Exhibit 10.7
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XXXXXXXXX.XXX, INC.
Series C Preferred Stock Purchase Agreement
Dated as of June 23, 1999
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XXXXXXXXX.XXX, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
Dated as of June 21, 1999
TABLE OF CONTENTS
ARTICLE I PURCHASE, SALE AND TERMS OF SHARES 1
1.01. THE PURCHASED SHARES. 1
1.02. PURCHASE PRICE AND CLOSING. 1
1.03. USE OF PROCEEDS. 2
1.04. REPRESENTATIONS AND WARRANTIES BY THE PURCHASERS. 2
ARTICLE II CONDITIONS TO PURCHASERS' OBLIGATION 4
2.01. REPRESENTATIONS AND WARRANTIES 4
2.02. DOCUMENTATION AT CLOSING. 4
2.03. CONSENTS, WAIVERS, ETC. 6
ARTICLE III REPRESENTATIONS AND WARRANTIES 6
3.01. ORGANIZATION AND STANDING OF THE COMPANY AND EACH OF ITS SUBSIDIARIES. 6
3.02. CORPORATE ACTION. 6
3.03. GOVERNMENTAL APPROVALS. 7
3.04. LITIGATION. 7
3.05. CERTAIN AGREEMENTS OF OFFICERS AND KEY EMPLOYEES 8
3.06. COMPLIANCE WITH OTHER INSTRUMENTS. 8
3.07. SALES AND MARKETING INFORMATION. 8
3.08. TAXES. 9
3.09. ERISA. 9
3.10. TRANSACTIONS WITH AFFILIATES. 9
3.11. ASSUMPTIONS OR GUARANTEES OF INDEBTEDNESS OF OTHER PERSONS. 9
3.12. INVESTMENTS IN OTHER PERSONS. 9
3.13. SECURITIES ACT. 10
3.14. DISCLOSURE. 10
3.15. BROKERS OR FINDERS. 10
3.16. CAPITALIZATION; STATUS OF CAPITAL STOCK. 10
3.16A. CAPITAL STOCK OF SUBSIDIARIES. 11
3.17. REGISTRATION RIGHTS. 11
3.18. INSURANCE. 11
3.19. BOOKS AND RECORDS. 12
3.20. TITLE TO ASSETS, PATENTS. 12
3.21. REAL PROPERTY HOLDING CORPORATION STATUS. 13
3.22. LABOR RELATIONS. 13
3.23. OTHER AGREEMENTS. 14
3.24. ENVIRONMENTAL PROTECTION. 16
3.25. COMPLIANCE WITH LAW; PERMITS. 16
3.26. FINANCIAL STATEMENTS 17
3.27. YEAR 2000 COMPLIANCE 17
3.28. MERGER DISCUSSIONS. 17
ARTICLE IV COVENANTS OF THE COMPANY 18
4.01. AFFIRMATIVE COVENANTS OF THE COMPANY OTHER THAN REPORTING REQUIREMENTS. 18
4.02. NEGATIVE COVENANTS OF THE COMPANY. 20
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4.03. REPORTING REQUIREMENTS. 23
ARTICLE V RIGHT OF FIRST REFUSAL 25
5.01. RIGHT OF FIRST REFUSAL. 25
5.02. NOTICE OF ACCEPTANCE. 25
5.03. CONDITIONS TO ACCEPTANCES AND PURCHASE. 26
5.04. FURTHER SALE. 26
5.05. TERMINATION OF RIGHT OF FIRST REFUSAL. 26
5.07. FIRST QUALIFIED PUBLIC OFFERING 27
ARTICLE VI DEFINITIONS AND ACCOUNTING TERMS 30
6.01. CERTAIN DEFINED TERMS. 30
6.02. ACCOUNTING TERMS. 33
ARTICLE VII MISCELLANEOUS 33
7.01. NO WAIVER; CUMULATIVE REMEDIES. 33
7.02. AMENDMENTS, WAIVERS AND CONSENTS. 33
7.03. ADDRESSES FOR NOTICES. 34
7.04. COSTS, EXPENSES AND TAXES. 35
7.05. BINDING EFFECT; ASSIGNMENT. 35
7.06. SURVIVAL. 35
7.07. PRIOR AGREEMENTS. 35
7.08. SEVERABILITY. 35
7.09. GOVERNING LAW. 36
7.10. HEADINGS. 36
7.11. COUNTERPARTS. 36
7.12. FURTHER ASSURANCES. 36
7.13. INDEMNIFICATION. 36
7.14. AGGREGATION OF STOCK. 36
7.15 CONFIDENTIALITY 36
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EXHIBITS
1.01 List of Purchasers
1.01A Restated Certificate of Incorporation
2.02B Form of Opinion of Counsel
2.02F Stockholders' Agreement
2.02J Registration Rights Agreement
3.04 Litigation
3.05 Certain Agreements of Officers and Key employees
3.06 Compliance with Other Instruments
3.07 Sales and Marketing Information
3.08 Taxes
3.09 ERISA
3.10 Transactions with Affiliates
3.11 Assumptions or Guaranties of Indebtedness of Other Persons
3.12A Loans or Advances
3.12B Subsidiaries
3.14 Material Contracts
3.16 Capitalization
3.17 Registration Rights
3.18 Insurance
3.20 Title to Assets, Patents
3.22 Labor Relations
3.23(a) Other Agreements - Distributors/Vendors
3.23(b) Other Agreements - Sales Contracts with Rebate/Right of Set-Off
3.23(c) Other Agreements - Contracts with Labor Unions
3.23(d) Other Agreements - Contracts Permitting Renegotiation of Price
3.23(e) Other Agreements - Purchase of Fixed Assets
3.23(f) Other Agreements - Employment
3.23(g) Employee Benefit Plans
3.23(h) Schedule of Loans with Security Interest
3.23(i) Guaranty of Obligation for Borrowed Money
3.23(j) Voting, Stockholder, Pledge or Buy Sell Agreements
3.23(k)(A) Agreements to Lease Real Property as Lessee or Lessor
3.23(k)(B) Other Agreements - Equipment Leases
3.23(l) Agreements to Acquire or Retire Equity Securities
3.23(m) Intangible Property
3.23(n) Consulting and Professional Agreements
3.23(o) Required to be Filed with the SEC with Registration Statement
3.23(p) Agreements to Exercise Buyout Provision of any Lease
3.23A Present Expectations or Intentions of Non-Performance
3.24 Environmental Protection
3.25 Compliance with Law; Permits
4.02(a) Indebtedness
4.02(h) Dealings with Affiliates and Others
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As of June 23, 1999
TO: The Persons listed on EXHIBIT 1.01 hereto
Re: PURCHASE OF SERIES C PREFERRED STOCK
Gentlemen:
Xxxxxxxxx.xxx, Inc. (the "Company"), a Delaware corporation, agrees with
each of you as follows:
ARTICLE I PURCHASE, SALE AND TERMS OF SHARES
1.01. THE PURCHASED SHARES. The Company has authorized the issuance and
sale of 4,727,786 shares of its authorized but unissued shares of Series C
Preferred Stock, $.01 par value (the "Series C Preferred"), at a purchase price
of $7.40305 per share to the persons (collectively, the "Purchasers" and,
individually, a "Purchaser") and in the respective amounts set forth in EXHIBIT
1.01 hereto. The designation, rights, preferences and other terms and conditions
relating to the Series C Preferred shall be as set forth on the Second Amended
and Restated Certificate of Incorporation of the Company (the "Restated
Certificate of Incorporation"), attached hereto as EXHIBIT 1.01A.
The Series C Preferred as now held or as hereafter acquired is sometimes
referred to herein as the "Purchased Shares" and the Purchased Shares and the
Converted Shares (as defined in Article VI hereof) are sometimes collectively
referred to herein as the "Shares."
1.02. PURCHASE PRICE AND CLOSING. Subject to and in reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Company agrees to issue and sell to the Purchasers, and the Purchasers,
severally but not jointly, agree to purchase that number of Purchased Shares set
forth opposite their respective names in EXHIBIT 1.01. The aggregate purchase
price of the Purchased Shares being purchased by each Purchaser is set forth
opposite such Purchaser's name in EXHIBIT 1.01. The purchase and sale shall take
place at a closing (the "Closing") to be held at the offices of Xxxx and Xxxx
LLP, 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx on June 23, 1999, at 10:00 A.M., or
at such other location, on such other date and at such time as the Company and
the Purchasers may mutually agree upon. At the Closing, the Company will issue
and deliver certificates evidencing the Purchased Shares to be sold at such
Closing to each of the Purchasers against payment to the Company of the full
purchase price therefor by (i) wire transfer, (ii) certified bank or cashier's
check payable to the order of the Company, or (iii) any combination of (i) and
(ii) above.
1
1.03. USE OF PROCEEDS. The Company shall use the proceeds from the sale of
the Purchased Shares for working capital and general corporate purposes.
1.04. REPRESENTATIONS AND WARRANTIES BY THE PURCHASERS. Each of the
Purchasers represents and warrants severally, but not jointly, that (a) it is
acquiring the Shares, for its own account and that the Shares are being and will
be acquired by it for the purpose of investment and not with a view to, or in
connection with, subdivision, distribution or resale thereof in violation of any
State or Federal securities laws; (b) the execution of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action (if any) on the part of the Purchaser, and this
Agreement has been duly executed and delivered, and constitutes a valid, legal,
binding and enforceable agreement of the Purchaser; (c) it is an "accredited
investor" within the meaning of Rule 501 of Regulation D promulgated under the
Securities Act (as defined in Article VI hereof); (d) it has taken no action
which would give rise to any claim by any other person for any other person for
any brokerage commissions, finders' fees or the like relating to this Agreement
or the transactions contemplated hereby; (e) the individual executing this
Agreement has appropriate authority to act on behalf of such Purchaser; (f) it
was not specifically formed to acquire the Shares subscribed for hereby; (g) it
understands that there is no market for the Shares and that there is no
assurance that such a market will develop and the Purchaser has no present need
for liquidity with respect to its investment; (h) it is able to bear the
economic risk of its investment for an indefinite period of time and can afford
a complete loss of its investment; (i) it has sufficient knowledge and
experience investing in companies similar to the Company in terms of the
Company's early stage of development and it understands that an investment in
the Company involves a very high degree of risk and it has taken full cognizance
of and understands such risks; (j) it has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of an investment in the Company, has evaluated such risks and has
determined that the Shares are a suitable investment for it; (k) it understands
that no Federal or State agency has made any finding or determination as to the
fairness for investment in, or any recommendation or endorsement of, the Shares;
(l) it has had an opportunity to discuss the Company's business, management and
financial affairs with the Company's management and has received from the
Company all such information concerning the Company as it has requested; (m) it
has consulted its own attorney, accountant or investment advisor with respect to
the investment contemplated hereby and its suitability for the Purchaser; (n)
its overall commitment to investments which are not readily marketable is not
disproportionate to the net worth of the Purchaser, and the Purchaser's
investment in the Shares will not cause such overall commitment to become
excessive; and (o) it received an offer concerning the Shares and first learned
of this investment in the state or other jurisdiction listed in the address of
such Purchaser on the attached EXHIBIT 1.01 hereto. The Purchasers'
representations under this Section 1.04, however, shall not limit or modify the
representations and warranties of the Company in Article III of this Agreement
or the right of the Purchasers to rely thereon. The acquisition by each
Purchaser of the Shares acquired by it shall constitute a confirmation as of the
date of such acquisition of the representations and warranties made herein by
each such Purchaser.
Each Purchaser understands that the Shares have not been registered under
the Securities Act, or the securities laws of any State by reason of their
issuance in a transaction exempt from
the registration requirements of the Securities Act pursuant to Section 4(2)
thereof or Rule 506 promulgated under the Securities Act, and applicable State
securities laws.
Each of the Purchasers further represents that it understands and agrees
that Company has no current obligation to register the Shares and that, until
registered under the Securities Act or transferred pursuant to the provisions of
Rule 144 as promulgated by the Securities and Exchange Commission, all
certificates evidencing any of the Shares, whether upon initial issuance or upon
any transfer thereof, shall bear a legend, prominently stamped or printed
thereon, reading substantially as follows:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 or applicable State securities
laws. These securities have been acquired for investment and not with a
view to distribution or resale, and may not be sold, mortgaged, pledged,
hypothecated or otherwise transferred without an effective registration
statement for such securities under the Securities Act of 1933 and
applicable State securities laws, unless the holder shall have obtained an
opinion of counsel satisfactory to the issuer of these securities as to the
availability of an exemption from the registration provisions of the
Securities Act of 1933 and applicable State securities laws."
The foregoing representations, warranties, agreements, undertakings and
acknowledgments are made by each Purchaser with the intent that they be relied
upon in determining its suitability as a purchaser of the Shares.
