Exhibit C
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DIGITAL SOUND CORPORATION
_____________________
PREFERRED STOCK PURCHASE AGREEMENT
_____________________
2,451,667 SHARES OF
SERIES B CONVERTIBLE PREFERRED STOCK
$6,612,502.50 AGGREGATE
PRINCIPAL AMOUNT OF CONVERTIBLE PROMISSORY NOTES
Dated as of December 19, 1997
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DIGITAL SOUND CORPORATION
0000 Xxxxxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxxx 00000
December 19, 1997
To Each of the Persons Named
in Annex A to this Agreement
Gentlemen and Ladies:
The undersigned, Digital Sound Corporation, a California corporation
(the "Company"), hereby agrees with you (sometimes referred to herein
individually as the "Investor" and sometimes collectively as the "Investors") as
follows:
1. Authorization of Securities. The Company has authorized the issue and
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sale or exchange of 2,451,667 shares of its Series B Convertible Preferred Stock
(the "Preferred Stock"), having the rights, preferences, privileges and
restrictions set forth in the Company's Certificate of Determination (the
"Certificate") attached hereto as Annex B and $6,612,502.50 aggregate principal
amount of its Convertible Promissory Notes in the form attached hereto as Annex
C (the "Convertible Promissory Notes"). The Preferred Stock is convertible into
the Company's common stock (the "Common Stock"); the Common Stock into which the
Preferred Stock is convertible is sometimes referred to herein as the
"Conversion Stock"; and the Preferred Stock, the Convertible Promissory Notes
and the Conversion Stock are sometimes referred to herein collectively as the
"Securities". The Convertible Promissory Notes are convertible into Preferred
Stock.
2. Sale and Purchase of Preferred Stock. Upon the terms and subject to
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the conditions herein contained, the Company agrees to sell to each Investor,
and each Investor severally agrees to purchase from the Company, at the Closing
(as hereinafter defined) on the Closing Date (as hereinafter defined), the
number of shares of Preferred Stock and the principal amount of Convertible
Promissory Notes at the purchase price or for the other consideration set forth
opposite its name on Annex A hereto.
3. Closing. The closing of the sale to and purchase by the Investors of
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the Preferred Stock (the "Closing") shall occur by exchange of documents by mail
or other courier to the respective parties to be held in escrow for delivery
upon oral instruction of the parties by telephone conference call on the date
hereof (the "Closing Date"). At the Closing, the Company shall deliver to each
Investor a certificate evidencing the shares of Preferred Stock being purchased
by it, which shall be registered in such Investor's name as stated on Annex A
hereto, and a certificate evidencing the Convertible Promissory Notes being
purchased by it, which shall be registered in such Investor's name as stated on
Annex A hereto, against, as applicable (i) delivery to the Company of payment by
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wire transfer in an amount equal to the purchase price of the shares of
Preferred Stock and the Convertible Promissory Notes being purchased by it or
(ii) surrender for cancellation of certificates evidencing the number of shares
of Series A Convertible Preferred Stock of the Company (the "Series A Preferred
Stock") set forth opposite its name on Annex A hereto.
4. Transfer Restrictions.
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4.1. Restrictions.
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(a) Each Investor understands and agrees that the Securities it will
be acquiring have not been registered under the Securities Act, and that
accordingly they will not be transferable except as permitted under various
exemptions contained in the Securities Act, or upon satisfaction of the
registration and prospectus delivery requirements of the Securities Act. Each
Investor acknowledges that it must bear the economic risk of its investment in
the Securities for an indefinite period of time since they have not been
registered under the Securities Act and therefore cannot be sold unless they are
subsequently registered or an exemption from registration is available.
(b) Each Investor represents and warrants to the Company that it is
acquiring the Securities it has agreed to purchase for investment purposes only,
for its own account, and not as nominee or agent for any other Person, and not
with a view to, or for resale in connection with, any distribution thereof
within the meaning of the Securities Act.
(c) Each Investor agrees with the Company as follows:
i) The certificates evidencing the Securities it has agreed to
purchase, and each certificate issued in transfer thereof, will bear the
following legend:
"The securities evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, or any state
securities laws and may not be sold or transferred unless there is an
effective registration statement under such Act and any applicable state
securities laws covering such securities or the Corporation receives an
opinion of counsel (which counsel and opinion are reasonably satisfactory
to the Corporation) stating that such sale or transfer is exempt from the
registration and prospectus delivery requirements of such Act."
ii) The certificates representing such Securities, and each
certificate issued in transfer thereof, will also bear any legend required
under any applicable state securities law.
iii) Absent a registration statement under the Securities Act
covering the disposition of the Securities which such Investor acquires,
such Investor will not sell, transfer, assign, pledge, hypothecate or
otherwise dispose of
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any or all of the Securities without first providing the Company with an
opinion of counsel (which counsel and opinion are reasonably satisfactory
to the Company) stating that such disposition is exempt from the
registration and prospectus delivery requirements of the Securities Act and
has been registered or qualified under (or is exempt from the registration
and qualification requirements of) any applicable state securities laws.
iv) Such Investor consents to the Company's making a notation on
its records or giving instructions to any transfer agent of the Common
Stock, Preferred Stock or Convertible Promissory Notes in order to
implement the restrictions on transfer of the Securities set forth in this
paragraph (c).
4.2. Removal of Restrictions. Any legend endorsed on a certificate
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evidencing a Security and any stop transfer instructions or notations on the
Company's records with respect to such Security pursuant to Section 4.1(c)(i)
hereof shall be removed or lifted and the Company shall issue a certificate
without such legend to the holder of such Security upon request (a) if the
transfer of such Security has been registered under the Securities Act, (b) if
such Security may be sold under Rule 144(k) promulgated under the Securities Act
or (c) if such holder provides the Company with an opinion of counsel (which
counsel and opinion are reasonably satisfactory to the Company) stating that a
public sale or transfer of such Security may be made without registration under
the Securities Act.
5. Representations and Warranties by the Company. Except as set forth in
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the disclosure schedule that has been prepared, executed and delivered by the
Company to the Investors on the date of this Agreement (the "Company Disclosure
Schedule"), the Company covenants with, and represents and warrants to, each
Investor as follows:
5.1. Due Organization; Subsidiaries; Etc.
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(a) The Company owns no shares of capital stock of, or equity
interest of any nature in, any Entity, other than Digital Sound International
Corporation and DGSD Malaysia Corporation. (The Company and each of its
Subsidiaries are sometimes referred to collectively in this Agreement as the
"Company").
