EXHIBIT 4.4
XXXXXXXXXXX.XXX CORPORATION
SECURITIES PURCHASE AGREEMENT
SEPTEMBER ___, 2000
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TABLE OF CONTENTS
PAGE
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1. Purchase and Sale of Preferred Stock..................................................................... 1
1.1 Sale and Issuance of Preferred Stock............................................................ 1
1.2 Closings; Delivery.............................................................................. 2
2. Representations and Warranties of the Company............................................................ 2
2.1 Organization, Good Standing and Qualification................................................... 2
2.2 Capitalization.................................................................................. 3
2.3 Subsidiaries.................................................................................... 3
2.4 Authorization and Compliance.................................................................... 3
2.5 Valid Issuance of Securities.................................................................... 4
2.6 Governmental Consents........................................................................... 4
2.7 Litigation...................................................................................... 5
2.8 Intellectual Property........................................................................... 5
2.9 Compliance with Other Instruments and Laws; Permits............................................. 5
2.10 Agreements; Actions............................................................................. 6
3. Representations and Warranties of the Purchasers......................................................... 8
3.1 Authorization................................................................................... 8
3.2 Experience; Accredited Investor................................................................. 8
3.3 Purchase Entirely for Own Account............................................................... 8
3.4 Disclosure of Information....................................................................... 9
3.5 Restricted Securities........................................................................... 9
3.6 No Public Market................................................................................ 9
3.7 Residence....................................................................................... 9
3.8 Further Restrictions on Disposition............................................................ 10
3.9 Legends........................................................................................ 10
3.10 Foreign Investors.............................................................................. 11
3.11 Waiver of Anti-Dilution Provisions............................................................. 11
3.12 Consent to Filing of Designations.............................................................. 11
4. Conditions of the Purchasers' Obligations............................................................... 11
4.1 Representations and Warranties................................................................. 11
4.2 Performance.................................................................................... 11
4.3 Compliance Certificate......................................................................... 11
4.4 Qualifications................................................................................. 11
4.5 Voting Agreement............................................................................... 12
4.6 Designations................................................................................... 12
4.7 VANNEXX Conversion............................................................................. 12
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4.8 Frastacky Conversion........................................................................... 12
4.9 Payment Plan................................................................................... 12
4.10 Performance Targets............................................................................ 12
5. Conditions of the Company's Obligations................................................................. 12
5.1 Representations and Warranties................................................................. 13
5.2 Performance.................................................................................... 13
5.3 Qualifications................................................................................. 13
6. Post Closing Covenants of the Company................................................................... 13
6.1 eSynch Bridge Loan............................................................................. 13
6.2 Xxxx Capital................................................................................... 13
6.3 Delivery of Financial Statements............................................................... 13
7. Covenant of the Purchasers.............................................................................. 14
7.1 Market-Standoff Agreement...................................................................... 14
8. Miscellaneous........................................................................................... 14
8.1 Survival of Warranties......................................................................... 14
8.2 Transfer; Successors and Assigns............................................................... 15
8.3 Governing Law.................................................................................. 15
8.4 Counterparts................................................................................... 15
8.5 Titles and Subtitles........................................................................... 15
8.6 Notices........................................................................................ 15
8.7 Finder's Fee................................................................................... 15
8.8 Fees and Expenses.............................................................................. 15
8.9 Attorney's Fees................................................................................ 16
8.10 Amendments and Waivers......................................................................... 16
8.11 Severability................................................................................... 16
8.12 Delays or Omissions; Remedies Cumulative....................................................... 16
8.13 Entire Agreement............................................................................... 16
8.14 California Corporate Securities Law............................................................ 16
8.15 Confidentiality................................................................................ 17
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EXHIBIT A Form of Series C Certificate of Designations
EXHIBIT B Form of Series D Certificate of Designations
EXHIBIT C Form of Series E Certificate of Designations
EXHIBIT D Schedule of Closings
EXHIBIT E Form of Warrant
EXHIBIT F Addendum Agreement
EXHIBIT G Schedule of Exceptions
EXHIBIT H Form of Voting Agreement
EXHIBIT I Revenue and Expense Targets
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XXXXXXXXXXX.XXX CORPORATION
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is made as of the
_____ day of September, 2000 by and among xXxxxxxxxxx.xxx Corporation, a
Delaware corporation (the "Company"), ___________________________ and _______
__________________ (each a "Purchaser" and together the "Purchasers").
The parties agree as follows:
1. PURCHASE AND SALE OF PREFERRED STOCK.
1.1 SALE AND ISSUANCE OF PREFERRED STOCK.
(a) The Company shall adopt and file with the Secretary of
State of the State of Delaware on or before the First Closing (as defined below)
the Series C Certificate of Designations in the form attached hereto as Exhibit
A (the "Series C Designation").
(b) The Company shall adopt and file with the Secretary of
State of the State of Delaware on or before the Second Closing (as defined
below) the Series D Certificate of Designations in the form attached hereto as
Exhibit B (the "Series D Designation").
(c) The Company shall adopt and file with the Secretary of
State of the State of Delaware on or before the Fourth Closing (as defined
below) the Series E Certificate of Designations in the form attached hereto as
Exhibit C (the "Series E Designation," and collectively with the Series C
Designation and the Series D Designation, the "Designations").