1.05 PERMITTED TRANSFERS. The Company agrees that it will permit (X) a
transfer of Purchased Shares or Converted Shares (i) to one or more of its
partners or members in any Purchaser that is a partnership or limited liability
company or to a retired or withdrawn partner or member who retires or withdraws
after the date hereof in full or partial distribution of his interest in such
partnership or limited liability company, (ii) to any immediate family member
(which shall be deemed to include a spouse, sibling, lineal descendant,
ancestor, mother-in-law, father-in-law, brother-in-law and sister-in-law) of an
individual Purchaser by gift or bequest or through inheritance, or to a trust or
family limited partnership (or other similar entity) created for the benefit of
one or more of the foregoing, (iii) to any shareholder of any Purchaser that is
a corporation or (iv) to any person or entity acquiring at least 250,000 shares
of Series C Preferred (such number being subject to adjustment for any stock
dividend, stock split, subdivision, combination or other recapitalization);
PROVIDED, HOWEVER, that the transferor provides written notice of such transfer
to the Company stating the transferee's name and address and specifying the
number and type of securities to be transferred; and PROVIDED, FURTHER, that the
Company receives a written instrument pursuant to which the transferee agrees to
be subject to the terms hereof to the same extent as if it were an original
Purchaser hereunder and (Y) a sale or other transfer of any of the Purchased
Shares or Converted Shares upon obtaining assurance satisfactory to the Company
that such transaction is exempt from the registration requirements of, or is
covered by an effective registration statement under, the Act and applicable
state securities or "blue-sky" laws, including, without limitation, receipt of
an unqualified opinion to such effect of counsel reasonably satisfactory to the
Company; PROVIDED, HOWEVER, that the
Company hereby acknowledges and agrees that each of @Ventures III, L.P. and
CMG@Ventures III, LLC (the "@Ventures Purchasers") shall be permitted to
transfer (without the need to deliver a legal opinion) any portion of its
Purchased Shares to @Ventures Investors, LLC and/or @Ventures Foreign Fund III,
L.P. (collectively, the "Investor Funds"), in accordance with that certain
Allocation and Stock Purchase Agreement, dated September 11, 1998 by and among
the @Ventures Purchasers and the Investor Funds, so long as in the case of a
transfer to an Investor Fund, such Investor Fund shall agree in writing to be
subject to the terms hereof to the same extent as if it were an original
Purchaser. Any transferee to whom a transfer is made in accordance with the
immediately preceding sentence shall be deemed an Investor for purposes of this
Agreement. Notwithstanding anything herein to the contrary, in no event may any
Purchaser, together with its affiliates and transferees, transfer any Purchased
Shares or Converted Shares to more than 10 persons in the aggregate.
ARTICLE II CONDITIONS TO PURCHASERS' OBLIGATION
The obligation of each Purchaser to purchase and pay for the Shares to be
purchased by it at the Closing is subject to the following conditions, all of
which shall be deemed satisfied or waived in the event that the transactions
contemplated herein to be effected at the Closing are consummated:
2.01. REPRESENTATIONS AND WARRANTIES . Each of the representations and
warranties of the Company and its Subsidiaries (as defined in Article VI hereof)
set forth in Article III hereof shall be true and correct on the date of the
Closing.
2.02. DOCUMENTATION AT CLOSING. The Purchasers shall have received prior to
or at the Closing all of the following documents or instruments, or evidence of
completion thereof, each in form and substance satisfactory to the Purchasers
and their counsel, or each of the following events shall have occurred prior to
or at the Closing.
(a) A copy of the Restated Certificate of Incorporation of the Company
and Articles of Organization of each of its Subsidiaries, in each case certified
by the Secretary of State of the jurisdiction of their respective organization,
a copy of the resolutions of the Board of Directors and, if required, the
stockholders of the Company evidencing the adoption of the Restated Certificate
of Incorporation, the approval of this Agreement, the issuance of the Shares and
the other matters contemplated hereby, a copy of the Bylaws of the Company and
of each of the Company's Subsidiaries, all of which have been certified by the
Secretary of the Company to be true, complete and correct in every particular,
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 Shares.
(b) An opinion of Xxxx and Xxxx LLP, counsel to the Company, in the
form of EXHIBIT 2.02B attached hereto.
(c) A certificate of the Secretary of the Company which shall certify
the names of the officers of the Company authorized to sign this Agreement, the
certificates for the
Purchased Shares, and the other documents, instruments 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 of the President of the Company stating that the
representations and warranties of the Company and its Subsidiaries contained in
Article III hereof and otherwise made by the Company in writing in connection
with the transactions contemplated hereby are true and correct and that all
conditions required to be performed by the Company and its Subsidiaries prior to
or at the Closing have been performed or waived as of the Closing.
(e) The Restated Certificate of Incorporation of the Company shall
provide for the designation of the rights and preferences of the Class A Common
Stock, the Class B Common Stock, the Series A Preferred and the Series B
Preferred in the form set forth in EXHIBIT 1.01A, attached hereto.
(f) A Second Amended and Restated Stockholders' Agreement in the form
set forth in EXHIBIT 2.02F (the "Stockholders' Agreement") shall have been
executed by such of the parties named therein as requested by the Purchasers.
(g) Certificates of Good Standing for the Company and each of its
Subsidiaries (i) from the jurisdiction of their respective organization and (ii)
from any other jurisdiction in which the character of the property owned or
leased, or the nature of the activities conducted, by the Company or any of its
Subsidiaries makes such licensing or qualification necessary, shall have been
provided to the Purchasers and their counsel.
(h) Payment for the costs, expenses, taxes and filing fees identified
in Section 7.04.
(i) The Bylaws of the Company shall provide for a Board of Directors
consisting of eight (8) members, who shall be designated in accordance with the
Stockholders' Agreement.
(j) The Company and the Purchasers shall have entered into a Second
Amended and Restated Registration Rights Agreement (the "Registration Rights
Agreement") in the form set forth in EXHIBIT 2.02J.
(k) The Purchasers specified on EXHIBIT 1.01 hereto shall purchase at
the Closing at least $20,000,000 in value of shares of Series C Preferred.
(l) The Company shall have reserved a total of not more than 3,500,000
shares of Class B Common Stock as Reserved Management Shares (as defined in
Article VI), which such number shall include the Reserved Management Shares that
have been previously been reserved.
(m) The Company shall have reserved 4,727,786 shares of Class B Common
Stock as Converted Shares.
2.03. CONSENTS, WAIVERS, ETC. Prior to the Closing the Company shall have
obtained all consents or waivers, if any, necessary to execute and deliver this
Agreement, issue the Shares and to carry out the transactions contemplated
hereby, and all such consents and waivers shall be in full force and effect at
the Closing. All corporate and other action and governmental filings necessary
to effectuate the terms of this Agreement, the 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 or State securities laws.
2.04 DUE DILIGENCE. The Purchasers shall have completed their due diligence
investigation of the Company and its Subsidiaries to their satisfaction.
ARTICLE III REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants as follows as of the date of the
Closing (it being understood and agreed that the representations and warranties
herein relate to the business of the Company and each of its Subsidiaries taken
as a whole):
3.01. ORGANIZATION AND STANDING OF THE COMPANY AND EACH OF ITS
SUBSIDIARIES. The Company and each of its Subsidiaries is a duly organized and
validly existing corporation in good standing under the laws of the State of its
incorporation 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 or as proposed to be conducted. The Company and each
of its Subsidiaries is duly licensed or qualified and in good standing as a
foreign corporation authorized to do business in all jurisdictions wherein the
character of the property owned or leased, or the nature of the activities
conducted by it, makes such licensing or qualification necessary, except where
the failure to be so licensed or qualified would not have a Material Adverse
Effect (as defined in Article VI).
3.02. CORPORATE ACTION. The Company has all necessary corporate power and
has taken all corporate action required to make all the provisions of this
Agreement and any other agreements (including the Stockholders' Agreement and
Registration Rights Agreement) and instruments executed in connection herewith
and therewith be the valid and binding obligations of the Company, enforceable
in accordance with their respective terms. The issuance of the Purchased Shares,
and the issuance of the Converted Shares upon conversion of the Purchased Shares
will not be subject to preemptive rights or other preferential rights in any
present or future shareholders of the Company and will not conflict with any
provision of any agreement or instrument to which the Company is a party or by
which it or its property is bound.
3.03. GOVERNMENTAL APPROVALS. Except for the filing of any notice
subsequent to the Closing that may be required under applicable State and/or
Federal securities laws (which, if required, shall be filed on a timely basis),
no authorization, consent, approval, license, exemption
of or filing or registration with any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, is or
will be necessary for the execution and delivery by the Company of this
Agreement, for the offer, issue, sale and delivery of the Shares, or for the
performance by the Company of its obligations under this Agreement.
3.04. LITIGATION. Except as set forth on EXHIBIT 3.04 hereto, there is no
litigation or governmental proceeding or investigation pending or, to the
knowledge of the Company, threatened against the Company or any of its
Subsidiaries affecting any of its respective properties or assets, or, to the
best knowledge of the Company, against any Key Employee (as defined in Article
VI hereof) affecting such person's performance of duties for the Company, his
share ownership in the Company or any of its Subsidiaries or otherwise relating
to the business of the Company or any of its Subsidiaries, nor, to the best
knowledge of the Company, has there occurred any event nor does there exist any
condition on the basis of which any such litigation, proceeding or investigation
might properly be instituted, which if adversely determined would result in a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries, nor,
to the knowledge of the Company, Key Employee or holder of the capital stock of
the Company (other than any Purchaser) or any of 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 in any
case, or in the aggregate, in any Material Adverse Effect. Except as set forth
on EXHIBIT 3.04 hereto, there are no actions or proceedings pending or, to the
knowledge of the Company, threatened (or any basis therefor known to the
Company) which might result, either in any case or in the aggregate, in any
material adverse effect on the business, operations, affairs or condition of the
Company or any of its Subsidiaries or in their properties or assets taken as a
whole, or which might call into question the validity of this Agreement, any of
the Shares, or any action taken or to be taken pursuant hereto or thereto. 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 any of the officers or employees of the Company or any of its
Subsidiaries or their use in connection with the business of the Company or any
of its Subsidiaries of any information or techniques allegedly proprietary to
any of their former employers.
3.05. CERTAIN AGREEMENTS OF OFFICERS AND KEY EMPLOYEES .
(a) Except as set forth on EXHIBIT 3.05, to the Company's knowledge,
except in instances which will not result in a Material Adverse Effect, no
officer or Key Employee of the Company or any of its Subsidiaries is, or is now
expected to be, in violation of any term of any employment contract, patent
disclosure agreement, proprietary information agreement, noncompetition
agreement, or any other contract or agreement or any restrictive covenant
relating to the right of any such officer or Key Employee to be employed by the
Company or any of its Subsidiaries because of the nature of the business
conducted or to be conducted by the Company or any of its Subsidiaries or
relating to the use of trade secrets or proprietary information of others, and
to the Company's knowledge and belief, the continued employment of the officers
and Key Employees of the Company or any of its Subsidiaries does not subject the
Company, any of its Subsidiaries or any Purchaser to any liability arising out
of the foregoing contracts or agreements.
(b) Except as set forth on EXHIBIT 3.05, to the knowledge of the
Company, no officer of the Company or any of its Subsidiaries, nor any Key
Employee of the Company or any of its Subsidiaries whose termination, either
individually or in the aggregate, would have a Material Adverse Effect on the
Company, has expressed any present intention of terminating his employment in
such capacity.
3.06. COMPLIANCE WITH OTHER INSTRUMENTS. Except as set forth on EXHIBIT
3.06, the Company and each of its Subsidiaries is in compliance in all respects
with the terms and provisions of this Agreement and of its Restated Certificate
of Incorporation (or Articles of Organization, as the case may be) and Bylaws,
and in all material respects with the terms and provisions of all material
mortgages, indentures, leases, agreements and other instruments, if any, by
which it is bound or to which it or any of its respective properties or assets
are subject, except where noncompliance would not result in a Material Adverse
Effect. Except as set forth on EXHIBIT 3.06, the Company and each of its
Subsidiaries is in compliance in all material respects with all judgments,
decrees, governmental orders, statutes, rules or regulations by which it is
bound or to which any of its properties or assets are subject, except where such
noncompliance would not result in a Material Adverse Effect. The Company and
each of its Subsidiaries possesses all authorizations, approvals, orders,
licenses, registrations, certificates and permits of and from all governmental
regulatory officials and bodies necessary to conduct their respective
businesses, except where such failure would not have a Material Adverse Effect.
Neither the execution, issuance and delivery of this Agreement, nor the
consummation of any transaction contemplated hereby or thereby, has constituted
or resulted in or will constitute or result in a default or violation of any
material term or provision of any of the foregoing documents, instruments,
judgments, agreements, decrees, orders, statutes, rules and regulations, except
where such default or violation would not, in the best knowledge of the Company,
result in a Material Adverse Effect.
