ULTRACARD, INC.
STOCK PURCHASE, VOTING AND CANCELLATION RIGHTS AND REDEMPTION
AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into as of this 30th
day of September, 1999, by and between UPGRADE INTERNATIONAL CORPORATION, a
Florida corporation, whose principal place of business is 0000-Xxxxxx Xxxxxx,
Xxxxx 000, Xxxxxxx, Xxxxxxxxxx 206-903-3116, facsimile number (000) 000-0000
("Buyer"), and ULTRACARD, INC., a Nevada corporation (the "Company") whose
principal place of business is 0000 X. Xxxxxx Xxx., Xxx. 000, Xxxxxxxx,
Xxxxxxxxxx 00000, facsimile number (000) 000-0000 (collectively, the "Parties").
WHEREAS, the Company is desirous of issuing to Buyer, and Buyer is desirous
of receiving from the Company One Million (1,000,000) shares of Company common
stock, par value $0.001 per share (the "Common Stock"), upon and subject to the
terms, limitations, restrictions and conditions, and for the consideration
hereinafter set forth; and
WHEREAS, the Company is also desirous of issuing to Buyer Seven Hundred
Twenty-Nine Thousand Ninety-Three (729,093) shares of Common Stock (the "Option
Stock") in consideration of that certain option agreement between Buyer and the
Company, dated January 30, 1998, and including its various amendments on
February 13, 1998, August 4, 1998, February 2, 1999 and August 31, 1999 (the
"Option Agreement") under which agreement Buyer has exercised it option to
acquire fifty percent of the issued and outstanding voting stock of the Company;
and
WHEREAS, the Company has adopted the 1999 Ultracard, Inc. Stock Option Plan
(the "SOP"), effective September 30, 1999, pursuant to which One Million
(1,000,000) shares of Common Stock have been reserved from the Company's
authorized but unissued Common Stock, which stock can be issued to the grantees
(the "Grantees") of the SOP upon exercise of options issued thereunder (all
Common Stock issued to the Grantees prior to the effectiveness of a registration
statement covering the initial public offering ("IPO") of the Company's Common
Stock (which results in net proceeds to the Company of no less than $35,000,000)
under the Securities Act of 1933, as amended (the "Act"), (the "Pre-IPO Newly
Issued Common Stock"); and
WHEREAS, the Parties desire to set forth their agreement with respect to
voting, redemption and other terms, conditions and restrictions in connection
with the Common Stock to be issued to Buyer pursuant to this Agreement, and
including in connection with the SOP, the IPO and the Option Agreement, as the
case may be.
NOW, THEREFORE, in consideration of the Option Agreement, the covenants
herein contained, and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the Parties agree as follows:
1. TRANSACTION
1.1 Issuance of Stock. Concurrently with the execution of this
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Agreement, and in consideration of the Option Agreement, the Company shall issue
to Buyer One Million (1,000,000) shares of Common Stock (the "SOP Stock")
subject to the terms, conditions, restrictions and limitations of this
Agreement. To the extent any adjustment is made to the number of shares of
Common Stock reserved for issuance under the SOP pursuant to Section 8 of the
SOP or by amendment of the SOP, a corresponding and proportionate adjustment
shall be made to the SOP stock ("SOP Adjustment").
1.2 Issuance of Option Shares. Concurrently with the execution of
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this Agreement, and also in consideration of the Option Agreement, the Company
shall issue to the Buyer the Option Stock, subject to the Cancellation Right (as
defined in paragraph 1.3 below).
1.3 Right to Cancel Option Stock. The Parties hereby agree that
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for the period beginning with the date of this Agreement and ending upon an IPO,
if the Company redeems, repurchases, and/or through rescission or otherwise,
reacquires and cancels and if its issued and outstanding Common Stock, Buyer
shall surrender to the Company the same number of shares of the Option Stock for
cancellation (the "Cancellation Right").
1.4 Closing. The issuance and delivery of the SOP Stock and the
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Option Stock (the "Closing") shall take place concurrently with the execution of
this Agreement (the "Closing Date").
1.5 Voting, Dividend and Distribution Rights with respect to the
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Stock. Until the IPO, the Buyer will only vote the number of shares of the SOP
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Stock equal to the number of shares of Common Stock issued as a result of
exercises of stock options granted under the SOP ("Pre IPO Newly Issued Common
Stock") outstanding at the time of such vote, and Buyer shall not be entitled to
any dividends or distributions with respect to any other shares of the SOP
Stock.