(b) Each of the Company and each Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all necessary power and authority: (i) to
conduct its business in the manner in which its business is currently being
conducted; and (ii) to own and use its assets in the manner in which its assets
are currently owned and used.
(c) Except as set forth in the Company Disclosure Schedule, each of
the Company and each Subsidiary is qualified to do business as a foreign
corporation, and is in good standing, under the laws of all jurisdictions where
the nature of its business requires such qualification and where the failure to
so qualify would have a Material Adverse Effect. The Company shall become
qualified or in good standing as soon as
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reasonably practicable after the Closing under the laws of all jurisdictions
where the nature of its business requires such qualification.
5.2. Certificate of Incorporation and Bylaws. The Company has made
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available to the Investors accurate and complete copies of the articles of
incorporation and bylaws of the Company and each Subsidiary, including all
amendments thereto.
5.3. Capitalization, Etc.
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(a) As of December 15, 1997, the authorized capital stock of the
Company consists of: (i) 50,000,000 shares of Common Stock, of which 20,561,593
shares have been issued and are outstanding as of the date of this Agreement;
and (ii) 15,000,000 shares of preferred stock, no par value, of which 2,631,579
shares have been designated Series A Preferred Stock, all of which have been
issued and are outstanding, and of which 3,386,667 shares have been designated
Series B Preferred Stock, of which no shares are outstanding as of the date of
this Agreement. All of the outstanding shares of Common Stock and Series A
Preferred Stock have been duly authorized and validly issued, and are fully paid
and nonassessable. Except as set forth in the Company Disclosure Schedule: (i)
none of the outstanding shares of Common Stock or Series A Preferred Stock is
entitled or subject to any preemptive or similar right; (ii) none of the
outstanding shares of Common Stock or Series A Preferred Stock is subject to any
right of first refusal in favor of the Company; and (iii) there is no contract
to which the Company is a party, or of which the Company is aware, relating to
the voting or registration of, or restricting any person from purchasing,
selling, pledging or otherwise disposing of (or granting any option or similar
right with respect to), any shares of outstanding Common Stock or Series A
Preferred Stock. The Company is under no obligation to repurchase, redeem or
otherwise acquire any outstanding shares of Common Stock or Series A Preferred
Stock.
(b) Except as set forth in the Company Disclosure Schedule and as of
December 15, 1997, there is no: (i) outstanding subscription, option, call,
warrant or right (whether or not currently exercisable) to acquire any shares of
the capital stock or other securities of the Company; (ii) outstanding security,
instrument or obligation that is or may become convertible into or exchangeable
for any shares of the capital stock or other securities of the Company; or (iii)
stockholder rights plan (or similar plan commonly referred to as a "poison
pill") or Contract under which the Company is or may become obligated to sell or
otherwise issue any shares of its capital stock or any other securities.
5.4. SEC Filings; Financial Statements.
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(a) The Company has filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Exchange Act in addition to one or more
registration statements and amendments thereto heretofore filed by the Company
with the SEC (all of the foregoing including filings incorporated by reference
therein being referred to herein as the
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"Company SEC Documents"). As of the time it was filed with the SEC (or, if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing): (i) each of the Company SEC Documents complied in all
material respects with the applicable requirements of the Securities Act or the
Exchange Act (as the case may be); and (ii) none of the Company SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or exists with respect to the
Company or its business, properties, prospects, operations or financial
condition, which, under any applicable Legal Requirements, requires public
disclosure or announcement by the Company but which has not been so publicly
announced or disclosed.
(b) The financial statements (including any related notes) contained
in the Company SEC Documents: (i) complied as to form in all material respects
with the published rules and regulations of the SEC applicable thereto; (ii)
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered (except as may be
indicated in the notes to such financial statements or, in the case of unaudited
statements, as permitted by Form 10-Q under the Exchange Act, and except that
the unaudited financial statements may not contain footnotes and are subject to
normal and recurring year-end adjustments which will not, individually or in the
aggregate, be material in amount), and (iii) fairly present the consolidated
financial position of the Company and its Subsidiaries as of the respective
dates thereof and the consolidated results of operations of the Company and its
Subsidiaries for the periods covered thereby.
5.5. Absence of Changes. Except as set forth in the Company Disclosure
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Schedule, since September 30, 1997, there has not been any material adverse
change in the business, condition, assets, liabilities, operations, financial
performance or prospects of the Company, and no event has occurred that could
reasonably be expected to have a Material Adverse Effect on the Company.
5.6. Proprietary Assets.
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(a) The Company has taken reasonable measures and precautions to
protect and maintain the confidentiality, secrecy and value of its Proprietary
Assets.
(b) Except as set forth in the Company SEC Documents and to the best
knowledge of the Company: (i) all patents, trademarks, service marks and
copyrights held by the Company are valid, enforceable and subsisting; (ii) no
Company Proprietary Assets and no Proprietary Asset that is currently being
developed by the Company (either by itself or with any other person) infringes,
misappropriates or conflicts with any Proprietary Asset owned or used by any
other Person; (iii) none of the products that are or have been designed,
created, developed, assembled, manufactured or sold by the Company is
infringing, misappropriating or making any lawful or unauthorized use of
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any Proprietary Asset owned or used by any other Person, and none of such
products has at any time infringed, misappropriated or made any unlawful or
unauthorized use of, and the Company has not received any notice or other
communication (in writing or otherwise) of any actual, alleged, possible or
potential infringement, misappropriation or unlawful or unauthorized use of any
Proprietary Asset owned or used by any other Person; (iv) no other Person is
infringing, misappropriating or making any unlawful or unauthorized use of, and
no Proprietary Asset owned or used by any other Person infringes or conflicts
with, any Company Proprietary Assets.
(c) The Company's Proprietary Assets constitute all the Proprietary
Assets necessary to enable the Company to conduct its business in the manner in
which such business has been and is being conducted. The Company has not (i)
licensed any of the Company Proprietary Assets to any person on an exclusive
basis, or (ii) entered into any covenant not to compete or Contract limiting its
ability to exploit fully any of its Proprietary Assets or to transact business
in any market or geographical area or with any person.
5.7. Contracts.
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(a) For purposes of this Agreement, any Contract that is or would be
material to the Company, to the business, condition, capitalization or
operations of the Company or to any of the transactions contemplated by this
Agreement shall be deemed to constitute a "Material Contract."