3.07. SALES AND MARKETING INFORMATION. The written internet sales figures
and marketing expenses attached hereto as EXHIBIT 3.07 (the "Sales Figures")
which have been provided to the Purchasers represent fairly the written sales
and on-line media advertising costs of the Company for the respective periods.
3.08. TAXES. Except as set forth on EXHIBIT 3.08, the Company and each of
its Subsidiaries have prepared correctly in all material respects and timely
filed all Federal, State, foreign and other tax returns required under the laws
of any applicable jurisdiction to be filed by them, have paid or made provision
for the payment of all taxes, including sales taxes, due from the Company and
each of its Subsidiaries, respectively, and all additional assessments (whether
or not shown on such returns) except where such nonpayment or lack or provision
would not result in a Material Adverse Effect. Except as set forth on EXHIBIT
3.08, none of the Federal income tax returns of the Company or any of its
Subsidiaries have been audited by the Internal Revenue Service. The Company does
not know of any additional assessments or adjustments pending or threatened
against the Company or any of its Subsidiaries, as the case may be, for any
period, nor of any basis for any such assessment or adjustment.
3.09. ERISA. Except as set forth in EXHIBIT 3.09, neither the Company nor
any of its Subsidiaries makes or has any present intention to make any
contributions to or has incurred any liability with respect to any employee
pension benefit plans for its employees which are subject to ERISA.
3.10. TRANSACTIONS WITH AFFILIATES. Except as contemplated hereby and
except as set forth on EXHIBIT 3.10, there are no loans, leases, royalty
agreements or other continuing transactions between any officer, employee or
director of the Company or any of its Subsidiaries or any Person (as defined in
Article VI hereof) owning capital stock of the Company or any of its
Subsidiaries or any member of the immediate family of such officer, employee,
director or stockholder or any corporation or other entity controlled by such
officer, employee, director or stockholder or a member of the immediate family
of such officer, employee, director or stockholder; PROVIDED that the term
"continuing transactions" shall not be deemed to include ongoing employment
arrangements between the Company and its employees or officers that are
consistent with, and entered into in, the ordinary course of business.
3.11. ASSUMPTIONS OR GUARANTEES OF INDEBTEDNESS OF OTHER PERSONS. Except as
contemplated hereby and except as set forth in EXHIBIT 3.11, neither the Company
nor any of its Subsidiaries have 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 the debtor or
otherwise to assure the creditor against loss), which remains currently
outstanding, any Indebtedness (as defined in Article VI hereof) of any other
Person, including any of its Subsidiaries.
3.12. INVESTMENTS IN OTHER PERSONS. Except as contemplated hereby and
except as set forth in EXHIBIT 3.12A, neither the Company nor any of its
Subsidiaries have made any loan or advance to any Person which is outstanding on
the date of this Agreement, nor are the Company or any of its Subsidiaries
committed or obligated to make any such loan or advance, nor does the Company or
any of its Subsidiaries own any capital shares, assets comprising the business
of, obligations of, or any interest in, any Person except as disclosed in this
Agreement. Except as set forth in EXHIBIT 3.12B, the Company has no
Subsidiaries.
3.13. SECURITIES ACT. To the best knowledge of the Company, the Company has
complied and will comply with all applicable Federal and State securities laws
in connection with the offer, issuance and sale of the Shares. Neither the
Company nor anyone acting on its behalf has or will sell, offer to sell or
solicit offers to buy the 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 Shares under the registration provisions of the Securities Act and
applicable State securities laws.
3.14. DISCLOSURE. This Agreement, including all Schedules and Exhibits
hereto, including but not limited to the Sales Figures referred to in Section
3.07 and attached hereto as EXHIBIT 3.07, does not contain any untrue statement
of a material fact nor does it omit to state a material fact necessary in order
to make the statements contained herein or therein not
misleading in light of the circumstances under which they are or were made.
There is no fact within the knowledge of the Company which has not been
disclosed herein or in writing by it to the Purchasers and which would have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries has,
and the Company has no reasonable grounds to know of, any liability, contingent
or otherwise, other than outstanding payables to furniture vendors, in an amount
exceeding $1,000,000, other than those liabilities described on EXHIBIT 3.10 or
EXHIBIT 3.14 or the contracts described in EXHIBIT 3.23. The projections
contained in the Business Plan (as defined in Article VI) were prepared in good
faith and are believed to be reasonable, but the Company cannot and does not
assure or guarantee the attainment of such projections.
3.15. 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 Company or any of its Subsidiaries for any commission, fee
or other compensation as a finder or broker because of any act or omission by
the Company, any of its Subsidiaries or any of their respective agents.
3.16. CAPITALIZATION; STATUS OF CAPITAL STOCK. The Company has a total
authorized capitalization consisting of (i) 24,000,000 shares of Class B Common
Stock, $.01 par value, of which 6,314,880 shares are issued and outstanding on
the date hereof, (ii) 3,040,000 shares of Class A Common Stock, $.01 par value,
of which 3,040,000 shares are issued and outstanding on the date hereof, (iii)
3,009,600 shares of Series A Preferred, of which 3,009,600 shares are issued and
outstanding on the date hereof, (iv) 7,246,036 shares of Series B Preferred, of
which 7,042,254 shares are issued and outstanding on the date hereof, and (v)
4,727,786 shares of Series C Preferred, of which no shares are issued or
outstanding, in each case without giving effect to the transactions contemplated
hereby. A complete list of the capital shares of the Company which has been
previously issued and the names in which such capital shares are registered on
the stock transfer books of the Company is set forth in EXHIBIT 3.16 hereto. All
the outstanding capital shares of the Company have been duly authorized, are
validly issued and are fully paid and non-assessable. The Purchased Shares, when
issued and delivered in accordance with the terms hereof and after payment of
the purchase price therefor, and the Converted Shares, when issued and delivered
upon conversion of the Purchased Shares, will be duly authorized, validly
issued, fully paid and non-assessable. Except as otherwise set forth in EXHIBIT
3.16, no options, warrants, subscriptions or purchase rights of any nature to
acquire from the Company shares of capital stock or other securities are
authorized, issued or outstanding, nor is the Company obligated in any other
manner to issue its capital shares or other securities except as contemplated by
this Agreement. Except as set forth in EXHIBIT 3.16, to the Company's knowledge,
there are no restrictions on the transfer of capital shares of the Company other
than those imposed by relevant Federal and State securities laws and as
otherwise contemplated by this Agreement, the Stockholders' Agreement and the
Registration Rights Agreement. Except as set forth in EXHIBIT 3.16 and other
than as provided in the above-referenced Stockholders' Agreement, to the
Company's knowledge, there are no agreements, understandings, trusts or other
collaborative arrangements or understandings concerning the voting of the
capital shares of the Company. Except as set forth in EXHIBIT 3.16, to the
Company's knowledge, there are no agreements, understandings or trusts
concerning transfers of the capital shares of the Company except for the
aforementioned Stockholders' Agreement, the aforementioned Registration Rights
Agreement and except as contemplated by this Agreement. The offer and sale of
all capital shares and other securities of the Company issued before the Closing
complied with or were exempt from all applicable Federal and State securities
laws and no stockholder has a right of rescission with respect thereto.
3.16A. CAPITAL STOCK OF SUBSIDIARIES. EXHIBIT 3.16A sets forth a list of
each Subsidiary of the Company and its jurisdiction of incorporation or
organization. The Company owns all of the outstanding capital stock of each of
the Subsidiaries, beneficially and of record, free and clear of all liens,
encumbrances, restrictions (other than those under applicable securities laws)
and claims of every kind. All the outstanding shares of capital stock of each of
the Subsidiaries have been duly authorized, are validly issued and are fully
paid and non-assessable. There are no options, warrants or rights to purchase
shares of capital stock or other securities of any of the Subsidiaries
authorized, issued or outstanding, nor is any Subsidiary obligated in any other
manner to issue shares of its capital stock or other securities.
3.17. REGISTRATION RIGHTS. Except as set forth in EXHIBIT 3.17 and except
for the rights granted pursuant to the Registration Rights Agreement, no Person
has demand or other rights (which such rights shall be effective subsequent to
the Closing) to cause the Company or any of its Subsidiaries to file any
registration statement under the Securities Act relating to any securities of
the Company or any of its Subsidiaries or any right to participate in any such
registration statement.
3.18. INSURANCE. EXHIBIT 3.18 sets forth a list (including the name of the
insurer, the name of the policyholder, the periods of coverage and the scope of
coverage) of all material insurance policies under which the Company or any of
its Subsidiaries is a party, a named insured or otherwise the beneficiary of
coverage.
3.19. BOOKS AND RECORDS. The books of account, ledgers, order books,
records and documents of the Company and each of its Subsidiaries reflect in all
material respects, all material information relating to the business of the
Company and each of its Subsidiaries, the location and collection of their
assets, and the nature of all transactions giving rise to the obligations or
accounts receivable of the Company and each of its Subsidiaries.
3.20. TITLE TO ASSETS, PATENTS. The Company and each of its Subsidiaries
has good and marketable title in fee to such of its fixed assets, if any, as are
real property, and good and merchantable title to all of its other assets, free
of any mortgages, pledges, charges, liens, security interests or other
encumbrances, except where such failure to so have would not have a Material
Adverse Effect, except as indicated in EXHIBIT 3.20. The Company and each of its
Subsidiaries enjoys peaceful and undisturbed possession under all leases under
which it is operating, and all such leases are valid and subsisting and in full
force and effect. Except as set forth in EXHIBIT 3.20, the Company knows of no
adverse claim that would interfere with its right or the right of any of its
Subsidiaries to use the patents, patent rights, permits, licenses, trade
secrets, trademarks, trademark rights, trade names or trade name rights or
franchises, registered copyrights, inventions, and intellectual property rights
being used to conduct its business as now operated and as now proposed to be
operated (a list of the patent and trademark applications
made by the Company and each of its Subsidiaries is attached hereto as EXHIBIT
3.20); and the Company has no reason to believe that the conduct of its business
or the conduct of the business of any of its Subsidiaries as now operated and as
now proposed to be operated conflicts or will conflict with valid patents,
patent rights, permits, licenses, trade secrets, trademarks, trademark rights,
trade names or trade name rights or franchises, registered copyrights,
inventions, and intellectual property rights of any other Person, except as
noted in EXHIBIT 3.20. To the Company's knowledge, no product or process
presently used or proposed to be manufactured, marketed, offered, sold or used
by the Company or any of its Subsidiaries will violate any license or infringe
on any intellectual property rights of any other Person; and neither the
intellectual property rights of the Company or any of its Subsidiaries nor the
operation or proposed operation of the business of the Company or any of its
Subsidiaries is known to conflict with the asserted rights of others, nor does
there exist any known basis for any such conflict, except as noted in EXHIBIT
3.20. The Company owns or has the right to use all of the back office and
graphic user interface software necessary to run its website and any graphic or
textual content thereof and, except as set forth in EXHIBIT 3.20, has the right
to use and include any graphic or text on such website free and clear of the
intellectual property rights of any third party. No claim is known to be pending
or threatened to the effect that any such intellectual property owned or
licensed by the Company or any of its Subsidiaries, or which the Company or any
of its Subsidiaries otherwise has the right to use, is invalid or unenforceable
by the Company or any of its Subsidiaries, and the Company has no reason to
believe that any patents or intellectual property rights owned or used by the
Company or any of its Subsidiaries may be invalid. Except as set forth on
EXHIBIT 3.20, neither the Company nor any of its Subsidiaries has any obligation
to compensate any Person for the use of any such patents or rights, and neither
the Company nor any of its Subsidiaries has granted any Person any license or
other rights to use in any manner any of the patents or rights of the Company or
any of its Subsidiaries, whether requiring the payment of royalties or not. The
Company has used commercially reasonable efforts to (i) protect and enforce all
copyright, trademark and patent rights of the Company except for those
copyright, trademark and patent rights that, individually or in the aggregate,
would not have a Material Adverse Effect, and (ii) otherwise secure and protect
for the Company's benefit all of its material rights in its material
intellectual property.
3.21. REAL PROPERTY HOLDING CORPORATION STATUS. Since its date of
incorporation, neither the Company nor any of its Subsidiaries has been, and as
of the date of the Closing, shall not be, a "United States real property holding
corporation," as defined in Section 897(c)(2) of the Internal Revenue Code, and
in Section 1.897-2(b) of the Treasury Regulations issued thereunder. Neither the
Company nor any of its Subsidiaries have any current plans or intentions which
would cause the Company or any of its Subsidiaries to become a "United States
real property holding corporation," and the Company and each of its Subsidiaries
have filed with the IRS all statements, if any, with its United States income
tax returns which are required under Section 1.897-2(h) of the Treasury
Regulations.