1.6 Redemption. Upon effectiveness of the IPO, the Company may at
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its option redeem from the Buyer for the Per Share Purchase Price the number of
shares of the SOP Stock equal to One Million (1,000,000) less the number of
Pre-IPO Newly Issued Common Stock; provided, however, that no SOP Stock may be
redeemed in respect of issued and outstanding options to purchase Common Stock
pursuant to the SOP until such options have expired unexercised. The redemption
of shares of the SOP Stock under this paragraph 1.6 shall be consummated by
delivery of written notice by the Company to Buyer, including the number of
shares to be redeemed (the "Redemption Notice"). Certificates representing all
of such shares (duly endorsed for transfer), shall be delivered in accordance
with the Redemption Notice.
1.7 Restrictive Legend. The respective restrictions imposed upon
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the SOP Stock and the Option Stock pursuant hereto, and pursuant to applicable
securities laws, or otherwise, will be referenced in a "legend" to be placed
upon the stock certificate(s) evidencing the SOP Stock and the Option Stock (the
"Stock Certificates").
1.8 Actions at Closing. Concurrent with the execution of this
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Agreement, the Company shall issue the SOP Stock and the Option Stock to Buyer
by executing and delivering a Stock Certificate in the name of Buyer which
evidences ownership of the SOP Stock and the Option Stock, containing the
respective Restrictive Legend(s) on each of the SOP Stock and the Option Stock,
and noting such ownership on the stock register of the Company.
1.9 Reaffirmation of Anti-Dilution Warranty and the Pending
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Commitment. Pursuant to the Option Agreement, the Company warranted that from
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the date the Buyer acquired all of the Optioned Shares (as defined in the Option
Agreement) until the date of any initial public offering of the shares of the
Company, the Company would not take any action or in any way allow or cause the
Buyer's ownership of the issued and outstanding shares of the Company to become
diluted so as to result in the Buyer owning less than fifty percent (50%) of all
of the issued and outstanding voting stock of the Company (the "Anti-Dilution
Warranty"), and in the event that the Company required additional financing
prior to an initial public offering of the Company's shares, the Buyer agreed to
provide sufficient debt financing on mutually agreeable terms or, at Buyer's
election, in the form of equity financing on mutually agreeable terms or a
combination of debt and equity on mutually agreeable terms (the "Additional
Financing"). The Company hereby reaffirms the Anti-Dilution Warranty. The
Company has advised Buyer that it anticipates its interim, short-term financing
requirements for its on-going staffing, FF&B, and development and research
expenses through the end of its fiscal year 2000 to be approximately Twenty
Million Dollars ($20,000,000). Buyer hereby reaffirms its firm commitment to
provide (or cause to be provided, as the case may be) the Company with
sufficient additional Financing to meet the Company's funding requirements
though the IPO, and the Company reaffirms its agreement to dedicate such portion
of the proceeds of the IPO to repay, if required, the Additional Financing. If
after written notice of a funding requirement by the Company to Buyer, Buyer is
unable (notwithstanding its firm commitment) to satisfy such funding requirement
within sixty (60) days (a "Funding Deficiency"), the Anti-Dilution Warranty
shall not apply to any subsequent stock issuances by the Company. If a Funding
Deficiency has occurred and the Company seeks equity funding not provided by or
arranged by Buyer (the "Deficiency Offering"), Buyer shall have the right to
purchase up to fifty percent (50%) of the Deficiency Offering on the same terms
and conditions as the Deficiency Offering is offered to any third party
("Participation Right"). Buyer shall have five (5) day from notice of the
Deficiency Offering to exercise its Participation Right.
2. INVESTMENT REPRESENTATIONS
Buyer hereby represents and warrants that:
(a) Buyer has been advised that the SOP Stock and the Option Stock
has not been registered under the Act, nor qualified or registered under any
other applicable state securities laws, and that in this connection the Company
is relying in part on the representations of Buyer set forth in this Agreement.
Buyer understands that no federal or state governmental agency has made a
finding or determination relating to the fairness of investment in the SOP Stock
and the Option Stock and that no such agency has or will recommend or endorse
them.
(g) Buyer is an "accredited investor" within the meaning of Rule
501 of Regulation D promulgated under the Act, or, if not an accredited
investor, then either has a preexisting personal or business relationship with
the Company or any of its officers, directors or controlling persons, or by
reason of its business or financial experience or the business or financial
experience of its professional advisors (who are unaffiliated with and who are
not compensated by the Company or any affiliate or selling agent of the Company,
directly or indirectly), has the capacity to protect Buyer's own interests in
connection with the purchase of the SOP Stock and the Option Stock.