(d) Subject to the terms and conditions of this Agreement,
each Purchaser agrees, severally and not jointly, to purchase, and the Company
agrees to sell and issue to each such Purchaser, at each Closing (as defined
below) or pursuant to Section 1.2(c), (i) that number of shares of the Company's
Series C Convertible Preferred Stock (the "Series C Preferred"), Series D
Convertible Preferred Stock (the "Series D Preferred") and Series E Convertible
Preferred Stock (the "Series E Preferred") set forth opposite each such
Purchaser's name on Exhibit D hereto at a purchase price of $1.00 per share of
Series C Preferred, $1.50 per share of Series D Preferred and $2.00 per share of
Series E Preferred, and (ii) warrants in the form attached hereto as Exhibit E
(the "Warrants") to purchase one share of the Company's common stock, par value
$.00001 per share (the "Common Stock") for every two shares of Series C
Preferred, Series D Preferred and Series E Preferred purchased by such Purchaser
at such Closing, with an exercise price per share equal to 50% of the purchase
price per share of the corresponding shares of preferred stock. The shares of
Series C Preferred, Series D Preferred and Series E Preferred issued to the
Purchasers pursuant to this Agreement are referred to in this Agreement as the
"Shares." The Shares will have the rights, preferences and privileges set forth
in the Designations.
1.2 CLOSINGS; DELIVERY.
(a) Subject to the terms and conditions set forth herein, the
purchase and sale of the Shares shall take place at the offices of Xxxxxx &
Xxxxxxx, 000 Xxxx Xxxxxx Xxxxx, 00xx Xxxxx, Xxxxx Xxxx, Xxxxxxxxxx, in five (5)
closings (each, a "Closing"), the first to occur at 10:00 a.m., on September
____, 2000, or at such other time and place as the Company and the Purchasers
scheduled to purchase at least a majority of the Shares on such date mutually
agree upon, orally or in writing (the "First Closing"). Subject to the terms and
conditions set forth herein, subsequent Closings shall occur at four (4) week
intervals (such Closings referred to as the "Second Closing," "Third Closing,"
"Fourth Closing" and "Fifth Closing," respectively).
(b) At each Closing, the Company shall deliver to each
Purchaser a certificate representing the Shares being purchased by such
Purchaser at such Closing and the corresponding Warrant or Warrants against
payment of the purchase price therefor by check payable to the Company, by wire
transfer to the Company's bank account, by forgiveness or offset of indebtedness
of the Company to such Purchaser or any combination of the foregoing. If a
Purchaser effects payment in whole or in part by forgiveness or offset of
indebtedness, then such Purchaser shall surrender to the Company for
cancellation at the relevant Closing any evidence of such indebtedness or shall
execute an instrument of cancellation in form and substance acceptable to the
Company.
(c) If the full number of the authorized shares of Series C
Preferred, Series D Preferred or Series E Preferred are not sold at the
Closings, the Company shall have the right, at any time and from time to time
prior to June 30, 2001, to sell the remaining authorized but unissued shares of
Series C Preferred, Series D Preferred and Series E Preferred to one or more
additional purchasers as determined by the Company, or to any Purchaser
hereunder who wishes to acquire additional shares of Series C Preferred, Series
D Preferred or Series E Preferred, at the price and on the terms set forth
herein, provided that any such additional purchaser shall be required to execute
an Addendum Agreement substantially in the form attached as Exhibit F; provided
further that no such additional purchaser may acquire shares of Series D
Preferred unless such additional purchaser shall first become a party to the
Voting Agreement (as defined below). Any additional purchaser so acquiring
shares of Series C Preferred, Series D Preferred or Series E Preferred shall be
considered a "Purchaser" for purposes of this Agreement and any Series C
Preferred, Series D Preferred or Series E Preferred so acquired by such
additional purchaser shall be considered "Shares" for purposes of this
Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Purchaser that, except as set forth on the
Schedule of Exceptions attached hereto as Exhibit G, as of the date hereof and
as of the Closing:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as currently conducted and as proposed to be conducted.
The Company is duly qualified to transact business
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and is in good standing in each jurisdiction in which the failure so to qualify
would have a material adverse effect on its business, properties or condition.
2.2 CAPITALIZATION.
(a) The authorized capital of the Company consists, or will
consist, immediately prior to the First Closing, of: (i) 10,000,000 shares of
Preferred Stock, of which (1) 2,000,000 shares have been designated Series A
Convertible Preferred Stock, 1,991,000 of which are issued and outstanding and
(2) 1,500,000 shares have been designated Series B Convertible Preferred Stock,
272,750 of which are issued and outstanding and (ii) 30,000,000 shares of Common
Stock, 5,403,253 shares of which are issued and outstanding immediately prior to
the Closing.
(b) All of the outstanding shares of the Company's Preferred
Stock and Common Stock are duly authorized, fully paid and nonassessable and
were issued in compliance with all applicable federal and state securities laws.
(c) The Company has reserved Two Million (2,000,000) shares of
Common Stock for issuance to officers, directors, employees and consultants of
the Company pursuant to its 2000 Equity Incentive Plan duly adopted by the Board
of Directors and approved by the Company's stockholders (the "Stock Plan"). Of
such reserved shares of Common Stock, options to purchase 1,723,258 shares have
been granted and are currently outstanding, and 276,742 shares of Common Stock
remain available for future grants under the Stock Plan.
(d) Except for (i) outstanding options issued pursuant to the
Stock Plan and warrants to purchase 1,097,333 shares of Common Stock, and (ii)
the conversion privileges of the Preferred Stock, there are no outstanding
options, warrants, rights (including conversion or preemptive rights and rights
of first refusal or similar rights) or agreements, orally or in writing, for the
purchase or acquisition from the Company of any of its securities or any other
agreements to participate in the profits of the Company.