3.22. LABOR RELATIONS. Except as set forth in the attached EXHIBIT 3.22,
(i) there is no labor strike, lock-out, slowdown, or work stoppage actually
pending, or threatened against or affecting the business of the Company or any
of its Subsidiaries; (ii) no labor organization claims to represent the
employees of the Company or any of its Subsidiaries; (iii) neither the Company
nor any of its Subsidiaries is a party to or bound by any collective bargaining
or similar agreement with any labor organization, or work rules or practices
agreed to with any labor organization or employee association applicable to the
employees of the Company or any of its Subsidiaries; (iv) the Company does not
have any knowledge of any current union organizing activities among its
employees nor has there been filed at the National Labor Relations Board any
petition regarding any question concerning representation of such employees; (v)
other than as set forth in the Company's employee handbook (if any) heretofore
provided to the Purchasers or their counsel, there are no written personnel
policies, rules or procedures applicable to the employees of the Company or any
of its Subsidiaries; (vi) the Company and each of its Subsidiaries is, and has
at all times been, in material compliance with all applicable laws respecting
employment and employment practices, terms and conditions of employment, wages,
hours of work and occupational safety and health, and is not engaged in any
unfair labor practices as defined in the National Labor Relations Act or other
analogous applicable law, ordinance or regulation; (vii) neither the Company nor
any of its Subsidiaries has received notice of any pending or threatened unfair
labor practice charge or complaint against the Company or any of its
Subsidiaries before the National Labor Relations Board or any similar State or
foreign agency; (viii) there is no grievance arising out of any collective
bargaining agreement; (ix) no charges are pending against the Company or any of
its Subsidiaries before the Equal Employment Opportunity Commission or any other
agency responsible for the prevention of unlawful employment practices; (x)
neither the Company nor any of its Subsidiaries has received notice of the
intent of any Federal, State, local or foreign agency responsible for the
enforcement of labor or employment laws to conduct an investigation nor that any
investigation is in progress; and (xi) neither the Company nor any of its
Subsidiaries has received notice of any pending or threatened complaints,
lawsuits or other proceedings in any forum by or on behalf of any present or
former employee, any applicant for employment or classes of the foregoing
alleging breach of any express or implied contract of employment, any law or
regulation governing employment or the termination thereof or other
discriminatory, wrongful or tortious conduct in connection with the employment
relationship, except where such notice would not have a Material Adverse Effect.
Except as set forth in the attached EXHIBIT 3.23(f), there are no employment
contracts or severance agreements with any employees of the Company or any of
its Subsidiaries.
3.23. OTHER AGREEMENTS. Except as set forth in the attached EXHIBITS 3.23
(A) - (P) or in other Exhibits hereto, neither the Company nor any Subsidiary is
a party to any written or oral contract or instrument or other corporate
restriction which, to the best knowledge of the Company, individually or in the
aggregate, could have a Material Adverse Effect. The Company is not in violation
of the terms of any of the agreements listed on EXHIBITS 3.23 (a) - (p), except
where such violation would not result in a Material Adverse Effect. Neither the
Company nor any Subsidiary is a party to any written or oral:
(a) distributor, vendor, franchise, dealer or manufacturer's
representative contract or agreement which is not terminable on less than in
ninety (90) days' notice without cost or other liability to the Company or any
Subsidiary (except for contracts which, in the aggregate, are not material to
the business of the Company or Subsidiary, as the case may be), except as set
forth in EXHIBIT 3.23(a);
(b) sales contract which entitles any customer to a rebate or right of
set-off, to return any product to the Company or any Subsidiary after acceptance
thereof or to delay the acceptance thereof, or which varies in any material
respect from the Company's standard form contracts or policies, except as set
forth in EXHIBIT 3.23(b);
(c) contract with any labor union (and no organizational effort is
being made with respect to any of its employees), except as set forth in EXHIBIT
3.23(c);
(d) contract or other commitment with any supplier containing any
provision permitting any party other than the Company or any Subsidiary to
renegotiate the price or other terms, or containing any pay-back or other
similar provision, upon the occurrence of a failure by either the Company or any
Subsidiary to meet its respective obligations under the contract when due or the
occurrence of any other event, except as set forth in EXHIBIT 3.23(d);
(e) contract for the future purchase of fixed assets or for the future
purchase of materials, supplies or equipment in excess of its normal operating
requirements, except as set forth in EXHIBIT 3.23(e);
(f) contract for the employment (or separation) of any officer,
individual, employee or other person (whether of a legally binding nature or in
the nature of informal understandings) on a full-time or consulting basis which
is not terminable on notice without cost or other liability to the Company or
any Subsidiary, except accrued vacation pay, except as set forth in EXHIBIT
3.23(f);
(g) bonus, pension, profit-sharing, retirement, hospitalization,
insurance, stock purchase, stock option or similar plan, contract or
understanding pursuant to which benefits are provided to any employee of the
Company or any Subsidiary (other than group insurance plans applicable to
employees generally), except as set forth in EXHIBIT 3.23(g);
(h) agreement or indenture relating to the borrowing of money or to
the mortgaging or pledging of, or otherwise placing a lien or security interest
on, any asset of the Company or any Subsidiary, except as set forth in EXHIBIT
3.23(h);
(i) guaranty of any obligation for borrowed money or otherwise (other
than in the ordinary course of business), except as set forth in EXHIBIT
3.23(i);
(j) voting trust, stockholders' agreement, pledge agreement or
buy-sell agreement relating to any securities of the Company or any Subsidiary
which shall be in effect after the Closing except as set forth in EXHIBIT
3.23(j);
(k) agreement, or group of related agreements with the same party or
any group of affiliated parties, under which the Company or any Subsidiary has
advanced or agreed to advance money or has agreed to lease any property as
lessee or lessor, except as set forth in EXHIBIT 3.23(k);
(l) agreement or obligation (contingent or otherwise) to issue or sell
or to repurchase or otherwise acquire or retire any share of its capital stock
or any of its other equity securities, except as set forth in EXHIBIT 3.23(l);
(m) assignment, license or other agreement with respect to any form of
intangible property, except as set forth in EXHIBIT 3.23(m);
(n) other contract or group of related contracts with the same party
involving more than $50,000 or continuing over a period of more than six (6)
months from the date or dates thereof (including renewals or extensions optional
with another party), which contract or group of contracts is not terminable by
the Company or any Subsidiary without penalty upon notice of thirty (30) days or
less, but excluding any contract or group of contracts with a customer of the
Company or any Subsidiary for the sale, lease or rental of the Company's or
Subsidiary's products or services if such contract or group of contracts was
entered into by the Company or any Subsidiary in the ordinary course of
business, except as set forth in EXHIBIT 3.23(n);
(o) other contract, instrument, commitment, plan or arrangement, a
copy of which would be required to be filed with the Securities and Exchange
Commission as an exhibit to a registration statement on Form S-1 if the Company
or any of its Subsidiaries were registering securities under the Securities Act,
except as set forth in EXHIBIT 3.23(o); or
(p) agreement to exercise a buy-out provision of any of the leases of
the Company or any of its Subsidiaries, nor to the Company's knowledge, is any
such agreement or the exercise of any such buy-out provision presently
contemplated, except as set forth in EXHIBIT 3.23(p).
The Company and each of its Subsidiaries, to the knowledge of the Company,
have in all material respects performed all the material obligations required to
be performed by them to date, have received no notice of default and are not in
default under any lease, agreement or contract now in effect to which the
Company or any Subsidiary is a party or by which it or its property may be
bound, except where such noncompliance or default would not result in a Material
Adverse Effect. Neither the Company nor any Subsidiary has any present
expectation or intention of not fully performing all its respective material
obligations under each such lease, contract or other agreement, and neither the
Company nor any Subsidiary has any knowledge of any material breach or
anticipated breach by the other party to any contract or commitment to which the
Company or any Subsidiary is a party.
3.24. ENVIRONMENTAL PROTECTION. Except as set forth on EXHIBIT 3.24, the
Company and each of its Subsidiaries, the operation of its business, and any
real property that the Company or any Subsidiary owns, leases or otherwise
occupies or uses (the "Premises") are to the best of the Company's knowledge in
material compliance with all applicable environmental laws and, to the best of
the Company's knowledge, neither the Company nor any Subsidiary is subject to
any liability on account of any environmental laws. To the best of the Company's
knowledge neither the Company nor any Subsidiary has caused or allowed a
release, or a threat of release, of any
hazardous substance or petroleum substance onto, at or near the Premises or any
other real property, and, to the best of the Company's knowledge, the Premises
has never been subject to a release, or a threat of release, of any hazardous
substance or petroleum substance.
3.25. COMPLIANCE WITH LAW; PERMITS.
(a) The Company and each of its Subsidiaries (i) is in compliance in
all material respects with all applicable Federal, State and local laws, rules,
regulations, ordinances and policies; and (ii) is not in default under any
applicable order, writ injunction or decree of any court or governmental
authority having jurisdiction over the Company or any of its Subsidiaries,
except where such default would not result in a Material Adverse Effect.
(b) EXHIBIT 3.25 sets forth a true and complete list of each material
permit, license, order or other authorization of Federal, State, local or
foreign governmental or regulatory bodies held by the Company and each of its
Subsidiaries (other than State corporation qualifications) in the conduct of its
business (collectively the "Permits"), together with the issuing authority and
the date of expiration. To the knowledge of the Company, the Permits constitute
all of the material permits, licenses, orders and other authorizations and
approvals required to permit the Company and each of its Subsidiaries to own and
lease its properties and assets and to conduct its business as it is currently
conducted. All of the Permits are in full force and effect and the Company and
each of its Subsidiaries currently operates within the limits thereof and there
are no proceedings pending or threatened, which could reasonably be expected to
result in the revocation, cancellation, suspension, non-renewal or any material
adverse modification of any of the Permits, except in cases that would not
result in a Material Adverse Effect. The Company and each of its Subsidiaries
has filed all reports and has paid all fees required to obtain and maintain the
Permits.
3.26. FINANCIAL STATEMENTS. The Company has furnished to each of the
Purchasers a complete and correct copy of the audited balance sheet of the
Company at December 31, 1998 and the related audited statements of operations
and cash flows for the fiscal period then ended (collectively, the "Financial
Statements"). The Financial Statements are complete and correct in all material
respects, are in material conformity with the books and records of the Company
and present fairly in all material respects the financial condition and results
of operations of the Company, at the dates and for the periods indicated, and
have been prepared in accordance with generally accepted accounting principles
("GAAP") consistently applied.
3.27. YEAR 2000 COMPLIANCE . The Company has undertaken an assessment of
the Information Technology used by the Company and has made inquiry to all
Material Third Parties regarding their Year 2000 Compliance with respect to
their Information Technology used by the Company. The Company is, or is
scheduled for testing before September 30, 1999 to be able to become, Year 2000
Compliant except to the extent any such non-compliance would not have a Material
Adverse Effect. Such Material Third Parties claim they are or will become Year
2000 Compliant with respect to their Information Technology used by the Company.
As used in this
Section 3.27: (a) the words "Year 2000 Compliant" mean, with respect to a
natural or legal person, that all Information Technology used in that person's
business activities will: (i) accurately process all date and time data
(including, but not limited to, calculating, comparing and sequencing)
including, without limiting the foregoing, between the years 1999 and earlier
and the years 2000 and later (in either direction, forward or backward); (ii)
accurately process leap year calculations for date and time data; and (iii) when
used in combination with any other Information Technology, accurately process
date and time data if the other Information Technology properly exchanges date
and time data with it; (b) the words "Information Technology" mean any and all
systems, facilities and devices by which information (including data, text and
images) is generated, stored, processed, displayed, received or communicated,
including computer hardware and computer software; and (c) the words "Material
Third Party" mean any of the Company's information exchange partners, suppliers
and vendors that own any Information Technology which is material to the
Company's business.
3.28. MERGER DISCUSSIONS. The Board of Directors of the Company has not
entertained a merger or acquisition proposal by any Person during the six month
period ended on the date of this Agreement.
ARTICLE IV COVENANTS OF THE COMPANY
4.01. AFFIRMATIVE COVENANTS OF THE COMPANY OTHER THAN REPORTING
REQUIREMENTS. Without limiting any other covenants and provisions hereof, the
Company covenants and agrees that until the consummation of a Qualified Public
Offering (as defined in Article VI hereof), it will perform and observe the
following covenants and provisions, and will cause each Subsidiary, if and when
such Subsidiary exists, to perform and observe such of the following covenants
and provisions as are applicable to such Subsidiary:
(a) MAINTENANCE OF INSURANCE. Obtain and maintain and cause each
Subsidiary to maintain, from responsible and reputable insurance companies or
associations key person life insurance policies on the lives of any Key Employee
as may be determined (with respect to identity, amount and terms) by the Board
of Directors, with the proceeds thereof payable to the order of the Company.
