to the extent required by law, its stockholders, which
nonvoting security will be identical in all respects to the voting
security exchanged for it, except that it will be nonvoting and will be
convertible into a voting security on such terms, solely as required to
allow such SBIC Investor to comply with then-applicable regulatory
considerations, as are requested by such SBIC Investor in good faith,
and (iii) amend, and use its reasonable efforts to cause such other
relevant parties, including without limitation, the Company's
stockholders, to take such actions as are legally required in order to
amend, this Agreement, the Related Agreements, the Company's
Certificate of Incorporation, the Company's Bylaws and related
agreements and instruments in order to effectuate and reflect the
foregoing. The parties to this Agreement (other than the Company) will
vote all of the Company's voting securities held by them, and will
execute and deliver all
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documents and instruments requested by them by the Company, in favor of
and to effect such amendments and actions.
ARTICLE VI
MISCELLANEOUS
6.01 No Waiver; Cumulative Remedies. No failure or delay on the part of
any Purchaser, or any other holder of the Purchased Shares or Conversion Shares
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy hereunder. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
6.02 Amendments, Waivers and Consents. Changes in or additions to this
Agreement may be made, and compliance with any covenant or provision herein or
therein set forth may be omitted or waived, if the Company shall obtain consent
thereto in writing from Persons holding an aggregate of at least sixty (60%)
percent of the issued and outstanding and issuable Conversion Shares (treating
for this purpose all Purchased Shares as if converted to Conversion Shares) and
shall, in each such case, deliver copies of such consent in writing to any
holders who did not execute the same; provided, however, that no such consent
shall be effective to reduce the percentage of the consent of the holders of the
Conversion Shares which is required under this Section nor to affect or alter
the rights under Section 5.01(i) and 5.02 hereof of any Purchaser who purchases
at least 250,000 Purchased Shares at the Closing pursuant to this Agreement,
without the consent of such party (so long as it holds any Purchased Shares
and/or Conversion Shares). Any waiver or consent may be given subject to
satisfaction of conditions stated therein and any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
6.03 Management Compensation. The Company will not grant increases in
the compensation of any officer or other member of senior management or issue
any stock options without authorization by the Board of Directors.
6.04 Addresses for Notices, etc. All notices, requests, demands and
other communications provided for hereunder shall be in writing (including
telegraphic communication) and sent by registered or certified mail (return
receipt requested), by Federal Express, DHL or other guaranteed overnight
delivery service, or by telex or telegraph, or by facsimile transmission or
delivered to the applicable party at the addresses indicated below:
If to the Company: net.Genesis Corp.
000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxx, President
With a Copy to: Xxxxx, Xxxx & Xxxxx LLP
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxx, Xx., Esq.
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If to the Purchasers: at the addresses set forth under their
respective names on Exhibit 2.01A hereto.
If to any other holder
of the Purchased Shares
or Converted Shares: at such holder's address for notice as set
forth in the register maintained by the
Company;
or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery with
the terms of this Section.
All notices, requests, consents and other communications hereunder shall be
deemed to have been received (i) if by hand, at the time of the delivery thereof
to the receiving party at the address of such party set forth above or as so
designated, (ii) if made by telex, telecopy or facsimile transmission, at the
time that receipt thereof has been acknowledged by electronic confirmation or
otherwise, (iii) if sent by overnight courier, on the next business day
following the day such notice is delivered to the courier service, or (iv) if
sent by registered or certified mail, on the fifth business day following the
day such mailing is made.
6.05 Costs, Expenses and Taxes. The Company agrees to pay at the
Closing the reasonable fees and out-of-pocket expenses of (i) Purchasers'
Special Counsel in preparing and documenting this Agreement and the agreements
referred to herein not to exceed $25,000 and (ii) legal counsel, independent
public accountants and other outside experts reasonably retained by the
Purchasers in connection with the amendment or enforcement of this agreement,
the Purchased Shares, the Conversion Shares and other instruments and documents
to be delivered hereunder or thereunder. In addition, the Company shall pay any
and all stamp and other taxes payable or determined to be payable in connection
with the execution and delivery of this Agreement, the Purchased Shares, the
Conversion Shares and other instruments and documents to be delivered hereunder
or thereunder and agrees to save the Purchasers harmless from and against any
and all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and filing fees.
6.06 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the Company and the Purchasers and their respective
successors and assigns, except that the Company shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Purchasers obtained in accordance with Section 6.02 hereof and
the rights and interests of the Purchasers shall be assignable without the
consent of the Company to any assignee.
6.07 Survival of Covenants, Representations and Warranties. All
covenants, representations and warranties made in this Agreement, the Purchased
Shares, or any other instrument or document delivered in connection herewith or
therewith, shall survive the execution and delivery hereof or thereof, provided
that such representations and warranties shall survive for a period of three (3)
years after the date hereof.
6.08 Prior Agreements. This Agreement constitutes the entire agreement
between the parties and supersedes any prior understandings or agreements
concerning the purchase of Series F Preferred Stock.
6.09 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the substantive laws of The Commonwealth of Massachusetts
(without regard to conflict of laws provisions).
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6.10 Headings. Article, section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
6.11 Sealed Instrument. This Agreement is executed as an instrument
under seal.
6.12 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
6.13 Further Assurances. From and after the date of this Agreement,
upon the reasonable request of the Purchasers, the Company and each Subsidiary
shall execute and deliver such instruments, documents and other writings as may
be necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement and the Purchased Shares.