(b) Except as set forth in the Company Disclosure Schedule, each
Material Contract is valid and in full force and effect, and is enforceable by
the Company in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
(c) Except as set forth in the Company Disclosure Schedule, the
Company has not violated or breached, or committed any default under, any
Material Contract, and, to the best knowledge of the Company, no other person
has violated or breached, or committed any default under, any Material Contract;
(ii) no event has occurred, and no circumstance or condition exists, that (with
or without notice or lapse of time) will, or could reasonably be expected to,
(A) result in a violation or breach of any of the provisions of any Material
Contract, (B) give any person the right to declare a default or exercise any
remedy under any Material Contract, (C) give any person the right to accelerate
the maturity or performance of any Material Contract, or (D) give any person the
right to cancel, terminate or modify any Material Contract; and (iii) the
Company has not received any notice or other communication regarding any actual
or possible violation or breach of, or default under, any Material Contract.
5.8. Liabilities. Except as set forth in the Company Disclosure Schedule,
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the Company does not have any accrued, contingent or other liabilities of any
nature, either matured or unmatured (whether or not required to be reflected in
financial statements in
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accordance with generally accepted accounting principles, and whether due or to
become due), except for: (a) liabilities identified as such in the "liabilities"
column of the unaudited balance sheet contained in the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1997; and (b) normal and
recurring liabilities that have been incurred by the Company since September 30,
1997 in the ordinary course of business and consistent with past practices.
5.9. Compliance with Legal Requirements. The Company is in compliance
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with all applicable Legal Requirements, except where the failure to comply with
such Legal Requirements has not had and will not have a Material Adverse Effect
on the Company. The Company has not received any notice or other communication
from any Governmental Body regarding any actual or possible violation of, or
failure to comply with, any Legal Requirement.
5.10. Transactions with Affiliates. Except as set forth in the Company
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SEC Documents or except as contemplated by this Agreement, since the date of the
Company's last proxy statement filed with the SEC, no event has occurred that
would be required to be reported by the Company pursuant to Item 404 of
Regulation S-K promulgated by the SEC.
5.11. Legal Proceedings; Orders. Except as set forth in the Company
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Disclosure Schedule or the Company SEC Documents, there is no pending Legal
Proceeding, and, to the best knowledge of the Company, no Person has threatened
to commence any Legal Proceeding: (i) that involves the Company or any of the
assets owned or used by the Company; or (ii) that challenges, or that may have
the effect of preventing, delaying, making illegal or otherwise interfering with
any of the transactions contemplated by this Agreement. To the best knowledge
of the Company, no event has occurred, and no claim, dispute or other condition
or circumstance exists, that will, or that could reasonably be expected to, give
rise to or serve as a basis for the commencement of any such Legal Proceeding.
There is no order, writ, injunction, judgment or decree to which the Company, or
any of the assets owned or used by the Company, is subject.
5.12. Authority; Binding Nature of Agreement. The Company has the
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absolute and unrestricted right, power and authority to enter into and to
perform its obligations under this Agreement, the Registration Rights Agreement
referred to in Section 9.1(e), and the Convertible Promissory Notes. The Board
of Directors of the Company (at a meeting duly called and held) has (a)
determined that this Agreement, the Registration Rights Agreement referred to in
Section 9.1(e), the Convertible Promissory Notes and the Certificate and the
transactions contemplated hereby and thereby are fair and in the best interests
of the Company and its shareholders, (b) approved the execution, delivery and
performance of this Agreement, the Registration Rights Agreement referred to in
Section 9.1(e), the Convertible Promissory Notes and the Certificate by the
Company and has approved the transactions contemplated hereby and thereby and no
further consent or authorization of the Company or the Board of Directors or
shareholders is required except as contemplated by this Agreement, including,
without limitation, by Section 8 hereof.
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This Agreement, the Registration Rights Agreement referred to in Section 9.1(e),
and the Convertible Promissory Notes constitute the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
their terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
5.13. Vote Required. Except as contemplated by this Agreement (including,
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without limitation, Section 8 hereof), no vote of the holders of any class or
series of the Company's capital stock is necessary to adopt and approve this
Agreement, the Certificate or the transactions contemplated by this Agreement.
5.14. Issuance of Shares; Offering Valid. The issuance of the Preferred
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Stock has been duly authorized and, when issued in accordance with the terms
hereof, the Preferred Stock shall be validly issued, fully paid and non-
assessable and not subject to any Encumbrances arising by virtue of actions or
omissions by the Company and entitled to the rights, preferences and privileges
set forth in the Certificate. The Conversion Stock has been or will be duly
authorized and reserved for issuance and, upon conversion in accordance with the
Certificate, will be duly issued, fully paid and non-assessable and not subject
to any Encumbrances. Assuming the accuracy of the representations and
warranties of the Investors contained in Section 6, the offer, issuance and sale
of the Securities are and will be exempt from the registration requirements of
the Securities Act and are exempt from registration and qualification under the
registration, permit or qualification requirements of all applicable state
securities laws.
5.15. Non-Contravention; Consents. Neither (1) the execution, delivery or
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performance of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the transactions contemplated by this
Agreement, will directly or indirectly (with or without notice or lapse of
time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of the articles of incorporation, bylaws or other charter or
organizational documents of the Company, or (ii) any resolution adopted by the
shareholders, the Board or any committee of the Board;
(b) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge the transactions
contemplated by this Agreement or to exercise any remedy or obtain any relief
under, any Legal Requirement or any order, writ, injunction, judgment or decree
to which the Company, or any of the assets owned or used by the Company are
subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by the Company or that otherwise relates to the business of the
Company or to any of the assets owned or used by the Company;
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(d) except as set forth in the Company Disclosure Schedule,
contravene, conflict with or result in a violation or breach of, or result in a
default under, any provision of any Contract that is or would constitute a
Material Contract, or give any Person the right to (i) declare a default or
exercise any remedy under any such Material Contract, (ii) accelerate the
maturity or performance of any such Material Contract, or (iii) cancel,
terminate or modify any term of such Material Contract; or
(e) result in the imposition or creation of any Encumbrance upon or
with respect to any asset owned or used by the Company (except for minor liens
that will not, in any case or in the aggregate, materially detract from the
value of the assets subject thereto or materially impair the operations of the
Company).
Except as set forth in the Company Disclosure Schedule, the Company
will not be required to make any filing (other than the filing of the
Certificate with the California Secretary of State or any SEC, NASD or state
security law filings which may be required to be made by the Company and any
registration statement which may be filed pursuant to the Registration Rights
Agreement referred to in Section 9.1(e)) with or give any notice to, or to
obtain any consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement, or (y) the consummation of the transactions
contemplated by this Agreement.