Maintain, and cause each Subsidiary to maintain, insurance with responsible and
reputable insurance companies or associations in such amounts and covering such
risks as is customarily carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Company or such
Subsidiary operates, but in any event in amounts sufficient to prevent the
Company or Subsidiary from becoming a co-insurer (except as approved by the
Board of Directors). The Company will not cause or permit any assignment of the
proceeds of any of the life insurance policies specified in the first sentence
of this paragraph and will not borrow against such policies. The Company will,
at its expense, use its best efforts to obtain and maintain directors' and
officers' liability insurance in an amount and for premiums which are on
commercially reasonable terms for comparable companies as determined by the
Board of Directors.
(b) PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain, and
cause each Subsidiary to preserve and maintain, its corporate existence, rights
and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified, and cause
each Subsidiary to 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 or lease of its properties.
Secure, preserve and maintain, and cause each Subsidiary to secure, preserve and
maintain, all licenses and other rights to use patents, processes, licenses,
permits, trademarks, trade names, inventions, intellectual property rights or
copyrights owned or possessed by it and deemed by the Company to be necessary to
the conduct of its business or the business of any Subsidiary, as the case may
be.
(c) INSPECTION. Permit, upon reasonable request and notice, during
normal business hours and without disruption of the Company's business, each of
the Purchasers or any agents or representatives thereof, to examine and make
copies of and extracts from the records and books of account of, and visit and
inspect the properties of the Company and any Subsidiary, to discuss the
affairs, finances and accounts of the Company and any Subsidiary with any of its
officers, directors or Key Employees and independent accountants, and consult
with and advise the management of the Company and any Subsidiary as to their
affairs, finances and accounts, all at reasonable times. Each Purchaser agrees
that it will use its best efforts to maintain the confidentiality of any
information so obtained by it which is not otherwise available from other
sources (and will use its best efforts to prevent such confidential information
from becoming known to the Company's competitors), subject to the disclosure of
information of a non-technical nature, including financial information, which
such Purchaser discloses to its partners and/or shareholders generally.
(d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Keep, and cause each
Subsidiary to 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
any Subsidiary.
(e) BUDGETS APPROVAL. Not later than thirty (30) days prior to the
commencement of each fiscal year, prepare and submit to, and obtain the approval
of a majority of, the Board of Directors, an annual budget with monthly
operating budgets in detail for such fiscal year, including capital and
operating expense budgets, cash flow projections and profit and loss
projections, all itemized in reasonable detail (including itemization of
provisions for officers' compensation).
(f) STOCK RESTRICTION AGREEMENTS. If any officer, employee or
consultant (including each Key Employee) receives any shares of Class B Common
Stock or rights or options to purchase shares of Class B Common Stock pursuant
to a stock purchase or option plan or other employee stock incentive program,
cause each such officer, employee and consultant to execute and deliver an
agreement in a form as deemed appropriate by the affirmative vote of a majority
of the members of the Board of Directors.
(g) THE BOARD OF DIRECTORS. Call and, to the extent a quorum can be
maintained, hold a meeting of the Company's Board of Directors at least every
six weeks; provided that, if approved by the Board of Directors after July 1,
1999, the frequency of Board
meetings may be reduced to once each fiscal quarter. Promptly pay all
out-of-pocket expenses reasonably incurred by each director of the Board of
Directors of the Company in attending each meeting of the Board of Directors or
any committee thereof. At the first meeting of the Company's Board of Directors
held after the date of Closing, the Company shall cause each of the Subsidiaries
to adjust the composition of its Board of Directors, any committees thereof and
its executive officers such that they are either (i) identical in person and
number to that of the Company, or (ii) composed of such persons as is determined
by the Company's Board of Directors.
(h) CHECK SIGNING. Require the signature of at least two officers of
the Company on any single check equal to or greater than $25,000 or such larger
amount as is set by the Company's Board of Directors from time to time.
(i) COMPENSATION. Provide to the Board of Directors information
regarding proposed (i) option grants to employees, consultants and directors;
and (ii) compensation and fringe benefits, both direct and indirect, of all Key
Employees, all vice presidents, all consultants (other than consultants to whom
total consideration during any year does not exceed $250,000) and all directors
of the Company and each Subsidiary, for advance approval by the Board of
Directors prior to or at the next scheduled Board meeting thereafter, so
informing those employees, consultants, or directors of such proposed option
grant, compensation or fringe benefit; provided that all such proposed
compensation and fringe benefits offered prior to Board approval shall be
contingent upon such Board approval.
(j) AVAILABLE SHARES. At all times, reserve and keep available out of
its authorized but unissued shares of Class B Common Stock, for the purpose of
effecting the conversion of the Purchased Shares, such number of its duly
authorized shares of Class B Common Stock as shall be sufficient to effect the
conversion of the Purchased Shares from time to time outstanding. If at any time
the number of authorized but unissued shares of Class B Common Stock shall not
be sufficient to effect the conversion of the Purchased Shares, the Company
shall take such corporate action as may be necessary to increase its authorized
but unissued shares of Class B Common Stock 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 which may be
required under applicable state securities laws in connection with the issuance
of shares of Class B Common Stock upon conversion of the Purchased Shares.
(k) NON-DISCLOSURE AGREEMENTS. The Company shall use its best efforts
to obtain an Assignment of Inventions and Non-Disclosure Agreement in such form
as is approved by the Board of Directors, from all officers, key employees or
other employees who will have access to confidential information of the Company
or any of its Subsidiaries, upon their employment by the Company or any of its
Subsidiaries.
4.02. NEGATIVE COVENANTS OF THE COMPANY. Without limiting any other
covenants and provisions hereof, the Company covenants and agrees that, until
the consummation of a Qualified Public Offering, it will comply with and observe
the following covenants and
provisions, and will cause each Subsidiary, if and when such Subsidiary exists,
to comply with and observe such of the following covenants and provisions as are
applicable to such Subsidiary, and will not, without the consent of the holders
of at least 50% in interest of the Series A Preferred, the Series B Preferred
and Series C Preferred, voting together as a single class:
(a) INDEBTEDNESS. Except as set forth on EXHIBIT 4.02(a), create,
incur, assume or suffer to exist, or permit any Subsidiary to create, incur,
assume or suffer to exist, any liability with respect to (i) Indebtedness
(excluding letters of credit or indemnities for letters of credit issued by
others) for money borrowed which exceeds in the aggregate $1,000,000, or (ii)
without the prior approval of a majority of the members of the Board of
Directors, Indebtedness in respect of lease obligations which exceeds in the
aggregate $300,000.
(b) MERGER OR SALE. Merge or consolidate with or into any other
entity, sell or lease to any person or entity any assets constituting all or
substantially all of the assets of the Company, or agree to do or permit any
Subsidiary to do any of the foregoing, except that any wholly owned Subsidiary
may merge into or consolidate with the Company or with or into any other wholly
owned Subsidiary.
(c) ASSUMPTIONS OR GUARANTIES OF INDEBTEDNESS OF OTHER PERSONS.
Assume, guarantee, endorse or otherwise become directly or contingently liable
on, or permit any Subsidiary to assume, guarantee, endorse 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 the debtor or otherwise to
assure the creditor against loss) any Indebtedness of any other Person, except
for guaranties by endorsement of negotiable instruments for deposit or
collection in the ordinary course of business and except for the guaranties of
the permitted obligations of any wholly owned Subsidiary.
(d) DISTRIBUTIONS. Except as required by the Company's Restated
Certificate of Incorporation, declare or pay any dividends, purchase, redeem,
retire, or otherwise acquire for value any of its capital stock (or rights,
options or warrants to purchase such shares) now or hereafter outstanding,
return any capital to its stockholders as such, or make any distribution of
assets to its stockholders as such, or permit any Subsidiary to do any of the
foregoing (such transactions being hereinafter referred to as "Distributions"),
EXCEPT that any such Subsidiary may declare and make payment of cash and stock
dividends, return capital and make distributions of assets to the Company,
PROVIDED, HOWEVER, that nothing herein contained shall prevent the Company from:
(i) effecting a stock split (except for a reverse stock split),
or
(ii) redeeming any shares of a deceased stockholder out of
insurance held by the Company on that stockholder's life, or
(iii) repurchasing, at the original purchase price of such
shares, any shares of the Company's capital stock held by officers,
employees, directors or
consultants of the Company which are subject to restrictive stock purchase
agreements under which the Company is entitled to repurchase such shares
upon the occurrence of certain events, including the termination of
employment,
if in the case of any such transaction the payment can be made in compliance
with the other terms of this Agreement.
(e) CHANGE IN NATURE OF BUSINESS. Make or permit any Subsidiary to
make, any material change in the nature of its business as contemplated in
written materials delivered to the Purchasers prior to the date hereof.
(f) OWNERSHIP OF SUBSIDIARIES. Without the prior approval of the Board
of Directors, purchase or hold beneficially any stock, other securities or
evidences of Indebtedness in, or make any investment in or provide any extension
of credit to any other Person, excluding a wholly-owned or controlled subsidiary
of the Company.
(g) CAPITAL EXPENDITURES. Except as set forth on EXHIBIT 4.02(g),
incur any Capital Expenditures (as defined in Article VI hereof) with respect to
a single item, asset, store, commissary or project in excess of $500,000 or
exceed the projections for Capital Expenditures contained in the Business Plan
by more than twenty-five percent (25%).
(h) DEALINGS WITH AFFILIATES AND OTHERS. Other than as contemplated by
this Agreement or set forth in EXHIBIT 4.02(h), and other than arms-length
transactions in the ordinary course of business involving less than $5,000,
enter into any transaction, including, without limitation, any loans or
extensions of credit or royalty agreements, with any officer or director of the
Company or any Subsidiary or holder of any class of capital shares of the
Company, or any member of their respective immediate families or any corporation
or other entity directly or indirectly affiliated with one or more of such
officers, directors or stockholders or members of their immediate families
unless such transaction is approved in advance by a majority of the members of
the Board of Directors who have no interest in such transaction, or absent such
Board of Directors approval, by all of the Purchasers.
(i) COMPENSATION. Unless approved by a majority of the members of the
Board of Directors, issue or authorize for issuance any Reserved Management
Shares (including options for the purchase thereof), or increase by more than
ten percent (10%) in any calendar year the salary and/or bonus of any Key
Employee or any vice president of the Company or any Subsidiary.
(j) INVESTMENT IN OTHER CORPORATIONS. Make or permit any Subsidiary to
make, any loan or advance to any Person in excess of $250,000, or purchase,
otherwise acquire, or permit any Subsidiary to purchase or otherwise acquire,
the capital stock, assets comprising the business of, obligations of, or any
interest in, any other corporation or entity.
(k) VESTING OF RESERVED MANAGEMENT SHARES. Grant to any of its
employees options or other rights to purchase Reserved Management Shares which
will become exercisable
or vest, as the case may be, at a rate in excess of 25% per annum from the date
of hire by the Company or any Subsidiary unless otherwise authorized by the
Board of Directors.
(l) ISSUANCE OF RESERVED MANAGEMENT SHARES. Issue any shares (or any
options to purchase shares) of Class B Common Stock which are Reserved
Management Shares in excess of 3,500,000 shares.
(m) CONSIDERATION FOR ISSUANCES OF COMMON STOCK. Except as set forth
in EXHIBIT 4.02(m), issue, sell or exchange, agree to issue, sell or exchange,
or reserve or set aside for issuance, sale or exchange, shares of its Common
Stock, or any securities convertible into Common Stock, without consideration or
for non-cash consideration; except for (i) Common Stock issued upon any
subdivision or combination of shares of Common Stock, (ii) the issuance of any
Converted Shares or (iii) the issuance of Reserved Management Shares.
(n) FURNITURE SHOWROOMS. Without the consent of a majority of the
Board of Directors, purchase any additional furniture showrooms.
(o) KEY EMPLOYEES. Terminate the employment of any Key Employee of the
Company or any vice president of the Company or any Subsidiary without the prior
approval of a majority of the Board of Directors.