(h) Buyer has not seen or received any advertising or general
solicitation with respect to the SOP Stock and the Option Stock.
(i) Buyer has disclosed to the Company in writing its state of
domicile or residence for purposes of determining the Company's Blue Sky filing
requirements for the transactions contemplated in this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants that:
3.1 Organization, Qualification, and Corporate Power. The Company
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is a corporation duly incorporated, validly existing, and in good standing under
the laws of the State of Nevada. The Company is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required. The Company has full corporate power and authority to
carry on the business in which it is engaged and to own and use the properties
owned and used by it.
3.2 Authorization of Transaction. The Company has full corporate
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power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of the Company, enforceable in accordance with its terms and
conditions, except as such enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors
rights generally and by general principals of equity.
3.3 Noncontravention. Neither the execution and the delivery of
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this Agreement, nor the consummation of the transactions contemplated hereby,
will to the best of its knowledge (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the
Company or any of its properties or assets is subject or any provision of the
charter or bylaws of the Company, or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, or cancel, or require any notice under any
agreement, contract, lease, license, instrument or other arrangement to which
the Company is a party or by which it is bound or to which any of its properties
or assets is subject, or (C) result in the imposition of any security interest
upon any of its properties or assets.
3.4 Validity of Securities. The SOP Stock and the Option Stock,
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when issued, sold, and delivered in accordance with the terms of this Agreement,
shall be duly and validly issued, fully paid, and nonassessable.
3.5 Percentage of Outstanding Shares of Stock. Giving effect to
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this Agreement, the 6,123,658 shares of Common Stock issued by the Company to
Buyer represent not less than fifty percent (50%) of the outstanding voting
stock of the Company on a fully diluted basis, giving full effect to the Stock
Option Plan and any other outstanding rights to acquire shares of the Company's
Common Stock, as of the date of this Agreement.
4. COVENANTS AND OBLIGATIONS OF BUYERS
4.1 Authorization of Transaction. Buyer has full power and
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authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of Buyer, enforceable in accordance with its terms and conditions, except as
such enforceability may be limited by applicable bankruptcy, insolvency or
similar laws affecting the enforcement of creditors rights generally and by
general principals of equity.
4.2 Limitations on Disposition. Without in any limiting the
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representations, warranties and limitations otherwise set forth in this
Agreement, Buyer agrees not to make any disposition of all or any portion of the
SOP Stock and the Option Stock unless and until the transferee has agreed in
writing for the benefit of the Company to be bound by all the terms and
conditions of this Agreement specified by the Company and
There is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement and the Act; or
Buyer shall have notified the Company of the proposed disposition and
shall have furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition and, if reasonably requested by the
Company, Buyer shall have furnished the Company with an opinion of counsel,
satisfactory to the Company, that such disposition will not require registration
under the Act.
4.3 Confidentiality. Buyer hereby agrees that it shall maintain in
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confidence, and shall not use or disclose without the prior written consent of
the Company, any information identified by the Company as confidential that is
furnished to Buyer by the Company in connection with this Agreement, including
without limitation, all financial statements, budgets and other information
delivered to or provided to Buyer by the Company. This obligation of
confidentiality shall not apply, however, to any information (i) in the public
domain through no unauthorized act or failure to act by Buyer, (ii) lawfully
disclosed to Buyer by a third party who possessed such information without any
obligation of confidentiality or (iii) legally known previously by Buyer
independent of any disclosure by the Company.
4.4 Market Stand-Off Agreement. Buyer hereby agrees that it shall
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not, in connection with any underwritten public offering by the Company of its
equity securities pursuant to an effective registration statement filed under
the Act, including the IPO, directly or indirectly sell, make any short sale of,
loan, hypothecate, pledge, offer, grant or sell any option or other contract for
the purchase of, purchase any option or other contract for the sale of, or
otherwise dispose of or transfer any of the SOP Stock and the Option Stock
without the prior written consent of the Company or its underwriters. Such
restriction (the "Market Stand-Off") shall be in effect for such period of time
following the date of the final prospectus for the offering as may be requested
by the Company or its underwriters. Such restriction, (the "Market Stand-Off")
offering as may be requested by the Company or such underwriters. In no event,
however, shall such period exceed 180 days. The Market Stand-Off shall in any
event terminate two (2) years after the date of the IPO. In the event of an SOP
Adjustment such additional shares shall be immediately subject to the Market
Stand-Off. In order to enforce the Market Stand-Off, the Company may impose
stop transfer instructions with respect to the SOP Stock and the Option Stock.