5.16. Fairness Opinion. The Company's Board of Directors has received the
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written opinion of Xxxxxxxx Xxxxx Xxxxxx & Xxxxx, dated November 21, 1997, to
the effect that the transactions contemplated by this Agreement are fair to the
existing holders of the Common Stock from a financial point of view.
5.17. Full Disclosure. This Agreement (including the Company Disclosure
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Schedule) does not (i) contain any representation, warranty or information that
is false or misleading with respect to any material fact, or (ii) omit to state
any material fact necessary in order to make the representations, warranties and
information contained herein and therein (in the light of the circumstances
under which such representations, warranties and information were made or
provided) not false or misleading.
6. Representations and Warranties by the Investors. Each Investor
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covenants with, and represents and warrants to, the Company as follows:
6.1. Sophistication, etc. The Investor has experience as an investor in
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securities of companies similar to the Company and has the knowledge,
sophistication and experience in business and financial matters necessary to
evaluate the merits and risks of an investment in the Securities and is able to
bear the risks of its investment in the Securities and to afford the complete
loss of such investment.
6.2. Accredited Investor. The Investor is an "accredited investor" as
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such term is defined in Rule 501(a) of Regulation D under the Securities Act.
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6.3. Access to Information. The Investor has been afforded access to
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information about the Company and the Company's financial condition, results of
operations, business, properties, technology, management and prospects. The
Investor has been afforded the opportunity to ask such questions as it has
deemed necessary of, and to receive answers from, representatives of the Company
concerning such matters as the Investor has deemed relevant to an evaluation of
the merits and risks of investing in the Securities.
6.4. Corporate Acts and Proceedings. All corporate (or, as appropriate,
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partnership, limited liability company or other organizational) acts and
proceedings required for the authorization, execution and delivery of this
Agreement and the Registration Rights Agreement referred to in Section 9.1(e)
hereof and the performance of this Agreement have been lawfully and validly
taken or will have been so taken by the Investor prior to the Closing.
6.5. Binding Obligations. This Agreement and the Registration Rights
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Agreement referred to in Section 9.1(e) hereof constitute the legal, valid and
binding obligations of the Investor and are enforceable against the Investor in
accordance with their respective terms, except as such enforcement is limited by
bankruptcy, insolvency and other similar laws affecting the enforcement of
creditors' right generally or by equitable principles of general application
(whether considered in an action at law or in equity).
7. Additional Representation and Warranty by Certain Investors. Each of
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Oak Investment Partners V, Limited Partnership and Oak V Affiliates Fund,
Limited Partnership covenants with, and represents and warrants to, the Company
that it has good and valid title to the number of shares of Series A Preferred
Stock set forth opposite its name on Annex A hereto to be surrendered for
cancellation hereunder, free and clear of all encumbrances, liens, pledges,
charges or adverse claims.
8. Shareholders' Meeting. (a) As expeditiously as reasonably practicable
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following the Closing, the Company shall file with the SEC its preliminary proxy
statement (the "Proxy") pursuant to Section 14 of the Exchange Act and in no
event shall such Proxy be filed later than February 27, 1998 and (b) as
expeditiously as reasonably practicable following the Closing, the Company shall
hold its regular annual meeting and in no event shall such meeting be held later
than April 15, 1998 (as extended, the "Meeting Date"); provided, however, if the
period of time by which the Proxy is subject to SEC review exceeds 30 days, the
Meeting Date shall be extended by such number of days that exceeds 30 days;
provided that the Company is using its best efforts to cause the Proxy to be
approved by the SEC within such 30 day period. Such meeting shall include for
submission for shareholder approval an amendment to the Company's articles of
incorporation increasing the Company's authorized Common Stock in an amount
sufficient to cause the automatic conversion of the Convertible Promissory
Notes.
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9. Conditions of Parties' Obligations.
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9.1. Conditions of Investors' Obligations. The obligation of each
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Investor to purchase and pay for the Preferred Stock and the Convertible
Promissory Notes which it has agreed to purchase on the Closing Date is subject
to the fulfillment prior to or on the Closing Date of the following conditions,
any of which may be waived in whole or in part by an Investor with respect to
such investor:
(a) No Misrepresentation. The representations and warranties of the
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Company under this Agreement shall be deemed to have been made at and as of the
Closing Date and shall, without regard to any Material Adverse Effect
qualification contained therein, be true and correct in all material respects.
(b) Compliance with Agreement. The Company shall have performed and
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complied in all material respects with all agreements and conditions required by
this Agreement to be performed or complied with by it on or before the Closing
Date.
(c) Certificate. The Certificate shall have been filed with the
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Secretary of State of the State of California, and the Investors shall have
received confirmation reasonably satisfactory to them that such filing has
occurred.
(d) Supporting Documents. Each Investor shall have received the
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following:
i) A copy of the Certificate and copies of resolutions of the
Board and each committee of the Board authorizing and approving the
Certificate and the execution, delivery and performance of this Agreement
and the Registration Rights Agreement referred to in Section 9.1(e) hereof
and the transactions contemplated hereby and thereby, each certified by the
secretary of the Company;
ii) A certificate of incumbency executed by the Secretary of the
Company certifying the names, titles and signatures of the officer(s)
executing the documents referred to in subparagraph (i).
(e) Registration Rights Agreement. The Company and the Investors
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shall have entered into a Registration Rights Agreement in the form attached
hereto as Annex D.
(f) The Company shall have received a letter from the Nasdaq Stock
Market, Inc., granting an exception from the shareholder approval requirement
under Marketplace Rules, 4460(i)(1)(B) and (D)(ii), 4460(i)(2) and 4460(j) with
respect to the transactions contemplated by this Agreement.
(g) The Investors shall purchase (including the exchange of 2,631,579
shares of the Series A Preferred Stock) at least $25,000,000 of Preferred Stock
and
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Convertible Promissory Notes at the Closing. Microsoft Corporation shall
purchase at least $5,000,000 of Preferred Stock and Convertible Promissory
Notes.
(h) The Investors shall have received from Xxxxxx & Xxxxxxx, counsel
for the Company, an opinion, dated the Closing Date, in the form attached hereto
as Annex E.
(i) The Board of Directors of the Company shall have received an
opinion from Xxxxxxxx Xxxxx Xxxxxx & Xxxxx to the effect that the transactions
contemplated by this Agreement are fair to the public shareholders of the
Company from a financial point of view.
9.2. Condition of Company's Obligations. The Company's obligation to
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issue and sell the Preferred Stock to the Investors on the Closing Date is
subject to the fulfillment prior to or on the Closing Date of the following
conditions, any of which may be waived in whole or in part by the Company.