(e) There are no outstanding rights or obligations of the
Company to repurchase or redeem any of its securities.
(f) The Company has not granted or agreed to grant any
registration rights, including piggyback rights, to any person or entity. To the
Company's knowledge, except as contemplated in the Voting Agreement (as defined
below), no stockholder of the Company has entered into any agreements with
respect to the voting of capital shares of the Company.
2.3 SUBSIDIARIES. The Company does not currently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership or similar arrangement.
2.4 AUTHORIZATION AND COMPLIANCE.
(a) All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this
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Agreement and the Voting Agreement in the form attached as Exhibit H (the
"Voting Agreement" and collectively with this Agreement the "Transaction
Documents"), the performance of all obligations of the Company hereunder and
thereunder and the authorization, issuance and delivery of the Shares, Warrants
and the Common Stock issuable upon conversion of the Shares and exercise of the
Warrants (together with the Shares and Warrants, the "Securities") has been
taken or will be taken prior to the Closing, and the Transaction Documents, when
executed and delivered by the Company, shall constitute valid and legally
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and
other laws of general application affecting enforcement of creditors' rights
generally, and as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.
(b) Subject to Section 4.4 of this Agreement, neither the
execution and delivery of the Transaction Documents nor the performance by the
Company of its obligations under the Transaction Documents (including the
issuance of the Shares and the Warrants (and the Common Stock issuable upon
conversion or exercise thereof)) will: (i) violate any provisions of the
Company's Certificate of Incorporation (the "Certificate") or the By-laws of the
Company; (ii) with or without the giving of notice or the passage of time, or
both, violate, or be in conflict with, or constitute a default under, or cause
or permit the termination or the acceleration of the maturity of, any debt or
obligation of the Company; (iii) require notice to or the consent of any party
to any agreement or commitment, including, without limitation, any lease or
license to which the Company is a party, or by which it or its properties is
bound or subject; (iv) result in the creation or imposition of any security
interest, lien, or other encumbrance upon any property or assets of the Company
under any agreement or commitment to which it is a party, or by which it or its
properties is bound or subject; or (v) violate any statute or law or any
judgment, decree, order, regulation or rule of any court or governmental
authority to which the Company or its properties is bound or subject.
2.5 VALID ISSUANCE OF SECURITIES. The Shares when issued, sold and
delivered in accordance with the terms hereof will be duly and validly issued,
fully-paid and nonassessable and, based in part upon the representations of the
Purchasers in this Agreement, will be issued in compliance with all applicable
federal and state securities laws regarding registration or qualification. The
shares of Common Stock issuable upon conversion of the Shares and exercise of
the Warrants have been duly and validly authorized and reserved for issuance
and, upon issuance in accordance with the terms of the Designations, shall be
duly and validly issued, fully-paid and nonassessable.
2.6 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the offer, sale or issuance of the
Shares and the Warrants (and the Common Stock issuable upon conversion of the
Shares and exercise of the Warrants) or the consummation of any other
transactions contemplated by this Agreement, except for (i) filings pursuant to
Section 25102(f) of the California Corporate Securities Law of 1968, as amended,
and the rules thereunder, other applicable state securities laws and Regulation
D of the Securities Act of 1933, as amended (the
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"Securities Act"), which filings shall be effected within the requisite time
periods, and (ii) the filing of the Designations in the office of the Secretary
of State of the State of Delaware which shall be filed by the Company on or
prior to the Closing.
2.7 LITIGATION. There is no action, suit, proceeding or
investigation pending or, to the Company's knowledge, currently threatened
against the Company that questions the validity of the Transaction Documents or
the right of the Company to enter into them, or to consummate the transactions
contemplated hereby or thereby, or that might result, either individually or in
the aggregate, in any material adverse change in the business, properties or
condition (financial or otherwise) of the Company, nor is the Company aware that
there is any basis for the foregoing. The Company is not a party to or subject
to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality specifically applicable to the
Company. There is no action, suit, proceeding or investigation by the Company
currently pending or which the Company intends to initiate.
2.8 INTELLECTUAL PROPERTY. To its knowledge, the Company owns or
possesses sufficient legal rights to all patents, trademarks, service marks,
tradenames, copyrights, trade secrets, licenses, information and proprietary
rights and processes necessary for its business as now conducted. The Company
has not received any written communications alleging that the Company has
infringed or violated or, by conducting its business, would infringe or violate
any of the patents, trademarks, service marks, tradenames, copyrights, trade
secrets or other proprietary rights or processes of any other person or entity.
The Company is not aware that any of its employees or independent contractors is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of such
employee's or independent contractor's efforts to promote the interest of the
Company or that would conflict with the Company's business as now conducted.
Neither the execution or delivery of this Agreement, nor the carrying on of the
Company's business by the employees and independent contractors of the Company,
nor the conduct of the Company's business as now conducted, will, to the
Company's knowledge, conflict with or result in a breach of the terms,
conditions, or provisions of, or constitute a default under, any contract,
covenant or instrument under which any such employee or independent contractor
is now obligated. The Company does not believe it is or will be necessary to use
any inventions of any of its employees (or persons it currently intends to hire)
made prior to their employment by the Company. Set forth in Section 2.8 of the
Schedule of Exceptions is a listing of all patents and trademarks of the Company
and all applications therefor.
2.9 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS; PERMITS. The Company
is not in violation or default of any provision of its Certificate or By-Laws.