This subsection shall not apply to Stock registered in a public offering under
the Act and buyer shall be subject to this subsection only if the directors or
officers of the Company are subject to similar arrangements.
4.5 Restrictions on Transferability. The Sop Stock and the Option Stock
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offered hereby are issued subject to significant restrictions on
transferability. The SOP Stock and the Option Stock have not been registered
under the Act. In reliance upon the exemptions provided by section 4(2) of the
Act and Regulation D and Rules 504 through 506 promulgated thereunder.
Furthermore, the SOP Stock and the Option Stock have not been registered under
the laws of any state in reliance upon exemptions therefrom. The SOP Stock and
the Option Stock may not be sold or transferred in the absence of effective
registration under the Act and such State laws as may apply, and an opinion of
counsel acceptable to the Company that such registration is not required.
Further restrictions on transferability are set forth herein.
5. MISCELLANEOUS
5.1 Notices. Any notice required or permitted hereunder shall be
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sent to a party at its address set forth above, or to another address if the
recipient has given prior written notice thereof. Any notice may be given as
follows: (i) by delivery in hand or via facsimile, effective on receipt; (ii) by
registered United States mail, return receipt request, effective on the third
business day after the date of mailing, or (iii) by recognized commercial
overnight courier, effective on the first business day after date of deposit
with the courier for U.S. addresses and on the second business day after such
deposit for other addresses. Oral notice shall be insufficient.
5.2 Governing Law. This Agreement shall be construed and enforced
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in accordance with, and governed by, the laws of the State of Nevada without
giving effect to the principles of the conflict of laws thereof.
5.3 Headings. The section headings contained in this Agreement are
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for reference purposes only and shall not affect the construction and
interpretation of this Agreement.
5.4 Severability. The invalidity of all or any part of any section
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of this Agreement shall not render invalid the remainder of such action. If any
provision of this Agreement is so broad as to be unenforceable, such provision
shall be interpreted to be only so broad as is enforceable.
5.5 Binding Effect. Buyer shall not assign this Agreement without
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the prior written consent of the Company. This Agreement shall be binding upon
and inure to the benefit of the Parties, their heirs, personal representatives,
successors, and permitted assignees. The covenants and obligations set forth in
this Agreement shall survive the execution and delivery of this Agreement and
the Closing.
5.6 Counterparts: Facsimile Signatures. This Agreement may be
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executed in two or more counterparts, each of which shall be deemed an original
but all of which shall constitute one and the same instrument. This Agreement
may contain more than one counterpart of the signature page and may be executed
by the affixing of the signatures of each of the Parties to one of these
counterpart signature pages. All of the counterpart signature pages shall be
read as though one, and they shall have the same force and effect as though all
of the signers had signed a single signature page. This Agreement may be
executed by a facsimile signature having the same force and effect as if the
document had been executed by the actual signature of the Party.
5.7 Arbitration. Any controversy or claim arising out of or from
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or relating to this Agreement or breach thereof, shall be settled by binding
arbitration in the City of Las Vegas, Nevada, in accordance with the rules of
the American Arbitration Association then in effect, except that the parties
thereto shall have any right to discovery as would be permitted by the Federal
Rules of Civil Procedure and the prevailing party shall be entitled to costs and
attorneys' fees, and judgment upon the award rendered therein may be entered in
any court having jurisdiction thereof.
5.8 Entire Agreement. This Agreement contains the entire agreement
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of the Parties with respect to the subject matter hereof. The Parties are not
bound by any oral statements that are made outside of this Agreement with
respect to the subject matter hereof. This Agreement may not be modified or
altered except by written instrument duly executed by both parties
WHEREFORE, the Parties have executed this Agreement effective as of the
date above written.
COMPANY BUYER
UltraCard, Inc., a Nevada corporation Upgrade International Corporation a
Florida corporation
By:/s/ Xxxxxx X. Xxxxx By: /s/ Xxxxxx Xxxxx
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Xxxxxx X. Xxxxx Xxxxxx Xxxxx
Its: President Its: President
Date: 3/22/00 Date:
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