(a) No Misrepresentation. The representations and warranties of each
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of the Investors under this Agreement shall be deemed to have been made at and
as of the Closing Date and shall be true and correct in all material respects.
(b) Compliance with Agreement. Each of the Investors shall have
-------------------------
performed and complied in all material respects with all agreements and
conditions required by this Agreement to be performed or complied with by it on
or before the Closing Date.
(c) Certificate. The Certificate shall have been filed with the
-----------
Secretary of State of the State of California, and the Company shall have
received confirmation reasonably satisfactory to it that such filing has
occurred.
(d) The Company shall not be required to sell and exchange less than
2,451,667 shares of the Preferred Stock to the Investors as a whole.
10. Definitions. Unless the context otherwise requires, the terms defined
-----------
in this Section 9 shall have the meanings specified for all purposes of this
Agreement.
"Affiliate" shall mean any Person that directly or indirectly
---------
controls, is controlled by, or is under common control with, the indicated
Person.
"Agreement" shall mean this Agreement.
---------
"Board" shall mean the Board of Directors of the Company.
-----
"Certificate" shall have the meaning assigned to it in Section 1
-----------
hereof.
"Common Stock" shall have the meaning assigned to it in Section 1
------------
hereof.
12
"Company Proprietary Asset" shall mean any Proprietary Asset owned by
-------------------------
or licensed to the Company or otherwise used by the Company.
"Consent" shall mean any approval, consent, ratification, permission,
-------
waiver or authorization (including any Governmental Authorization).
"Contract" shall have mean any written, oral or other agreement,
--------
contract, subcontract, lease, understanding, instrument, note, option, warranty,
purchase order, license, sublicense, insurance policy, benefit plan or legally
binding commitment or undertaking of any nature: (a) to which the Company is a
party; (b) by which the Company or any asset of the Company is or may become
bound or under which the Company has, or may become subject to, any obligation;
or (c) under which the Company has or may acquire any right or interest.
"Conversion Stock" shall mean the unissued Common Stock into which the
----------------
Preferred Stock is convertible and the Common Stock issued upon such conversion.
"Encumbrance" shall mean any lien, pledge, hypothecation, charge,
-----------
mortgage, security interest, encumbrance, claim, infringement, interference,
option, right of first refusal, preemptive right, community property interest or
restriction of any nature (including any restriction on the voting of any
security, any restriction on the transfer of any security or other asset, any
restriction on the receipt of any income derived from any asset, any restriction
on the use of any asset and any restriction on the possession, exercise or
transfer of any other attribute of ownership of any asset).
"Entity" shall mean any corporation (including any non-profit
------
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
"Governmental Authorization" shall mean any: (a) permit, license,
--------------------------
certificate, franchise, permission, clearance, registration, qualification or
authorization issued, granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Legal Requirement; or (b)
right under any Contract with any Governmental Body.
"Governmental Body" shall mean any (a) nation, state, commonwealth,
-----------------
province, territory, county, municipality, district or other jurisdiction of any
nature; (b) federal, state, local, municipal, foreign or other government; or
(c) governmental or quasi-governmental authority of any nature (including any
governmental division, department, agency, commission, instrumentality,
official, organization, unit, body or Entity and any court or other tribunal).
"Holder" of any Security shall mean the record or beneficial owner of
------
such Security. A Holder of Preferred Stock shall be deemed to be also the
Holder of the Conversion Stock underlying the Preferred Stock.
13
"Holders of Majority of the Conversion Stock" shall mean the Holders
-------------------------------------------
of more than 50% of the then-outstanding shares of the Conversion Stock issued
or issuable upon conversion of the Preferred Stock.
"Investor" shall have the meaning assigned to it in the introductory
--------
paragraph of this Agreement.
"Legal Proceeding" shall mean any action, suit, litigation,
----------------
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding), hearing, inquiry, audit, examination or
investigation commenced, brought, conducted or heard by or before, or otherwise
involving, any court or other Governmental Body or any arbitrator or arbitration
panel that could reasonably be expected to have a Material Adverse Effect on the
Company.
"Legal Requirement" shall mean any federal, state, local, municipal,
-----------------
foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Body.
"Material Adverse Effect" shall mean an event, violation, inaccuracy,
-----------------------
circumstance or other matter if such event, violation, inaccuracy, circumstance
or other matter would have a material adverse effect on the business, condition,
assets, liabilities, operations or financial performance of the Company and its
subsidiaries taken as a whole.
"Person" shall include all natural persons, corporations, business
------
trusts, associations, companies, partnerships, joint ventures and other Entities
and Government Bodies.
"Preferred Stock" shall have the meaning assigned to it in Section 1
---------------
hereof.
"Proprietary Asset" shall mean any (a) patent, patent application,
-----------------
trademark (whether registered or unregistered), trademark application, trade
name, fictitious business name, service xxxx (whether registered or
unregistered), service xxxx application, copyright (whether registered or
unregistered), copyright application, maskwork, maskwork application, trade
secret, know-how, customer list, franchise, system, computer software, computer
program, source code, algorithm, invention, design, blueprint, engineering
drawing, proprietary product, technology, proprietary right or other
intellectual property right or intangible asset; or (b) right to use or exploit
any of the foregoing.
"Representatives" shall mean officers, directors, employees, agents,
---------------
attorneys, accountants, advisors and representatives.
"SEC" shall mean the Securities and Exchange Commission.
---
"Securities" shall have the meaning assigned to it in Section 1
----------
hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------
14
"Subsidiary" shall mean any corporation, association or other business
----------
entity at least 50% of the outstanding voting stock of which is at the time
owned or controlled directly or indirectly by the Company or by one or more of
such subsidiary entities or both.
11. Fees and Costs. In the event a Holder of any Security brings an
--------------
action against the Company or the Company brings an action against a Holder
arising under this Agreement, the prevailing party in such dispute shall be
entitled to recover from the losing party all fees, costs and expenses of
enforcing any right of such prevailing party under or with respect to this
Agreement or the Certificate, including without limitation such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
12. Miscellaneous.
-------------
12.1. Waivers and Amendments. With the written consent of the Holders of
----------------------
a Majority of the Conversion Stock (a) the obligations of the Company and the
rights of the Holders of the Securities under this Agreement may be waived
(either generally or in a particular instance, either retroactively or
prospectively and either for a specified period of time or indefinitely), and
(b) the Company may enter into a supplementary agreement for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of any supplemental agreement or modifying in
any manner the rights and obligations hereunder of the Holders of the Securities
and the Company.