The Company is not in violation of, or default under any provision of any
instrument, mortgage, deed of trust, loan, contract, commitment, judgment,
decree, order or obligation to which it is a party or by which it or any of its
properties are bound, which violations or defaults, individually or in the
aggregate, would materially adversely affect the business, properties or
condition (financial or otherwise) of the Company. To the Company's knowledge,
it is not in violation of any provision of any federal, state or local statute,
rule or governmental regulation which would materially adversely affect the
business, properties or condition (financial or otherwise) of the Company.
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The Company has all franchises, permits, licenses and any similar authority
necessary for the conduct of its business, the lack of which could materially
and adversely affect the business, properties or condition (financial or
otherwise) of the Company. The Company is not in default in any material respect
under any of such franchises, permits, licenses or other similar authority.
2.10 AGREEMENTS; ACTIONS.
(a) Except for agreements explicitly contemplated by the
Transaction Documents, there are no agreements, understandings, instruments,
contracts or proposed transactions to which the Company is a party or by which
it is bound that involve (i) obligations (contingent or otherwise) of, or
payments to, the Company in excess of, $50,000, (ii) the license of any patent,
copyright, trade secret or other proprietary right to or from the Company (other
than end-user, object code, internal use software licenses and
support/maintenance agreements), or (iii) the grant of rights to any person or
entity to manufacture, produce, assemble, license, market, or sell the Company's
products or services or affect adversely the Company's exclusive right to
develop, manufacture, assemble, distribute, market or sell its products or
services.
(b) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock (including any repurchases thereof), (ii) incurred any
indebtedness for money borrowed or incurred any other liabilities individually
in excess of $50,000 or in excess of $200,000 in the aggregate, (iii) made any
loans or advances to any person or entity, other than ordinary advances for
travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its
assets or rights, other than the sale of its inventory in the ordinary course of
business.
(c) The Company is not a guarantor or indemnitor of any
indebtedness of any other person or entity.
2.11 RELATED PARTY TRANSACTIONS. The Company is not indebted,
directly or indirectly, to any of its stockholders, officers or directors or to
their respective affiliates, spouses or children, in any amount whatsoever other
than in connection with payments for services rendered and for expenses or
advances of expenses incurred in the ordinary course of business or relocation
expenses of employees. To the Company's knowledge, none of the Company's
stockholders, officers or directors, or any affiliates thereof or members of
their immediate families, are, directly or indirectly, indebted to the Company
(other than in connection with purchases of the Company's stock) or have any
direct or indirect ownership interest in any entity with which the Company is
affiliated or with which the Company has a business relationship, or any entity
which competes with the Company, except that officers, directors and/or
stockholders of the Company may own stock in (but not exceeding two percent of
the outstanding capital stock of) any publicly traded company that may compete
with the Company. To the Company's knowledge, none of the Company's
stockholders, officers or directors or any members of their immediate families
are, directly or indirectly, interested in any material contract with the
Company (other than to the extent any such person or entity is a party to an
Agreement).
2.12 TITLE TO ASSETS. The Company has good and marketable title to
all of its assets that it purports to own, free and clear of all mortgages,
liens, loans and encumbrances,
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except such encumbrances and liens which arise in the ordinary course of
business and do not individually or in the aggregate materially impair the
Company's ownership or use of such assets. With respect to the assets it leases,
the Company is in material compliance with such leases and, to its knowledge,
holds a valid leasehold interest free of any liens, claims or encumbrances.
2.13 FINANCIAL STATEMENTS. The Company has made available to each
Purchaser its unaudited financial statements (including balance sheet, income
statement and statement of cash flows) as of June 30, 2000 and for the fiscal
year ended December 31, 1999 (collectively, the "Financial Statements"). The
Financial Statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods indicated, except that the Financial Statements may not contain all
footnotes required by generally accepted accounting principles. The Financial
Statements fairly present the financial condition and operating results of the
Company as of the dates, and for the periods, indicated therein, subject to
normal year-end audit adjustments. Except as set forth in the Financial
Statements, the Company has no material liabilities, contingent or otherwise,
other than (i) liabilities incurred in the ordinary course of business
subsequent to June 30, 2000 and (ii) obligations under contracts and commitments
incurred in the ordinary course of business and not required under generally
accepted accounting principles to be reflected in the Financial Statements,
which, in both cases, individually or in the aggregate are not material to the
financial condition or operating results of the Company.
2.14 EMPLOYEE BENEFIT PLANS. The Company does not have any Employee
Benefit Plans as defined in the Employee Retirement Income Security Act of 1974.
2.15 TAX MATTERS. The Company has filed all tax returns and reports
as required by law. These returns and reports are true and correct in all
material respects. The Company has paid all taxes and other assessments due. The
Company has not elected pursuant to the Internal Revenue Code of 1986, as
amended (the "Code"), to be treated as a Subchapter S corporation or a
collapsible corporation pursuant to Section 1362(a) or Section 341(f) of the
Code, nor has it made any other elections pursuant to the Code (other than
elections that relate solely to methods of accounting, depreciation or
amortization) that would have a material effect on the business, properties or
condition (financial or otherwise) of the Company. None of the Company's tax
returns have ever been audited by any governmental authorities. The Company has
withheld or collected from each payment made to its employees the amount of all
taxes (including without limitation, federal income taxes, Federal Insurance
Contribution Act taxes and Federal Unemployment Tax Act taxes) required to be
withheld or collected therefrom, and has paid the same to the proper tax
receiving officers or authorized depositories.