6.13 Adjustment to Stock. Any reference in this Agreement to a
particular number of shares of the Company's Common Stock or Preferred Stock, of
any class or series, shall be automatically adjusted to account for a stock
dividend, stock split or in connection with a combination of shares,
recapitalization, merger or consolidation or reorganization of the Company.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
COMPANY:
ATTEST: NET.GENESIS CORP.
By: /s/ Xxxx Xxxxx By: /s/ Xxxxxxxx Xxxx
------------------ ---------------------
Name: Xxxx Xxxxx Name: Xxxxx Xxxx
Title: Secretary Title: President
(see counterpart signature pages)
-23-
24
Series F Convertible Preferred Stock Purchase Agreement
*Counterpart Signature Page*
INVESTORS:
XXXXXXX RIVER PARTNERSHIP VII
By:/s/ Xxx Xxxxxxxxxxx
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
BESSEMER VENTURE PARTNERS IV L.P.
By: Deer IV & Co. L.L.C.,
General Partner
By:/s/ Xxxxxx Xxxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxxx, Manager
BVP IV SPECIAL SITUATIONS L.P.
By: Deer IV & Co. L.L.C.,
General Partner
By:/s/ Xxxxxx Xxxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxxx, Manager
BESSEC VENTURES IV L.P.
By: Deer IV & Co. L.L.C.,
General Partner
By:/s/ Xxxxxx Xxxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxxx, Manager
/s/ Xxxxxx Xxxxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxxxx
-24-
25
Series F Convertible Preferred Stock Purchase Agreement
*Counterpart Signature Page*
/s/ Xxxxxx Xxxxxxxx
------------------------------------------------
Xxxxxx X. Xxxxxxxx, attorney-in-fact signing for
those designated below by the "*" notation
*Xxxxxxx X. Xxxxxx
*Brimstone Island Co. L.P.
*G. Xxxxx Xxxxxxxx
*Xxxxxx X. Xxxxxxx
*Xxxxx X. Xxxxxx
*Xxxx X. Xxxx
*Xxxxxx X. Xxxxxxxxxxx
*Xxxxxx X. Xxxxxxx
*Xxxxxx X. Xxxxx
*Xxxxxxx X. Xxxxx
*Xxxx X. Xxxxxxx
*Belisarius Corporation
*Xxxx X. XxxXxxxxx
*Xxxxxx X. Xxxxxxxxx
*Xxxxxx Xxxx
*Xxxxxx X.X. Xxxxxxxx
*Xxxxxx X. Xxxxxxxxxx
*Xxxxxxx Corporation
XXXXXXXXX & XXXXX
By:/s/ Xxxxxx Xxxxxx
----------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
BAYVIEW INVESTORS
By: BancBoston Xxxxxxxxx Xxxxxxxx
General Partner
By: illegible
-----------------------------------------
Authorized Signatory
-25-
26
Series F Convertible Preferred Stock Purchase Agreement
*Counterpart Signature Page*
ONELIBERTY FUND IV
By: OneLiberty Partners IV LLC
By:/s/ Xxxxxxx X. Xxxxx
-----------------------------------
Xxxxxxx X. Xxxxx, Manager
ONELIBERTY ADVISORS IV LP
By: OneLiberty Partners IV LLC
By:/s/ Xxxxxxx X. Xxxxx
-----------------------------------
Xxxxxxx X. Xxxxx, Manager
ST. XXXX VENTURE CAPITAL V, LLC
By:
By: illegible
---------------------------------
Its
ST. XXXX VENTURE CAPITAL AFFILIATES
FUND I, LLC
By: St. Xxxx Venture Capital, Inc.
its Manager
By: illegible
---------------------------------
Its
/s/ Xxxxxxxxx X. Xxxx
---------------------------------------------
Xxxxx Xxxx
-26-
27
Series F Convertible Preferred Stock Purchase Agreement
*Counterpart Signature Page*
XXXXXXX XXXXXX 1999 TRUST
By: illegible
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
-27-
28
Series F Convertible Preferred Stock Purchase Agreement
*Counterpart Signature Page*
BankAmerica Ventures
By:/s/ Xxxx X'Xxxxxxxx
------------------------------------------
Name: Xxxx X'Xxxxxxxx
----------------------------------------
Title: Principal
---------------------------------------
GS CAPITAL PARTNERS
By
-------------------------------------------
NEXUS GROUP
By
-------------------------------------------
Boston Milennia Partners Limited Partnership
By: Xxxx Partners Limited Partnership
By: illegible
------------------------------------------
Name:_____________________, General Partner
Boston Milennia Associates Partnership
By: illegible
------------------------------------------
Name:_____________________, General Partner
-28-
29
Series F Convertible Preferred Stock Purchase Agreement
*Counterpart Signature Page*
Xxxxxxxx Communications and Information Fund, Inc.
By:
-----------------------------------------------
Xxxxx-Xxxxx, Inc.
By: illegible
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
Xxxxxxxxx & Xxxxx Employee Venture Fund, X.X. XX
By: H&Q Venture Management, L.L.C.,
Its General Partner
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
Comdisco, Inc.
By: illegible
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
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Series F Convertible Preferred Stock Purchase Agreement
*Counterpart Signature Page*
The Xxxxxxx Sachs Group, Inc.
By: illegible
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
Xxxxx Xxxxxx Xxxx 0000, X.X.
By: Stone Street 1999 Corp.,
Its General Partner
By: illegible
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
Xxxxxx Xxxxxx Xxxx 0000, X.X.
By: Stone Street 1999 Corp.,
Its General Partner
By: illegible
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
-30-