The foregoing notwithstanding, no such waiver or supplemental
agreement shall affect any of the rights of any Holder of a Security created by
the Certificate or by the California Corporations Code without compliance with
all applicable provisions of the California Corporations Code.
Neither this Agreement nor any provision hereof may be changed,
waived, discharged or terminated orally or by course of dealing, but only by a
statement in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
12.2. Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery or registered
first-class mail, facsimile, or air courier guaranteeing overnight delivery:
(a) If to a Holder of any of the Securities, addressed to such
Holder at its address shown on the signature pages hereof, or at such other
address as such Holder may specify by written notice to the Company, or
15
(b) If to the Company initially at the following address:
Digital Sound Corporation
0000 Xxxxxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxxx 00000
Attention: B. Xxxxxx Xxx
Facsimile: (000) 000-0000
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is electronically acknowledged, if by facsimile; and on the next business day,
if timely delivered to an air courier guaranteeing overnight delivery.
12.3. Severability. Should any one or more of the provisions of this
------------
Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, all other provisions of this
Agreement and of each other agreement entered into pursuant to this Agreement
shall be given effect separately from the provision or provisions determined to
be illegal or unenforceable and shall not be affected thereby.
12.4. Successors, Assignees and Transferees. All the terms and provisions
-------------------------------------
of this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto,
whether so expressed or not, and, in particular, shall be binding upon and inure
to the benefit of any immediate or remote transferee of any Investor that is a
Holder at the time of any of the Securities; provided, however, that a
-------- --------
transferee who acquires Securities in a public offering registered under the
Securities Act or in a transaction that qualifies for exemption pursuant to Rule
144 under the Securities Act shall take such Securities free of the benefits and
burdens of this Agreement. This Agreement shall not run to the benefit of or be
enforceable by any Person other than a party to this Agreement and such
successors, assigns and transferees.
12.5. Headings. The headings of the Sections and paragraphs of this
--------
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
12.6. Choice of Law. It is the intention of the parties that the internal
-------------
laws, and not the laws of conflicts, of California should govern the
enforceability and validity of this Agreement, the construction of its terms and
the interpretation of the rights and duties of the parties.
12.7. Entire Agreement. This Agreement contains the entire agreement
----------------
between the parties hereto with respect to the transactions contemplated by this
Agreement and supersedes all prior arrangements or understandings with respect
thereto.
16
12.8. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
12.9. Expenses. Except as specifically provided herein, all reasonable
--------
legal costs and expenses of Xxxxxx Godward LLP incurred in connection with this
Agreement and the transactions contemplated hereby on behalf of the Investors
shall be paid by the Company.
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
undersigned, whereupon this letter shall become a binding contract between you
and the undersigned.
(Signature pages follow)
17
[Preferred Stock Purchase Agreement]
DIGITAL SOUND CORPORATION
By /s/ Xxxx X. Xxxx
------------------------
Xxxx X. Xxxx, President
and /s/ B. Xxxxxx Xxx
------------------------
B. Xxxxxx Xxx, Secretary
S-1
[Preferred Stock Purchase Agreement]
The foregoing Agreement is
hereby accepted as of the
date first above written.
XXXX X. XXXXXX, AN INDIVIDUAL
By: /s/ Xxxxx X. Xxxxxx
-----------------------------
Xxxx X. Xxxxxx, an Individual
Exact name of Investor or nominee
as it should appear on stock and convertible
promissory note certificates: Xxxx X. Xxxxxx
--------------
Address for notices:
Cedar Grove Partners, LLC
0000 Xxxxxxxx Xxxx Xxxx Xxxx X.X.
Xxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Investor is organized under the laws
of the State of N/A
---
S-2
[Preferred Stock Purchase Agreement]
The foregoing Agreement is
hereby accepted as of the
date first above written.
XXXXXXX X. XXXXXXX, AN INDIVIDUAL
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------
Xxxxxxx X. Xxxxxxx, an Individual
Exact name of Investor or nominee
as it should appear on stock and convertible
promissory note certificates: Xxxxxxx X. Xxxxxxx
------------------
Address for notices:
c/o Willner Properties
000 Xxxxxxxxx Xxxx
Xxxx xx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Investor is organized under the laws
of the State of N/A
---
S-3
[Preferred Stock Purchase Agreement]
The foregoing Agreement is
hereby accepted as of the
date first above written.
SPRING POINT PARTNERS, L.P.
By: /s/ Xxxx X. Xxxxx
-------------------------------
Xxxx X. Xxxxx, Managing Partner
Exact name of Investor or nominee
as it should appear on stock and convertible
promissory note certificates: Spring Point Partners, L.P.
---------------------------
Address for notices:
000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Investor is organized under the laws
of the State of California
----------
S-4
[Preferred Stock Purchase Agreement]
The foregoing Agreement is
hereby accepted as of the
date first above written.
XXXXXXX FAMILY TRUST UTA DTD 12/18/90
By: /s/ Xxxxx Xxxxxxx
----------------------
Xxxxx Xxxxxxx, Trustee
Exact name of Investor or nominee
as it should appear on stock and convertible
promissory note certificates: Xxxxxxx Family Trust UTA DTD 12/18/90
-------------------------------------
Address for notices:
00000 Xxxxxxxx Xxxx., Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Investor is organized under the laws
of the State of California
----------
S-5
[Preferred Stock Purchase Agreement]
The foregoing Agreement is
hereby accepted as of the
date first above written.
XXXXXXXXX X. AND XXXXX XXXXX XXXXXX, AS JOINT TENANTS
By: /s/ Xxxxxxxxx X. Xxxxxx By: /s/ Xxxxx Xxxxx Xxxxxx
---------------------------- ---------------------------
Xxxxxxxxx X. Xxxxxx Xxxxx Xxxxx Xxxxxx
Exact name of Investor or nominee
as it should appear on stock and convertible
promissory note certificates: Xxxxxxxxx X. Xxxxxx and Xxxxx Xxxxx Xxxxxx, as
----------------------------------------------
Joint Tenants
-------------
Address for notices:
00000 Xxxxx Xxxxxx Xxxx., Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxxxx X. Xxxxxx and Xxxxx Xxxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Investor is organized under the laws
of the State of N/A
---
S-6
[Preferred Stock Purchase Agreement]
The foregoing Agreement is
hereby accepted as of the
date first above written.
XXXXXX SUSSKIND HEDGECAP FUND, L.P.