2.16 INSURANCE. The Company has in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed.
2.17 LABOR MATTERS. The Company has no collective bargaining
agreements with any of its employees. There is no labor union organizing
activity pending or, to the knowledge of the Company, threatened with respect to
the Company. No current or prospective employee of the Company has been granted
the right to continued employment by the Company
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or to any material compensation or other benefits following termination of
employment with the Company or any change in its control. The Company is not
aware that any officer or key employee intends to terminate his or her
employment with the Company within the six months after the First Closing. The
Company does not have a present intention to terminate the employment of any
officer or key employee. Each officer and key employee is devoting 100% of his
or her business time to the conduct of the business of the Company. The Company
is not aware that any officer or key employee intends to work less than full
time during the six months after the First Closing.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser,
severally and not jointly, hereby represents and warrants to the Company that as
of the date hereof and as of each Closing:
3.1 AUTHORIZATION. Such Purchaser has full power and authority to
enter into the Transaction Documents. The Transaction Documents, when executed
and delivered by such Purchaser, will constitute valid and legally binding
obligations of such Purchaser, enforceable in accordance with their respective
terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and any other laws of general
application affecting enforcement of creditors' rights generally, and as limited
by laws relating to the availability of a specific performance, injunctive
relief, or other equitable remedies, or (b) to the extent the indemnification
provisions contained in the Investor Rights Agreement may be limited by
applicable federal or state securities laws.
3.2 EXPERIENCE; ACCREDITED INVESTOR. Such Purchaser has experience
as an investor in securities of companies in the developmental stage and
acknowledges that it can bear the economic risk of its investment in the
Securities. Such Purchaser has either (a) a pre-existing personal or business
relationship with the Company or any of its officers, directors or controlling
persons that is of a nature and duration which enables the Purchaser to be aware
of the character, business acumen and general business and financial
circumstances of the Company or (b) 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 its own interests in connection with its purchase of the
Securities. Such Purchaser has the financial capacity to bear the risk of this
investment. Such Purchaser is an accredited investor as defined in Rule 501(a)
of Regulation D promulgated under the Securities Act.
3.3 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Securities to be acquired
by the Purchaser will be acquired for investment for the Purchaser's own account
(or a trust account if such Purchaser is a nominee), not as a nominee or agent,
and not with a view to the resale or distribution of any part thereof, and that
the Purchaser has no present intention of selling, granting any participation
in, or otherwise distributing the same. The Purchaser does not presently have
any contract, undertaking, agreement or arrangement with any person or entity to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Securities. The Purchaser has not been formed for the
specific purpose of acquiring solely the Securities.
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3.4 DISCLOSURE OF INFORMATION. Such Purchaser has received and
reviewed information about the Company as such Purchaser deems necessary and has
had an opportunity to discuss the Company' business, management and financial
affairs with its management and to review the Company's facilities. Such
Purchaser understands and acknowledges that such discussions, as well as any
written information issued by the Company (i) were intended to describe the
aspects of the Company's business and prospects which the Company believes to be
material, but were not necessarily an exhaustive description, and (ii) may have
contained forward-looking statements involving known and unknown risks and
uncertainties which may cause the Company's actual results in future periods or
plans for future periods to differ materially from what was anticipated and that
no representations or warranties were or are being made with respect to any such
forward-looking statements or the probability of achieving any of the results
projected in any of such forward-looking statements. Such Purchaser further
understands and acknowledges that the financial and other information contained
in the Confidential Private Placement Memorandum dated March 30, 2000, related
to the Company's Series B Convertible Preferred Stock, does not reflect the
current circumstances or financial condition of the Company.
3.5 RESTRICTED SECURITIES. The Purchaser understands that the
Securities have not been, and will not be, registered under the Securities Act,
by reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Purchaser's representations as
expressed herein. The Purchaser understands that the Securities are "restricted
securities" under applicable U.S. federal and state securities laws and that,
pursuant to these laws, the Purchaser must hold the Securities indefinitely
unless they are registered with the Securities and Exchange Commission and
qualified by state authorities, or an exemption from such registration and
qualification requirements is available. The Purchaser acknowledges that the
Company has no obligation to register or qualify the Securities for resale. The
Purchaser further acknowledges that if an exemption from registration or
qualification is available, it may be conditioned on various requirements
including, but not limited to, the time and manner of sale, the holding period
for the Securities, and on requirements relating to the Company which are
outside of the Purchaser's control, and which the Company is under no obligation
and may not be able to satisfy. Such Purchaser acknowledges that the Company
will make a notation on its stock books regarding the restrictions on transfers
set forth in this Section 3 and will transfer securities on the books of the
Company only to the extent not inconsistent therewith.
3.6 NO PUBLIC MARKET. The Purchaser understands that no public
market now exists for any of the securities issued by the Company, and that the
Company has made no assurances that a public market will ever exist for the
Securities.
3.7 RESIDENCE. If the Purchaser is an individual, the Purchaser
resides in the state or province identified in the address of the Purchaser set
forth on the signature pages hereof or Exhibit D; if the Purchaser is an entity,
then the office or offices of the Purchaser in which its investment decision was
made is located at the address or addresses of the Purchaser set on such
signature pages or Exhibit D.