4.03. REPORTING REQUIREMENTS. Until the consummation of a Qualified Public
Offering, the Company will furnish the following to each person who holds any of
the Shares:
(a) MONTHLY REPORTS: as soon as available and in any event within
thirty (30) days after the end of each calendar month (excluding fiscal quarter
and year ending months addressed in subparagraphs (b) and (c) below),
consolidated and consolidating balance sheets of the Company and its
Subsidiaries as of the end of such month and consolidated and consolidating
statements of income and retained earnings of the Company and its Subsidiaries
for such month and for the period commencing at the end of the previous fiscal
year and ending with the end of such month, setting forth in each case in
comparative form the corresponding figures for the corresponding period of the
preceding fiscal year, and including comparisons to monthly budgets, a summary
of the Company's aging accounts receivable and accounts payable, a cash flow
analysis for such month, a schedule showing each expenditure of a capital nature
in excess of $50,000 during such month, detail of sales and profits for such
month and the year-to-date, all in reasonable detail and duly certified by the
chief financial officer of the Company as having been prepared in accordance
with generally accepted accounting principles consistently applied (except for
year-end adjustments and the absence of footnotes);
(b) QUARTERLY REPORTS: as soon as available and in any event within
sixty (60) days after the end of each of the first three (3) quarters of each
fiscal year of the Company, consolidated and consolidating balance sheets of the
Company and its Subsidiaries as of the end of such quarter and consolidated and
consolidating statements of income and retained earnings and cash flows of the
Company and its Subsidiaries for such quarter and for the period commencing at
the end of the previous fiscal year and ending with the end of such quarter,
setting forth in each case in comparative form the corresponding figures for the
corresponding period of the preceding fiscal year, and including comparisons to
quarterly budgets and a summary discussion of the Company's principal functional
areas, all in reasonable detail and duly certified (subject to year-end audit
adjustments and the absence of footnotes) by the chief financial officer of the
Company as having been prepared in accordance with generally accepted accounting
principles consistently applied;
(c) ANNUAL REPORTS: as soon as available and in any event within 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 and consolidating balance sheets of the Company and its
Subsidiaries as of the end of such fiscal year and consolidated and
consolidating statements of income and retained earnings and of changes in the
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, all such consolidated statements to be duly certified by
the chief financial officer of the Company and by such independent public
accountants of recognized national standing as have been approved by a majority
of the Board of Directors;
(d) BUDGETS: as soon as available after approval by the Board of
Directors, a business plan and monthly operating budgets for the forthcoming
fiscal year;
(e) NOTICE OF ADVERSE CHANGES: promptly after the occurrence thereof
and in any event within thirty (30) Business Days after such occurrence is known
to the Company, notice of any material adverse change in the operations or
financial condition of the Company or any material default in any other material
agreement to which the Company is a party;
(f) WRITTEN REPORTS: promptly upon receipt or publication thereof, any
written reports submitted to the Company by independent public accountants in
connection with an annual or interim audit of the books of the Company and its
Subsidiaries made by such accountants or by consultants or other experts in
connection with such consultant's or other expert's review of the Company's
operations or industry, and written reports prepared by the Company to comply
with other investment or loan agreements;
(g) NOTICE OF PROCEEDINGS: 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, affecting the Company or any Subsidiary of the type described in
Section 3.04;
(h) STOCKHOLDERS' AND SEC REPORTS: promptly upon sending, making
available, or filing the same, such reports and financial statements as the
Company or any Subsidiary shall send or make available to the stockholders of
the Company or file with the Securities and Exchange Commission; and
(i) OTHER INFORMATION: such other information respecting the business,
properties or the condition or operations, financial or otherwise, of the
Company or any of its Subsidiaries as any holder of the Shares may from time to
time reasonably request.
ARTICLE V RIGHT OF FIRST REFUSAL
5.01. RIGHT OF FIRST REFUSAL. The Company shall not issue, sell or
exchange, agree or obligate itself to issue, sell or exchange, or reserve or set
aside for issuance, sale or exchange, any (i) shares of Class A Common Stock,
(ii) shares of Class B Common Stock, (iii) any other equity security of the
Company, including without limitation, shares of Series A Preferred, Series B
Preferred or Series C Preferred, (iii) any debt security of the Company (other
than a bank line of credit or other Indebtedness for borrowed money from an
institutional lender, in each case with no equity feature) including without
limitation, any debt security which by its terms is convertible into or
exchangeable for any equity security of the Company, (iv) any security of the
Company that is a combination of debt and equity, or (v) any option, warrant or
other right to subscribe for, purchase or otherwise acquire any such equity
security or any such debt security of the Company, unless in each case the
Company shall have first offered to sell such securities (the "Offered
Securities") to the holders of the Series A Preferred, Series B Preferred and
the Purchasers (together, the "Investors") as follows: The Company shall offer
to sell to each Investor (a) that number of such securities so that, after
giving effect to such issuance, such Investor will continue to maintain its same
proportionate equity ownership in the Company as of the date of such notice on a
fully diluted basis assuming the shares reserved for issuance upon the exercise
of options have been issued (the "Basic Amount"), and (b) such additional
portion of the Offered Securities as such Investor shall indicate it will
purchase should the other Investor subscribe for less than their Basic Amounts
(the "Undersubscription Amount"), at a price and on such other terms as shall
have been specified by the Company in writing delivered to such Investor (the
"Offer"), which Offer by its terms shall remain open and irrevocable for a
period of twenty (20) days from receipt of the offer.
5.02. NOTICE OF ACCEPTANCE. Notice of each Investor's intention to accept,
in whole or in part, any Offer made pursuant to Section 5.01 shall be evidenced
by a writing signed by such Investor and delivered to the Company prior to the
end of the 20-day period of such offer, setting forth such of the Investor's
Basic Amount as such Investor elects to purchase and, if such Investor shall
elect to purchase all of its Basic Amount, any Undersubscription Amount as such
Investor shall elect to purchase (the "Notice of Acceptance"). If the Basic
Amounts subscribed for by all Investors are less than the total Offered
Securities, then each Investor who has set forth Undersubscription Amounts in
its Notice of Acceptance shall be entitled to purchase, in addition to the Basic
Amounts subscribed for, all Undersubscription Amounts it has subscribed for;
PROVIDED, HOWEVER, that should the Undersubscription Amounts subscribed for
exceed the difference between the Offered Securities and the Basic Amounts
subscribed for (the "Available Undersubscription Amount"), each Investor who has
subscribed for any Undersubscription Amount shall be entitled to purchase only
that portion of the Available Undersubscription Amount as the Undersubscription
Amount subscribed for by such Investor bears to the total Undersubscription
Amounts subscribed for by all Investor, subject to rounding by the Board of
Directors to the extent it reasonably deems necessary.
5.03. CONDITIONS TO ACCEPTANCES AND PURCHASE.
(a) PERMITTED SALES OF REFUSED SECURITIES. In the event that Notices
of Acceptance are not given by the Investors in respect of all the Offered
Securities, the Company shall not be obligated to sell the part of such Offered
Securities as to which a Notice of Acceptance has not been given by the
Investors (the "Refused Securities"), and the Company shall have 120 days from
the expiration of the period set forth in Section 5.01 to sell all or any part
of the Refused Securities to the Person or Persons specified in the Offer, but
only in all respects upon terms and conditions, including, without limitation,
unit price and interest rates, which are no more favorable, in the aggregate, to
such other Person or Persons or less favorable to the Company than those set
forth in the Offer.
(b) REDUCTION IN AMOUNT OF OFFERED SECURITIES. In the event the
Company shall propose to sell less than all the Refused Securities (any such
sale to be in the manner and on the terms specified in Section 5.03(a) above),
then each Investor may, at its sole option and in its sole discretion, reduce
the number of, or other units of the Offered Securities specified in its
respective Notices of Acceptance to an amount which shall be less than the
amount of the Offered Securities which the Investor elected to purchase pursuant
to Section 5.02 multiplied by a fraction, (i) the numerator of which shall be
the amount of Offered Securities which the Company actually proposes to sell,
and (ii) the denominator of which shall be the amount of all Offered Securities.
In the event that any Investor so elects to reduce the number or amount of
Offered Securities specified in its respective Notices of Acceptance, the
Company may not sell or otherwise dispose of more than the reduced amount of the
Offered Securities until such securities have again been offered to the
Investors in accordance with Section 5.01.
(c) CLOSING. Upon the closing of the sale to such other Person or
Persons of all or less than all of the Refused Securities, the Investors shall
purchase from the Company, and the Company shall sell to the Investors (upon
full payment for such shares), the number of Offered Securities specified in the
Notices of Acceptance, as reduced pursuant to Section 5.03(b) if the Investors
have so elected, upon the terms and conditions specified in the Offer. The
purchase by the Investors of any Offered Securities is subject in all cases to
the preparation, execution and delivery by the Company and the Investors of a
purchase agreement relating to such Offered Securities reasonably satisfactory
in form and substance to the Investors and their counsel.
5.04. FURTHER SALE. In each case, any Offered Securities not purchased by
the Investors or other Person or Persons in accordance with Section 5.03 may not
be sold or otherwise disposed of until they are again offered to the Investors
under the procedures specified in Sections 5.01, 5.02 and 5.03.
5.05. TERMINATION OF RIGHT OF FIRST REFUSAL. The rights of the Investors
under this Article V shall terminate immediately prior to the consummation of a
Qualified Public Offering.
5.06. EXCEPTION. The rights of the Investors under this Article V shall not
apply to:
(a) up to 3,500,000 shares of Class B Common Stock (as adjusted for a
stock splits and the like) or options exercisable therefor, issued or issuable
to officers, employees or consultants for the Company or any Subsidiary pursuant
to the Company's 1998 Stock Incentive Plan or other stock incentive plan;
(b) equity securities of the Company issued pursuant to the
acquisition of another corporation by the Company by merger (whereby the Company
owns no less than fifty-one percent (51%) of the voting power of such
corporation) or purchase of substantially all of its stock or assets;
(c) the Converted Shares;
(d) the issuance of shares of Series B Preferred upon exercise of the
Comdisco Warrants, or the issuance of shares of Class B Common Stock upon
conversion of the shares of Series B Preferred issued upon exercise of the
Comdisco Warrants;
(e) the issuance of shares of Class B Common Stock upon conversion of
the shares of Class A Common Stock outstanding as of the date of this Agreement;
(f) the issuance of shares of Class B Common Stock upon conversion of
the shares of Series B Preferred outstanding as of the date of this Agreement;
or
(g) the issuance of shares of Class B Common Stock upon conversion of
the shares of Series C Preferred issued pursuant to this Agreement.
5.07. FIRST QUALIFIED PUBLIC OFFERING .
(a) RIGHT OF FIRST REFUSAL. Notwithstanding the provisions of Section
5.05 of this Agreement but subject to the limitations set forth in Section 5.06
and this Section 5.07, the Company hereby grants to Purchasers holding Series C
Preferred a right of first refusal to purchase such Purchaser's Proportionate
Share of the shares of Class B Common Stock from the shares of Class B Common
Stock to be issued at the closing of the Company's first Qualified Public
Offering, if any. The price per share of Class B Common Stock which each such
Purchaser becomes entitled to purchase by reason hereof shall be the public
offering price per share of Class B Common Stock in such Qualified Public
Offering (the "Offering Price").
(b) LIMITATIONS. Subject to the limitations set forth in the following
sentence, the "Proportionate Share" for each such Purchaser shall be that number
of shares of the Class B Common Stock to be issued in such Qualified Public
Offering necessary so that, after giving effect to such issuance, such Purchaser
will continue to maintain its same proportionate equity ownership in the
Company, as of the date immediately prior to the effective date of the
registration statement covering such Qualified Public Offering, on a fully
diluted basis assuming, among other things, the shares reserved for issuance
upon the exercise of options have been issued. Notwithstanding the foregoing
sentence, such Proportionate Share, in the aggregate for
all Purchasers, may not exceed 8% of the number of shares of Class B Common
Stock issued by the Company in such Qualified Public Offering (exclusive of the
number of shares of Class B Common Stock issued pursuant to any underwriter's
overallotment option); PROVIDED, HOWEVER, the managing underwriter of such
offering shall be entitled to reduce in whole or in part the Proportionate Share
to the extent determined necessary by the managing underwriter in its sole
discretion (X) to the success of such offering (including without limitation
that purchase by a Purchaser of its Proportionate Share would adversely affect
any of the offering price, offering size, likelihood of completion or completion
date) for reasons set forth in writing to the Purchasers no less than five days
prior to the anticipated effective date of the registration statement covering
such offering or (Y) to comply with the rules or regulations of the Securities
and Exchange Commission, the National Association of Securities Dealers, Inc.,
the Nasdaq Stock Market, Inc., or other regulatory body or exchange for reasons
set forth in writing to the requesting Purchasers no less than one day prior to
the anticipated effective date of the registration statement covering such
offering. Any reduction (in whole or in part) in any Purchaser's Proportionate
Share shall be PRO RATA among the Purchasers expressing an interest in receiving
an offer from the Company in accordance with subsection 5.07(d) below (the "IPO
Purchasers") based upon the number of Shares then held by the IPO Purchasers.
(c) SOLICITATION OF INTEREST. Except as (and to the extent) prohibited
by law, the Company shall, no less than one day prior to the anticipated
effective date of the registration statement covering such Qualified Public
Offering, deliver by facsimile transmission to the Purchasers holding Series C
Preferred a notice (a "Solicitation of Interest") with respect to such Qualified
Public Offering stating the Company's bona fide intention to offer shares of
Class B Common Stock in such Qualified Public Offering. The Company shall send
the Solicitation of Interest to each such Purchaser at the fax number for such
Purchaser set forth in the Company's corporate records or such other fax number
that such Purchaser shall from time to time specify in writing to the Company.