By: Xxxxxx Xxxxxxxx Investment Management, L.P.
a Delaware limited partnership
Its: General Partner
By: SSCO, Inc.
a Delaware corporation
Its: General Partner
By: /s/ Xxxxxxx Xxxxxxxx
---------------------------------------------
Xxxxxxx Xxxxxxxx, Director and Vice President
Exact name of Investor or nominee
as it should appear on stock and convertible
promissory note certificates: Xxxxxx-Xxxxxxxx Hedgecap Fund, L.P.
-----------------------------------
Address for notices:
000 Xxxxxxxx Xxxx., 00xx Xxxxx
Xxxxx Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Investor is organized under the laws
of the State of Delaware
--------
S-7
[Preferred Stock Purchase Agreement]
The foregoing Agreement is
hereby accepted as of the
date first above written.
XXXXXX HEDGECAP LIMITED
By: Xxxxxx Xxxxxxxx Investment Management, L.P.
a Delaware limited partnership
Its: General Partner
By: SSCO, Inc.
a Delaware corporation
Its: General Partner
By: /s/ Xxxxxxx Xxxxxxxx
---------------------------------------------
Xxxxxxx Xxxxxxxx, Director and Vice President
Exact name of Investor or nominee
as it should appear on stock and convertible
promissory note certificates: Xxxxxx Hedgecap Limited
-----------------------
Address for notices:
000 Xxxxxxxx Xxxx., 00xx Xxxxx
Xxxxx Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Investor is organized under the laws
of the State of Delaware
--------
S-8
[Preferred Stock Purchase Agreement]
The foregoing Agreement is
hereby accepted as of the
date first above written.
XXXXXX OFFSHORE, LIMITED
By: Xxxxxx Xxxxxxxx Investment Management, L.P.
a Delaware limited partnership
Its: Investment Advisor
By: SSCO, Inc.
a Delaware corporation
Its: General Partner
By: /s/ Xxxxxxx Xxxxxxxx
---------------------------------------------
Xxxxxxx Xxxxxxxx, Director and Vice President
Exact name of Investor or nominee
as it should appear on stock and convertible
promissory note certificates: Xxxxxx Offshore, Limited
------------------------
Address for notices:
000 Xxxxxxxx Xxxx., 00xx Xxxxx
Xxxxx Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Investor is organized under the laws
of the Cayman Islands
--------------
S-9
[Preferred Stock Purchase Agreement]
The foregoing Agreement is
hereby accepted as of the
date first above written.
XXXXXX PARTNERS, L.P.
By: Xxxxxx Xxxxxxxx Investment Management, L.P.
a Delaware limited partnership
Its: General Partner
By: SSCO, Inc.
a Delaware corporation
Its: General Partner
By: /s/ Xxxxxxx Xxxxxxxx
---------------------------------------------
Xxxxxxx Xxxxxxxx, Director and Vice President
Exact name of Investor or nominee
as it should appear on stock and convertible
promissory note certificates: Xxxxxx Partners, L.P.
---------------------
Address for notices:
000 Xxxxxxxx Xxxx., 00xx Xxxxx
Xxxxx Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Investor is organized under the laws
of the State of Delaware
--------
S-10
[Preferred Stock Purchase Agreement]
The foregoing Agreement is
hereby accepted as of the
date first above written.
XXXXX GLOBAL INVESTMENTS, LTD.
By: Xxxxx Capital Management, Inc.
Its: Trading Advisor
By: /s/ Sarvas Savvinidis
-----------------------------------------
Sarvas Savvinidis, Director of Operations
Exact name of Investor or nominee
as it should appear on stock and convertible
promissory note certificates: Xxxxx Global Investments, Ltd.
------------------------------
Address for notices:
c/o Moore Capital Management, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Investor is organized under the laws
of the British Virgin Islands
----------------------
S-11
[Preferred Stock Purchase Agreement]
The foregoing Agreement is
hereby accepted as of the
date first above written.
REMINGTON INVESTMENT STRATEGIES, L.P.
By: Xxxxx Capital Advisors, L.L.C.
Its: General Partner
By: /s/ Sarvas Savvinidis
-----------------------------------------
Sarvas Savvinidis, Director of Operations
Exact name of Investor or nominee
as it should appear on stock and convertible
promissory note certificates: Remington Investment Strategies, L.P.
-------------------------------------
Address for notices:
Xxxxx Capital Advisors, L.L.C.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Investor is organized under the laws
of the State of Delaware
--------
S-12
[Preferred Stock Purchase Agreement]
The foregoing Agreement is
hereby accepted as of the
date first above written.
CITIVENTURE 96 PARTNERSHIP FUND, L.P.
By: Chancellor LGT Asset Management, Inc.
Its: Investment Advisor
By: /s/ Xxxxxxxxxx Xxxx
----------------------------------
Xxxxxxxxxx Xxxx, Managing Director
Exact name of Investor or nominee
as it should appear on stock and convertible
promissory note certificates: Citiventure 96 Partnership Fund, L.P.
-------------------------------------
Address for notices:
c/o Chancellor LGT Asset Management, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Investor is organized under the laws
of the Cayman Islands
--------------
S-13
[Preferred Stock Purchase Agreement]
The foregoing Agreement is
hereby accepted as of the
date first above written.
CHANCELLOR LGT PRIVATE CAPITAL OFFSHORE PARTNERS II, L.P.
By: CPCO Associates, L.P.
Its: Investment General Partner
By: Chancellor LGT Venture Partners, Inc.,
Its: General Partner
By: /s/ Xxxxxxxxxx Xxxx
----------------------------------
Xxxxxxxxxx Xxxx, Managing Director
Exact name of Investor or nominee
as it should appear on stock and convertible
promissory note certificates: Chancellor LGT Private Capital Offshore Partners
------------------------------------------------
II, L.P.
--------
Address for notices:
c/o Chancellor LGT Asset Management, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Investor is organized under the laws
of the Cayman Islands
--------------
S-14
[Preferred Stock Purchase Agreement]
The foregoing Agreement is
hereby accepted as of the
date first above written.
CHANCELLOR LGT PRIVATE CAPITAL OFFSHORE PARTNERS I, C.V.
By: Chancellor LGT KME IV Partner, L.P.
Its: Investment General Partner
By: Chancellor LGT Venture Partners, Inc.
Its: General Partner
By: /s/ Xxxxxxxxxx Xxxx
----------------------------------
Xxxxxxxxxx Xxxx, Managing Director
Exact name of Investor or nominee
as it should appear on stock and convertible
promissory note certificates: Chancellor LGT Private Capital Offshore Partners
------------------------------------------------
I, C.V.