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3.8 FURTHER RESTRICTIONS ON DISPOSITION. Without in any way limiting
the provisions of Section 3.5, such Purchaser agrees not to make any disposition
of all or any portion of the Securities unless and until the transferee has
agreed in writing for the benefit of the Company to be bound by this Section 3
and the Transaction Documents (provided and to the extent the Transaction
Documents are then applicable), and any of the following conditions apply: (a)
there is then in effect a registration statement under the Securities Act
covering such proposed disposition and the disposition is made in accordance
with such registration statement; or (b) (i) such Purchaser shall have notified
the Company of the proposed disposition and shall have furnished the Company
with a statement of the circumstances surrounding the proposed disposition and
(ii) if reasonably requested by the Company, such Purchaser shall have furnished
the Company with an opinion of counsel, reasonably acceptable to the Company,
that such disposition will not require registration under the Securities Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances. Notwithstanding
clauses (a) and (b), no such registration statement or opinion shall be required
for a transfer by a Purchaser to her, his or its (1) constituent partner or
member, (2) former partner or member, (3) estate, (4) spouse, sibling or the
lineal descendants or ancestors of the Purchaser or his or her spouse or (5)
affiliate; provided, however, that any such transferee agrees in writing to be
subject to the terms of the Transaction Documents then applicable to the
Purchaser.
3.9 LEGENDS. The Purchaser understands that the Securities, and any
securities issued in respect of or exchange for the Securities, may bear one or
all of the following legends until they are no longer required by law or the
provisions of this Agreement:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933."
(b) Any legend set forth in the other Transaction Documents.
(c) Any legend required by the Blue Sky laws of any state to
the extent such laws are applicable to the shares represented by the certificate
so legended.
The legend set forth above shall be removed by the Company from any certificate
evidencing Shares upon transfer of the Shares in compliance with Rule 144(k)
under the Securities Act or upon delivery to the Company of an opinion, in form
and substance and by counsel reasonably satisfactory to the Company, that a
registration statement under the Securities Act is at that time in effect with
respect to the legended security or that such security can be freely transferred
without such a registration statement being in effect and that such transfer
will not jeopardize the exemption or exemptions from registration pursuant to
which the Shares were issued.
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3.10 FOREIGN INVESTORS. If the Purchaser is not a United States
person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986,
as amended), such Purchaser hereby represents that it has satisfied itself as to
the full observance of the laws of its jurisdiction in connection with any
invitation to subscribe for the Shares or any use of this Agreement, including
(i) the legal requirements within its jurisdiction for the purchase of the
Shares, (ii) any foreign exchange restrictions applicable to such purchase,
(iii) any governmental or other consents that may need to be obtained, and (iv)
the income tax and other tax consequences, if any, that may be relevant to the
purchase, holding, redemption, sale, or transfer of the Shares. Such Purchaser's
subscription and payment for and continued beneficial ownership of the Shares,
will not violate any applicable securities or other laws of the Purchaser's
jurisdiction.
3.11 WAIVER OF ANTI-DILUTION PROVISIONS. Each Purchaser hereby
waives any and all rights afforded to such Purchaser pursuant to anti-dilution,
adjustment or similar provisions contained in any of the Designations or any
Warrant, to the extent that such rights may be triggered by the issuance of
Securities under this Agreement, including any Addendum Agreement.
3.12 CONSENT TO FILING OF DESIGNATIONS. Each Purchaser hereby
consents to the filing of the Designations and the issuance and sale of shares
of Series C Preferred, Series D Preferred and Series E Preferred, pursuant to
the terms of this Agreement or otherwise.
4. CONDITIONS OF THE PURCHASERS' OBLIGATIONS. The obligations of each
Purchaser to the Company under this Agreement are subject to the fulfillment, on
or before each Closing, of each of the following conditions, unless otherwise
waived by such Purchaser:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 and 8.7 shall be true and
correct on and as of such Closing with the same effect as though such
representations and warranties had been made on and as of the date of such
Closing.
4.2 PERFORMANCE. The Company shall have performed and complied with
all covenants, agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
such Closing.
4.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to the Purchasers at such Closing a certificate certifying that the
conditions specified in Sections 4.1 and 4.2 have been fulfilled.
4.4 QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required to be in effect as of such Closing in connection
with the lawful issuance and sale of the Shares pursuant to this Agreement shall
be obtained and effective as of the Closing.
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4.5 VOTING AGREEMENT. The Company and each Purchaser shall have
executed and delivered the Voting Agreement in substantially the form attached
hereto as Exhibit H.
4.6 DESIGNATIONS. The Company shall have filed with the Secretary of
State of Delaware such of the Designations as are required under Section 1.1
above to be filed on or prior to each Closing Date, which shall continue to be
in full force and effect as of such Closing Date.
4.7 VANNEXX CONVERSION. The Company shall have entered into an
agreement with VANNEXX Canada, Inc., Ed van Wijk and Xxxx XxxXxxxxx
(collectively, the "VANNEXX Parties") pursuant to which any commission payable
to the VANNEXX Parties, or any of them, in respect of the sale of the Shares
hereunder shall be payable in equity securities of the Company, and pursuant to
which the VANNEXX Parties will collectively be paid $15,000 upon each of the
First Closing and the Second Closing.
4.8 FRASTACKY CONVERSION. The Company shall have entered into an
agreement with Frastacky Associates, Inc., pursuant to which the outstanding
balance of principal and accrued interest under that certain Convertible
Promissory Note dated July 24, 2000, made by the Company in favor of Frastacky
Associates, Inc., shall be converted into equity securities of the Company on or
before October 22, 2000.