(d) EXPRESSION OF INTEREST. Each such Purchaser shall, on or before
5:00 p.m. (Boston time) on the immediately succeeding business day after receipt
of the Solicitation of Interest (the "Expression of Interest Deadline"), by
facsimile transmission to the Company and its counsel, notify the Company of its
desire (an "expression of interest") in receiving an offer to purchase (i) all
or part of its Proportionate Share (specifying, if less than its Proportionate
Share, the number of shares it desires to receive an offer to purchase) and (ii)
a number of shares, if any, in excess of such Purchaser's Proportionate Share
that it desires to receive an offer to purchase (the "Excess Shares"), subject
in each case to the limitations set forth in this Section 5.07. A Purchaser
shall be deemed to have waived its right to receive an offer to purchase any of
the shares in such Qualified Public Offering if the Company does not receive the
Purchaser's expression of interest as aforesaid by the Expression of Interest
Deadline. The Company may, during the 60-day period after expiration of the
Expression of Interest Deadline, either solicit expression of interests from any
person or persons with respect to that portion of such Class B Common Stock for
which the such Purchasers have not made an expression of interest or determine
not to offer or sell such portion, in whole or in part; PROVIDED, HOWEVER, if
the Company does not consummate the sale of the Shares in such Qualified Public
Offering within 60 days of the Solicitation of Interest, the right provided
hereunder shall be deemed revived as to
all Purchasers holding Series C Preferred. If any Purchaser expresses an
interest in receiving an offer to purchase a number of shares that is less than
its Proportionate Share (or is deemed to waive its right to receive an offer to
purchase its Proportionate Share in such Qualified Public Offering), each IPO
Purchaser requesting Excess Shares, if any, shall be entitled to receive an
offer from the Company for that number of additional shares equal to the lesser
of (A) the number of Excess Shares with respect to which such IPO Purchaser
expressed an interest and (B) such IPO Purchaser's allocable portion of all
Excess Shares based on the respective equity ownership in the Company
(determined as of the date immediately prior to the effective date of the
registration statement covering such Qualified Public Offering on a fully
diluted basis assuming, among other things, the shares reserved for issuance
upon the exercise of options have been issued) by all IPO Purchasers who
expressed an interest in receiving an offer to purchase Excess Shares.
(e) An IPO Purchaser's notification pursuant to subsection 7.05(d)
shall be deemed an expression of interest in receiving an offer by the Company
to purchase the number of shares of Class B Common Stock indicated by such IPO
Purchaser pursuant to subsection 5.07(d) above (including any Excess Shares), in
each case subject to the limitations set forth in this Section 5.07. The
Company's offer to sell such shares to the IPO Purchasers shall be deemed to
occur automatically two hours after the latest to occur of (A) the effectiveness
of the registration statement covering such Qualified Public Offering and (B)
the Company's determination of the Offering Price (the completion of the last to
occur of the foregoing, the "Offer Commencement"). Each IPO Purchaser shall have
an unconditional right to withdraw its expression of interest by written notice
to the Company on or before the Offer Commencement. Once so withdrawn, the
Company shall have no obligation to offer or to sell, and the IPO Purchaser
shall have no obligation to purchase, any shares. An IPO Purchaser's expression
of interest shall, unless so withdrawn by such IPO Purchaser on or before the
Offer Commencement, automatically be deemed to be a binding commitment to
purchase the shares of Class B Common Stock, including any Excess Shares,
indicated by such IPO Purchaser pursuant to subsection 5.07(d) above, but
subject to the limitations set forth in this Section 5.07) immediately after the
Offer Commencement. The IPO Purchasers' purchase of such shares shall occur
simultaneously with the closing of the purchase and sale of the other shares of
Class B Common Stock distributed in such Qualified Public Offering pursuant to a
stock purchase agreement in form satisfactory to the Company, and each IPO
Purchaser shall thereat pay the purchase price for its shares by wire transfer
to the Company of immediately available funds. As promptly as practicable (and
in any event within ten days) thereafter, the Company shall issue and deliver to
each IPO Purchaser at the Company's principal office a certificate or
certificates for such shares.
(f) Notwithstanding anything in this Agreement to the contrary, the
Company shall not be required to take any actions pursuant to this Section 5.07
that would be inconsistent with any federal or state securities laws, rules,
regulations or interpretations (including without limitation Rule 134 under the
Securities Act) or the rules or regulations of the National Association of
Securities Dealers, Inc., the Nasdaq Stock Market, Inc. or other regulatory body
or exchange.
(g) The rights of the Purchasers under this Section 5.07 shall
terminate upon the earlier of (i) immediately after the Offer Commencement and
(ii) immediately prior to the sale of all or substantially all of the assets or
business of the Company, by merger, sale of assets or otherwise.
(h) The Purchasers agree that none of the Company or its officers,
directors, employees, shareholders, affiliates, successors, transferees,
assigns, agents or representatives or any underwriter shall have any liability
to the Purchasers arising in connection with any reduction or elimination of any
Proportionate Share taken in accordance with subsection 5.07(b) except to the
extent arising out of the Company's bad faith.
ARTICLE VI DEFINITIONS AND ACCOUNTING TERMS
6.01. CERTAIN DEFINED TERMS. 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" means this Series C Preferred Purchase Agreement as from time
to time amended and in effect between the parties, including all Exhibits
hereto.
"Board of Directors" means the board of directors of the Company as
constituted from time to time.
"Business Plan" means the Company's Operating Plan, dated April 24, 1999,
together with all Exhibits thereto, as delivered to representatives of the
Purchasers.
"Capital Expenditures" for any period shall mean all amounts debited or
required to be debited to the fixed asset accounts on the balance sheet of the
Company during such period in accordance with generally accepted accounting
principles in respect of (a) the acquisition, development or improvement of any
computer hardware, software or equipment, (b) the acquisition, construction,
improvement, replacement or betterment of land, buildings, machinery, equipment
or of any other fixed assets or leaseholds, and (b) to the extent related to and
not included in (a) or (b) above, materials, contract labor and direct labor
(excluding expenditures properly chargeable to repairs or maintenance in
accordance with generally accepted accounting principles).
"Class A Common Stock" means the Company's Class A Common Stock, $.01 par
value, as authorized as of the date of this Agreement, having the rights,
powers, privileges and preferences set forth in EXHIBIT 1.01A hereto.
"Class B Common Stock" includes (a) the Company's Class B Common Stock,
$.01 par value, as authorized as of the date of this Agreement, having the
rights, powers, privileges and preferences set forth in EXHIBIT 1.01A, (b) any
other capital shares 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, without limitation as to amount, either to all or to a share of the
balance of current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference, and the
holders of which shall ordinarily, in the absence of contingencies or in the
absence of any provision to the contrary in the Company's Restated Certificate
of Incorporation, be entitled to vote for the election of a majority of
directors of the Company (even though the right so to vote has been suspended by
the happening of such a contingency or provision), 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.
"Comdisco Warrants" means the warrants to purchase up to 202,465 shares of
Series B Preferred which the Company may issue to Comdisco, Inc. in connection
with subordinated debenture financing and capital lease transactions consistent
with the term sheet approved by the Company's Board of Directors prior to the
date hereof and previously provided to the Purchasers.
"Company" means and shall include Xxxxxxxxx.xxx, Inc., a Delaware
corporation, and its successors and assigns.
"Consolidated" and "consolidating" when used with reference to any term
defined herein mean that term as applied to the accounts of the Company and its
Subsidiaries consolidated in accordance with generally accepted accounting
principles.
"Converted Shares" means those shares of Class B Common Stock into which
shares of Series C Preferred are convertible pursuant to the terms of the
Company's Restated Certificate of Incorporation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"GAAP" means in accordance with United States generally accepted accounting
principles, consistently applied.
"Indebtedness" means all obligations, contingent and otherwise, which
should, in accordance with generally accepted accounting principles, be
classified upon the obligor's balance sheet (or the notes thereto) as
liabilities, but in any event including liabilities secured by any mortgage on
property owned or acquired subject to such mortgage, whether or not the
liability secured thereby shall have been assumed, and also including (i) 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 (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business and (ii) 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.
"Key Employee" means and includes Xxxxxx Xxxxxx and Xxxxxxx Xxxxx, and any
other individual as may be reasonably designated by the Board of Directors of
the Company.
"Knowledge," "to the best of knowledge," "known," and any other words of
similar import as used with respect to representations and warranties by the
Company shall mean those matters or facts which are actually known or, upon
reasonable investigation should be known, by any Key Employee.
"Material Adverse Effect" means a material adverse effect on the business,
assets, condition (financial or otherwise) or results of operations of the
Company or any Subsidiary, taken as a whole.
"Person" means an individual, corporation, partnership, joint venture,
trust, or unincorporated organization, or a government or any agency or
political subdivision thereof.
"Purchaser" and "Purchasers" shall have that meaning attributable to it in
Section 1.01 of this Agreement.
"Qualified Public Offering" means a fully underwritten, firm commitment
public offering pursuant to an effective registration statement under the
Securities Act covering the offer and sale by the Company of any of its Class B
Common Stock in which the aggregate gross proceeds to the Company equal or
exceed $15,000,000.
"Reserved Management Shares" means shares of Class B Common Stock, not to
exceed in the aggregate 3,500,000 shares (appropriately adjusted to reflect
stock splits, stock dividends, combinations of shares and the like with respect
to the Class B Common Stock) reserved by the Company for issuance pursuant to
stock purchase, stock grant or stock option arrangements for employees,
directors or consultants of the Company, all under arrangements approved by the
Board of Directors.
"Securities Act" means 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" means the Series A Preferred Stock of the Company,
$.01 par value, having the rights, powers, privileges and preferences set forth
in EXHIBIT 1.01A.
"Series B Preferred" means the Series B Participating Convertible Preferred
Stock of the Company, $.01 par value, having the rights, powers, privileges and
preferences set forth in EXHIBIT 1.01A hereto.
"Series C Preferred" means the Series C Convertible Preferred Stock of the
Company, $.01 par value, having the rights, powers, privileges and preferences
set forth in EXHIBIT 1.01A hereto.
"Shares" shall have that meaning attributable to it in Section 1.01 of this
Agreement.
"Subsidiary" or "Subsidiaries" includes any corporation or trust of which
the Company and/or any of its other Subsidiaries (as herein defined) directly or
indirectly owns at the time at least fifty percent (50%) of the outstanding
shares of every class of such corporation or trust other than directors'
qualifying shares.
6.02. ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP.
ARTICLE VII MISCELLANEOUS
7.01. NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the part of
any party to this Agreement 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.
7.02. AMENDMENTS, WAIVERS AND CONSENTS. Any provision in this Agreement to
the contrary notwithstanding, and except as hereinafter provided, changes in or
additions to this Agreement may be made, and compliance with any covenant or
provision set forth herein may be omitted or waived, if the Company (i) shall
obtain consent thereto in writing from the holder or holders of at least 50% in
interest of the Series C Preferred, and (ii) shall deliver copies of such
consent in writing to any holders who did not execute such consent. 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. Notwithstanding anything to the contrary
contained herein, any amendment (A) which (x) increases any Purchaser's
obligations hereunder, (y) alters or amends the percentage stated in Section
4.02 hereof, or (z) grants to any one or more Purchasers any rights more
favorable than any rights granted to all other Purchasers or otherwise treats
any one or more Purchasers differently than all other Purchasers, must be
approved by each Purchaser so as to be effective against such Purchaser or (B)
to Article IV or Article V (other than Section 5.07) must be approved by 50% in
interest of the Series A Preferred, Series B Preferred and Series C Preferred,
voting together as a single class. For purposes of the immediately preceding
sentence as it applies to Article IV or Article V (other than Section 5.07),
holders of Series A Preferred and Series B Preferred shall be treated as
Purchasers.
7.03. ADDRESSES FOR NOTICES.
(a) All notices, requests, demands and other communications provided
for hereunder shall be in writing and mailed, sent by facsimile transmission or
delivered to each applicable party at the address set forth in EXHIBIT 1.01
hereto or at such other address as to which such party may inform the other
parties in writing in compliance with the terms of this Section.
If to any other holder of the 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 the addresses set forth on EXHIBIT 1.01 hereto or at such other
address as shall be designated by such Person in a written notice to the other
parties complying as to delivery with the terms of this Section.
If to the Company: at 0000 Xxxxxxxxx Xxxx, Xxxxx 0 Xxxxxxxxxx, XX 00000,
or via facsimile at (000) 000-0000, Attention: Xxxxxx Xxxxxx, or at such
other address as shall be designated by the Company in a written notice to
the other parties complying as to delivery with the terms of this Section;
with a copy to Xxxx and Xxxx LLP, 00 Xxxxx Xxxxxx, Xxxxxx, XX 00000, or via
facsimile at (000) 000-0000, Attention: Xxxxxxx X. Xxxxxx, Esq.
If to any Purchaser associated with Amerindo Investment Advisors Inc., with
a copy to Buchalter, Nemer, Fields & Younger, 000 Xxxxx Xxxxxxxx Xxxxxx, Xxx
Xxxxxxx, XX 00000 or via facsimile at (000) 000-0000, Attention: Xxxx Xxxxx,
Esq.