4.9 PAYMENT PLAN. The Company shall have prepared a proposed plan of
payment of all amounts owed by the Company as of the First Closing (i) to the
Company's vendors, and (ii) in respect of payroll tax liabilities, including
without limitation, federal income taxes, Federal Insurance Contribution Act
taxes and Federal Unemployment Tax Act taxes, such plan to provide for payment
over a minimum of six (6) months to be approved by Xxxxxxx Xxxx, such approval
not to be unreasonably withheld.
4.10 PERFORMANCE TARGETS. For each Closing after the First Closing,
the Company's net revenues for the most recently completed month shall have been
more than 80% of targeted net revenues for such period as set forth on Exhibit I
hereto, or (i) the actual revenues of the Company for such period shall have
been more than 80% of targeted revenues for such period as set forth on Exhibit
I hereto, and (ii) the actual aggregate expenses of the Company for such period
shall have been less than 120% of targeted expenses for such period as set forth
on Exhibit I hereto. If any monthly Closing shall not occur due to a failure of
the Company to satisfy the conditions set forth in this Section 4.10, each
Purchaser shall be entitled to receive, for no further consideration to the
Company, the remaining Shares of each Series of Preferred Stock of which the
Company has issued shares in an earlier Closing that such Purchaser would have
received if all Closings had been completed.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS. The obligations of the Company
to each Purchaser under this Agreement are subject to the fulfillment, on or
before each Closing, of each of the following conditions, unless otherwise
waived:
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5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each Purchaser contained in Section 3 and 8.7 shall be true and
correct on and as of such Closing with the same effect as though such
representations and warranties had been made on and as of such Closing.
5.2 PERFORMANCE. All covenants, agreements and conditions contained
in this Agreement to be performed by the Purchasers on or prior to such Closing
shall have been performed or complied with in all material respects.
5.3 QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required to be in effect as of the Closing in connection with
the lawful issuance and sale of the Shares pursuant to this Agreement shall be
obtained and effective as of the Closing.
6. POST CLOSING COVENANTS OF THE COMPANY. The Company hereby covenants as
follows:
6.1 ESYNCH BRIDGE LOAN. The Company shall use commercially
reasonable efforts to renegotiate the terms of that certain Convertible
Promissory Note, dated as of June 22, 2000, made by the Company in favor of
eSynch Corporation, to convert the outstanding balance of principal and accrued
interest thereunder into equity securities of the Company or delay the time at
which eSynch Corporation may demand payment thereof.
6.2 XXXX CAPITAL. The Company will not voluntarily make any payment
to Xxxx Capital Partners Inc. in respect of services rendered by Xxxx Capital
Partners Inc. prior to the first Closing.
6.3 DELIVERY OF FINANCIAL STATEMENTS. So long as any Shares are
outstanding, and until the earlier of the completion of the first public
offering of any securities of the Company or such time as the Company becomes
subject to the reporting requirements of the Securities Exchange Act of 1934,
the Company shall deliver to each Purchaser who then holds any Shares:
(a) as soon as practicable, but in any event within ninety
(90) days after the end of each fiscal year of the Company, an income statement
for such fiscal year, a balance sheet of the Company and statement of
shareholder's equity as of the end of such year, and a statement of cash flows
for such year, such year-end financial reports to be in reasonable detail,
prepared in accordance with GAAP, and audited and certified by an independent
public accounting firm selected by the Company;
(b) as soon as practicable, but in any event within thirty
(30) days after the end of each of the first three (3) quarters of each fiscal
year of the Company, an unaudited profit or loss statement, a statement of cash
flows for such fiscal quarter and an unaudited balance sheet as of the end of
such fiscal quarter;
(c) so long as Xxxxxxx Xxxx or Xxxxxxx Xxx collectively hold
at least 50% of the Shares issued and sold to them under this Agreement, within
thirty (30) days of the
-13-
end of each month, the Company shall deliver to Xxxxxxx Xxxx an unaudited income
statement and a statement of cash flows and balance sheet for and as of the end
of such month, in reasonable detail, and records of checks written for such
month;
(d) as soon as practicable, but in any event thirty (30) days
prior to the end of each fiscal year, a budget and business plan for the next
fiscal year, prepared on a monthly basis and, as soon as prepared, any other
budgets or revised budgets prepared by the Company.
7. COVENANT OF THE PURCHASERS.
7.1 MARKET-STANDOFF AGREEMENT.
(a) MARKET-STANDOFF PERIODS; AGREEMENT. In connection with the
initial public offering of the Company's securities and upon request of the
Company or the underwriters managing such offering of the Company's securities,
each Holder agrees not to sell, make any short sale of, loan, grant any option
for the purchase of, or otherwise dispose of any securities of the Company
(other than those included in the registration) without the prior written
consent of the Company or such underwriters, as the case may be, for 180 days or
such longer period of time from the effective date of such registration as may
be requested by the Company or such managing underwriters and to execute an
agreement reflecting the foregoing as may be requested by the underwriters at
the time of the Company's initial public offering. In addition, the Holder
agrees to be bound by similar restrictions, and to sign a similar agreement, in
connection with any registration statement filed after the closing date of the
initial public offering, provided that the duration of the market-standoff
period with respect to such additional registration shall not exceed 120 days
from the effective date of any such additional registration statement.
(b) STOP-TRANSFER INSTRUCTIONS. In order to enforce the
foregoing covenants, the Company may impose stop-transfer instructions with
respect to the securities of each Purchaser (and the securities of every other
person subject to the restrictions in Section 7.1(a)).
(c) TRANSFEREES BOUND. Each Purchaser agrees that it will not
transfer securities of the Company unless each transferee agrees in writing to
be bound by all of the provisions of this Section 7.1, provided that this
Section 7.1(c) shall not apply to transfers pursuant to a registration
statement.
8. MISCELLANEOUS.
8.1 SURVIVAL OF WARRANTIES. Unless otherwise set forth in this
Agreement, the warranties, representations and covenants of the Company and the
Purchasers contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing for a period of one (1)
year following the Closing; provided, however, that such representations and
warranties are only made as of the date of such execution and delivery and as of
such Closing.
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8.2 TRANSFER; SUCCESSORS AND ASSIGNS. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties as are permitted by the Transaction
Documents. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
permitted assigns any rights, remedies, obligations, or liabilities under or by
reason of this Agreement, except as expressly provided in this Agreement.
8.3 GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to its principles of conflicts of law or
choice of law.
8.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and signatures may be delivered by facsimile, each of which may be
executed by less than all Purchasers, each of which shall be enforceable against
the parties actually executing such counterparts, and all of which together
shall constitute one instrument.
8.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.6 NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient upon delivery, when delivered
personally or by overnight courier or sent by telegram or fax, or forty-eight
(48) hours after being deposited in the U.S. mail, as certified or registered
mail, with postage prepaid, addressed to the party to be notified at such
party's address as set forth on the signature page or Exhibit D hereto, or as
subsequently modified by written notice, and (a) if to the Company, with a copy
to Xxxxxx & Xxxxxxx, 000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxx Xxxx, Xxxxxxxxxx
00000-0000, Attn: Xxxx X. Xxxxx, Esq., or (b) if to the Purchasers, with a copy
to [PURCHASER COUNSEL NAME AND ADDRESS].
8.7 FINDER'S FEE. Each party represents that it neither is nor will
be obligated for any finder's fee or commission in connection with this
transaction, other than any fees or commissions that may be payable by the
Company to VANNEXX Canada, Inc., Ed van Wijk or Xxxx XxxXxxxxx. Each Purchaser
agrees to indemnify and to hold harmless the Company from any liability for any
commission or compensation in the nature of a finder's fee (and the costs and
expenses of defending against such liability or asserted liability) for which
each Purchaser or any of its officers, employees, or representatives is
responsible. The Company agrees to indemnify and hold harmless each Purchaser
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Company or any of its officers, employees or
representatives is responsible.
8.8 FEES AND EXPENSES. The Company and the Purchasers shall bear
their own expenses and legal fees incurred on their behalf with respect to this
Agreement and the transactions contemplated hereby; provided, however, that the
Company shall bear up to $25,000 for the reasonable fees and expenses of Xxxxxxx
Xxxx and Xxxxxxx Xxx, collectively, incurred on
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their behalf with respect to this Agreement and the transactions contemplated
hereby upon receipt of reasonably detailed documentation therefor.
8.9 ATTORNEY'S FEES. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of any of the
Transaction Documents, the prevailing party shall be entitled to reasonable
attorney's fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
8.10 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended or waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of the Company and
the holders of at least a majority of the Common Stock issued or issuable upon
conversion of the Shares. Any amendment or waiver effected in accordance with
this Section 8.10 shall be binding upon the Purchasers and each transferee of
the Shares (or the Common Stock issuable upon conversion thereof), each future
holder of all such securities, and the Company.
8.11 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. Until such time as the parties agree on an
enforceable replacement for such provision, (a) such provision shall be excluded
from this Agreement, (b) the balance of the Agreement shall be interpreted as if
such provision were so excluded and (c) the balance of the Agreement shall be
enforceable in accordance with its terms.
8.12 DELAYS OR OMISSIONS; REMEDIES CUMULATIVE. No delay or omission
to exercise any right, power or remedy accruing to any party under this
Agreement, upon any breach or default of any other party under this Agreement,
shall impair any such right, power or remedy of such non-breaching or
non-defaulting party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any party, shall be cumulative
and not alternative.
8.13 ENTIRE AGREEMENT. This Agreement and the Exhibits hereto
constitute the entire agreement among the parties hereto pertaining to the
subject matter hereof, and any and all other written or oral agreements relating
to the subject matter hereof existing among any of the parties hereto are
expressly canceled.
8.14 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO THE
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QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON
THE QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.
8.15 CONFIDENTIALITY. The Company and each Purchaser agrees that,
except with the prior written permission of the applicable party, it shall at
all times keep confidential and not divulge, furnish or make accessible to
anyone any confidential information, knowledge or data concerning or relating to
the business or financial affairs of the other parties to which such party has
been or shall become privy by reason of this Agreement, discussions or
negotiations relating to this Agreement, the performance of its obligations
hereunder or the ownership of Shares purchased hereunder. The provisions of this
Section 8.15 shall be in addition to, and not in substitution for, the
provisions of any separate nondisclosure agreement executed by the parties
hereto with respect to the transactions contemplated hereby.
[Signature Pages Follow]
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The parties have executed this Securities Purchase Agreement as of the
date first written above.
COMPANY:
XXXXXXXXXXX.XXX CORPORATION,
a Delaware corporation
By:__________________________________
Xxxxx Xxxxxx
President
Address: 23046 Xxxxxxx xx xx Xxxxxxx
Xxxxx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
PURCHASERS:
_____________________________________
(Print Name of Purchaser)
By: _______________________________
Name: _______________________________
(print)
Title:_______________________________
Address:
SIGNATURE PAGE TO PURCHASE AGREEMENT