If to any Purchaser associated with the @Ventures Purchasers, with a copy
to Xxxxxxxx, Xxxxxxx & Xxxxxxx, 000 Xxxxxxx Xxxxxx, Xxxxxx, XX 00000 or via
facsimile at (000) 000-0000, Attention: Xxxxx Xxxxxx, Esq.
All such notices, requests, demands and other communications shall, (i)
when mailed (which mailing must be accomplished by express overnight courier
service or registered mail, return receipt requested), be effective two days
after deposited in the mails, (ii) when sent by facsimile, be effective one hour
after sending (or as of 8 a.m. Boston time on the following day, if faxed after
the later of 6 p.m. Boston time and the close of business of the recipient) and
(iii) when delivered by hand, upon receipt, in each case addressed as aforesaid,
unless otherwise provided herein.
7.04. COSTS, EXPENSES AND TAXES. The Company, on the one hand, and the
Purchasers, on the other hand, shall each bear its own costs and expenses
(including accounting and legal fees and related expenses) incurred in
connection with the preparation, execution and delivery of this Agreement and
the transactions contemplated hereby; PROVIDED, HOWEVER, the Company agrees to
pay, upon receipt of proper documentation in reasonable detail, up to $35,000 of
the reasonable fees and out-of-pocket expenses of legal counsel to the
Purchasers (which up to $15,000 shall be allocable to legal counsel of Amerindo
Investment Advisors Inc.). In addition, the Company shall pay (i) any and all
stamp and other similar taxes payable or determined to be payable in connection
with the execution and delivery of this Agreement, the issuance of the Shares,
and the other instruments and documents to be delivered hereunder or thereunder,
and
agrees to hold 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 (ii) upon receipt of proper documentation in reasonable detail, the
reasonable fees and out-of-pocket expenses of counsel to the Purchasers (not to
exceed $2,500 per transaction or $5,000 in the aggregate) incurred in connection
with reviewing any amendments, waivers, consents or approvals requested by the
Company in connection with this Agreement subsequent to the date hereof.
7.05. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Company and the Purchasers and their respective
heirs, successors and assigns, except that the Company shall not have the right
to delegate any of its respective obligations hereunder or to assign its
respective rights hereunder or any interest herein without the prior written
consent of the holders of at least 60% in interest of the Series C Preferred.
7.06. SURVIVAL. All representations and warranties made in this Agreement,
or any other instrument or document delivered in connection herewith or
therewith, and Section 7.13 shall survive the execution and delivery hereof or
thereof for a period of three years and Section 7.15 shall survive the execution
and delivery hereof or thereof without limitation.
7.07. PRIOR AGREEMENTS. This Agreement constitutes the entire agreement
between the parties and, supersedes any prior understandings or agreements
concerning the purchase and sale of the Shares.
7.08. SEVERABILITY. The provisions of this Agreement and the terms of the
Series C Preferred are severable and, in the event that any court of competent
jurisdiction shall determine that any one or more of the provisions or part of a
provision contained in this Agreement or the terms of the Series C Preferred
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision or part of a provision of this Agreement or the terms of the
Series C Preferred; but this Agreement and the terms of the Series C Preferred
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of a provision, had never been contained herein, and such
provisions or part reformed so that it would be valid, legal and enforceable to
the maximum extent possible.
7.09. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with and governed by the General Corporation Law of the State of
Delaware.
7.10. 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.
7.11. 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.
7.12. FURTHER ASSURANCES. From and after the date of this Agreement, upon
the request of any Purchaser or the Company, the Company and the Purchasers
shall execute and deliver such instruments, documents and other writings as may
be reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement and the Shares.
7.13. INDEMNIFICATION. The Company shall, with respect to the
representations and warranties made by the Company herein, indemnify, defend and
hold the Purchasers harmless against all liability, loss or damage, together
with all reasonable costs and expenses related thereto (including legal and
accounting fees and expenses), arising from the untruth, inaccuracy or breach of
any such representations or warranties of the Company. Without limiting the
generality of the foregoing, the Purchasers shall be deemed to have suffered
liability, loss or damage (to the extent of their ownership interest in the
Company) as a result of the untruth, inaccuracy or breach of any such
representations or warranties if such liability, loss or damage shall be
suffered by the Company as a result of, or in connection with, such untruth,
inaccuracy or breach or any facts or circumstances constituting such untruth,
inaccuracy or breach. Each Purchaser shall, severally and not jointly, with
respect to the representations and warranties made by such Purchaser herein,
indemnify, defend and hold the Company harmless against all liability, loss or
damage, together with all reasonable costs and expenses related thereto
(including legal and accounting fees and expenses), arising from the untruth,
inaccuracy or breach of any such representations or warranties of such
Purchaser.
7.14. AGGREGATION OF STOCK. All securities of the Company held or acquired
by an affiliate of any Purchaser or entities under common management with or
managed by such Purchaser shall be aggregated with those held or acquired by
such Purchaser for the purpose of determining the availability of or discharge
of any rights of such Purchaser under this Agreement.
7.15 CONFIDENTIALITY . Each Purchaser shall, and shall cause its affiliates
(as the term is defined in the Securities Act) (individually, an "Affiliate" and
collectively "Affiliates") to, hold in confidence and shall use its reasonable
best efforts to cause all officers, directors and personnel who continue after
the Closing to be employed by the Purchaser or any Affiliate thereof to hold in
confidence all knowledge and information of a secret or confidential nature with
respect to the business of the Company and its Affiliates and not to disclose,
publish or make use of the same without the consent of the Company, except to
the extent that the information shall have become public knowledge other than by
breach of this Agreement by such Purchaser, and provided that such Purchaser (i)
may disclose information if required by law upon prior written notice to the
Company and (ii) may disclose non-technical information regarding the Company's
business and financial performance which such Purchaser discloses generally to
its partners and/or shareholders. The Purchasers agree that the remedy at law
for any breach of this Section 7.15 would be inadequate and that the Company
shall be entitled to injunctive relief in addition to any other remedy it may
have upon breach of any provision of this Section 7.15.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
XXXXXXXXX.XXX, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
Counterpart Signature Page
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
THE COMPANY: PURCHASERS:
----------- ----------
XXXXXXXXX.XXX, INC., ATGF II
By: /s/ Xxxxxx Xxxxxx By: /s/
----------------------------- ----------------------------
Name: Xxxxxx Xxxxxx Name: _________________________
Title: President/Chief Executive Officer Title: _________________________
@VENTURES III, L.P.
By: @Ventures Partners III, L.L.C.
Its General Partner
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------
TRELLUS PARTNERS, L.P.
By: Trellus Company, LLC,
its General Partner
By /s/ Xxxx Xxxxx
------------------------------
Xxxx Xxxxx, President
RRE INVESTORS, L.P.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: General Partner
XXXXXXXXX.XXX, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
Counterpart Signature Page
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
RRE INVESTORS FUND, L.P.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: General Partner
COMDISCO, INC.
By: /s/ Xxxx X. Xxxxxx
------------------------------
Name: Xxxx X. Xxxxxx
Title: Senior Vice President
Venture Division
CMG@VENTURES III, L.L.C.
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------
Member
/s/ Xxxxxxx Xxxxxxxxxxx
---------------------------------
Xxxxxxx Xxxxxxxxxxx, individually
BRAND EQUITY VENTURES I, L.P.
By: Brand Equity Partners I, LLC,
Its: General Partner
By: /s/ Xxxxxxxxxxx X. Xxxxxxx
------------------------------
Xxxxxxxxxxx X. Xxxxxxx
Its: Managing Member
2
XXXXXXXXX.XXX, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
Counterpart Signature Page
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
PURCHASERS:
BESSEC VENTURES IV L.P.
By: Deer IV & Co. LLC,
General Partner
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------
Xxxxxx X. Xxxxxxxx, Manager
BESSEMER VENTURE PARTNERS IV, L.P.
By: Deer IV & Co. LLC,
General Partner
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------
Xxxxxx X. Xxxxxxxx, Manager
/s/ Xxxxx Xxxxxxxxxx
---------------------------------
Xxxxx Xxxxxxxxxx, individually
/s/ Xxxxxx Xxxxx
------------------------------
Xxxxxx Xxxxx, individually
3
XXXXXXXXX.XXX, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
Counterpart Signature Page
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
PURCHASERS:
COVESTCO-ATEURA, LLC
By: AtEura, LLC
Its: Manager
By: Venteura Limited
Its: Managing Member
By: /s/ Xxxxx X. Johann
------------------------------
Its: Director
------------------------------
4
XXXXXXXXX.XXX, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
Counterpart Signature Page
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
PURCHASERS:
@VENTURES INVESTORS, LLC
By: /s/
----------------------
Managing Member
@VENTURES FOREIGN FUND III, L.P.
By: /s/
-----------------------
Name:
Title:
5
XXXXXXXXX.XXX, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
Counterpart Signature Page
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
PURCHASERS:
ARKARO HOLDING B.V.
By: /s/ Xxxxx X. Van Der Sluijs-Xxxxxx
----------------------------------
Xxxxx X. van der Sluijs-Xxxxxx
Managing Director
6
EXHIBIT 1.01
SERIES C
NAME AND ADDRESS OF PURCHASERS PREFERRED STOCK PURCHASE PRICE
------------------------------ ---------------- --------------
ARKARO HOLDING B.V. 1,350,795 $10,000,002.92
LOCATELLIKADE 1
PARNASSUSTOREN
1076 AZ AMSSTERDAM
X.X. XXX 00000
0000 XX XXXXXXXXX
XXX XXXXXXXXXXX
ATTN: XXXXX X. VAN DER SLUIJS-XXXXXX
COVESTCO-ATEURA,LLC 1,080,635 $ 7,999,994.94
X/X XXXX XXXXX
XXXXXXXXXX 0
XXXXX, XXXXXXXXXXXXX, XX-0000
ATTN: XXXXX X. XXXXXX
WITH COPIES TO:
XX. XXXXXXX X. XXXX PARTNERS
199 PICCADILLY
LONDON WIV 9LE
ATTN: XXXXXX XXXX AND XXXXXXX XXXXXXX
XXXXXXX & CO., L.L.C.
000 XXXXXXX XXXXXX 00XX XXXXX
XXX XXXX, XX 00000
ATTN: XXXX XXXXXXXX
ATGF II 726,982 $ 5,381,884.10
C/O AMERINDO INVESTMENT ADVISORS INC.
000 XXXX XXXXXX, 0XX XXXXX
XXX XXXX, XX 00000
ATTN: XXXXXXX XXXXXX
@VENTURES III, L.P. 421,988 $ 3,123,998.26
C/O @VENTURES
000 XXXXXXXXXX XXXXXX
XXXXXXX, XX 00000
ATTN: XXXX X. XXXXXXX
TRELLUS PARTNERS, LP 263,405 $ 1,950,000.39
000 X. 00XX XXXXXX, 00XX XXXXX
XXX XXXX, XX 00000
RRE INVESTORS, L.P. 261,352 $ 1,934,801.92
000 XXXX 00XX XXXXXX
XXX XXXX, XX 00000
RRE INVESTORS FUND, L.P. 143,886 $ 1,065,195.25
P.O. BOX 31106 SMB
WEST BAY ROAD
GRAND CAYMAN, CAYMAN ISLANDS, B.W.I.
COMDISCO, INC. 135,079 $ 999,996.59
0000 XXXXX XXXXX XXXX
XXXXXXXX, XX 00000
ATTN: VENTURE GROUP
7
CMG@VENTURES III, L.L.C. 118,330 $ 876,002.91
000 XXXXXXXXXX XXXXXX
XXXXXXX, XX 00000
ATTN: XXXX X. XXXXXXX
XXXXXXX XXXXXXXXXXX 80,000 $ 592,244
0000 XXXXX XXXXXX XXXXX
XXXXXXXXXXX, XX 00000
BRAND EQUITY VENTURES I, L.P. 67,540 $ 000,000
XXXXX XXXXXXXX XXXXX
XXXXXXXXX, XX 00000
ATTN: XXXXXXXXXXX X. XXXXXXX
BESSEMER VENTURE PARTNERS IV LP 40,524 $ 300,001.20
0000 XXX XXXXXXX XXXX, XXXXX 000
XXXXXXXX, XX 00000
BESSEC VENTURES IV LP 27,016 $ 200,000.80
C/O BESSEMER VENTURE PARTNERS
0000 XXX XXXXXXX XXXX, XXXXX 000
XXXXXXXX, XX 00000
XXXXXX XXXXX 6,754 $ 50,000.20
000 X. 00XX XXXXXX, XXX. 0
XXX XXXX, XX 00000
XXXXX XXXXXXXXXX 3,500 $ 25,910.68
AMERINDO INVESTMENT ADVISORS INC.
00 XXXXX XXXXXXXXX XXXXXX
XXXXXX X0X 0XX
XXXXXXX
TOTALS: 4,727,786 $35,000,036.16