-------
Address for notices:
c/o Chancellor LGT Asset Management, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Investor is organized under the laws
of the Netherlands Antilles
--------------------
S-15
[Preferred Stock Purchase Agreement]
The foregoing Agreement is
hereby accepted as of the
date first above written.
CHANCELLOR LGT PRIVATE CAPITAL OFFSHORE PARTNERS III, L.P.
By: CPCP Associates, L.P.
Its: General Partner
By: Chancellor LGT Venture Partners, Inc.
Its: General Partner
By: /s/ Xxxxxxxxxx Xxxx
----------------------------------
Xxxxxxxxxx Xxxx, Managing Director
Exact name of Investor or nominee
as it should appear on stock and convertible
promissory note certificates: Chancellor LGT Private Capital Offshore Partners
------------------------------------------------
III, L.P.
---------
Address for notices:
c/o Chancellor LGT Asset Management, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Investor is organized under the laws
of the Delaware
--------
S-16
[Preferred Stock Purchase Agreement]
The foregoing Agreement is
hereby accepted as of the
date first above written.
OAK INVESTMENT PARTNERS VII, LIMITED PARTNERSHIP
By: Oak Associates VII, L.L.C.
Its: General Partner
By: /s/ Xxxxxx Xxxxxx
----------------------------------------------------
Xxxxxx Xxxxxx, Managing Member
Exact name of Investor or nominee
as it should appear on stock
certificate: Oak Investment Partners VII, Limited Partnership
------------------------------------------------
Address for notices:
000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Investor is organized under the laws
of the State of Delaware
--------
S-17
[Preferred Stock Purchase Agreement]
The foregoing Agreement is
hereby accepted as of the
date first above written.
OAK VII AFFILIATES FUND, LIMITED PARTNERSHIP
By: Oak VII Affiates, L.L.C.
Its: General Partner
By: /s/ Xxxxxx Xxxxxx
------------------------------
Xxxxxx Xxxxxx, Managing Member
Exact name of Investor or nominee
as it should appear on stock
certificate: Oak VII Affiliates Fund, Limited Partnership
--------------------------------------------
Address for notices:
000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Investor is organized under the laws
of the State of Delaware
--------
S-18
[Preferred Stock Purchase Agreement]
The foregoing Agreement is
hereby accepted as of the
date first above written.
OAK INVESTMENT PARTNERS V, LIMITED PARTNERSHIP
By: Oak Associates V, L.L.C.
Its: General Partner
By: /s/ Xxxxxx Xxxxxx
-------------------------------
Xxxxxx Xxxxxx, Managing Member
Exact name of Investor or nominee
as it should appear on stock
certificate: Oak Investment Partners V, Limited Partnership
----------------------------------------------
Address for notices:
000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Investor is organized under the laws
of the State of Delaware
--------
S-19
[Preferred Stock Purchase Agreement]
The foregoing Agreement is
hereby accepted as of the
date first above written.
OAK V AFFILIATES FUND, LIMITED PARTNERSHIP
By: Oak V Affiliates
a Connecticut partnership
Its: General Partner
By: /s/ Xxxxxx Xxxxxx
------------------------------
Xxxxxx Xxxxxx, General Partner
Exact name of Investor or nominee
as it should appear on stock
certificate: Oak V Affiliates Fund, Limited Partnership
------------------------------------------
Address for notices:
000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Investor is organized under the laws
of the State of Delaware
--------
S-20
[Preferred Stock Purchase Agreement]
The foregoing Agreement is
hereby accepted as of the
date first above written.
MICROSOFT CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------
Title: Chief Financial Officer
---------------------------
Exact name of Investor or nominee
as it should appear on stock and convertible
promissory note certificates: Microsoft Corporation
---------------------
Address for notices:
Xxx Xxxxxxxxx Xxx
0X/0000
Xxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Investor is organized under the laws
of the State of Washington
----------
S-21
SCHEDULES TO PREFERRED STOCK PURCHASE AGREEMENT
Section 5.1 Due Organization; Subsidiaries; etc.
Section 5.3 Capitalization rights of certain persons to purchase the
Company's capital stock or require the registration of such
capital stock under the Securities Act.
Section 5.5 Absence of Changes: A list of certain changes or events since
September 30, 1997.
Section 5.7 Contracts: A list of the material contracts of the Company
whereby the Company is, or may deemed to be, in default.
Section 5.8 Certain Liabilities of the Company.
Section 5.11 Legal Proceedings: A list of material litigation of the Company
and its Subsidiaries.
Section 5.15 Non-Contravention; Consents: A list of agreements, obligations,
encumbrances, and plans of the Company that the execution and
performance of the Preferred Stock Purchase Agreement would cause
a breach or default thereof.
S-1
ANNEX A
-------
SCHEDULE OF INVESTORS
Principal Amount
Number of Shares of Convertible Purchase Price
of Preferred Stock Promissory Notes or Other
Name/Nominee Being Purchased Being Purchased Consideration
------------ --------------- --------------- -------------
Xxxx X. Xxxxxx 4,463 $16,522.50 $49,995.00
Xxxxxxx X. Xxxxxxx 13,387 $49,597.50 $150,000.00
Spring Point Partners, 22,312 $82,657.50 $249,997.50
X.X.
Xxxxxxx Family Trust UTA 26,775 $99,187.50 $300,000.00
DTD 12/18/90
Xxxxxxxxx X. Xxxxxx and 44,625 $165,315.00 $500,002.50
Xxxxx Xxxxx Xxxxxx
Xxxxxx Xxxxxxxx, 75,863 $281,032.50 $850,005.00
Hedgecap Fund, X.X.
Xxxxxx Hedgecap Limited 13,387 $49,597.50 $150,000.00
Xxxxxx Offshore, Limited 49,087 $181,845.00 $549,997.50
Xxxxxx Partners, L.P. 40,163 $148,777.50 $450,000.00
Xxxxx Global 164,667 $609,997.50 $1,845,000.00
Investments, Ltd.
Remington Investment 36,146 $133,905.00 $405,000.00
Strategies, L.P.
Citiventure 96 232,586 $861,607.50 $2,606,002.50
Partnership Fund, X.X.
Xxxxxxxxxx LGT Private 103,441 $383,190.00 $1,158,997.50
Capital Offshore
Partners II, X.X.
Xxxxxxxxxx LGT Private 8,121 $30,090.00 $90,997.50
Capital Offshore
Partners I, C.V.
Chancellor LGT Private 57,477 $212,925.00 $644,002.50
Capital Partners III,
Limited Partnership
Oak Investment Partners 435,317 $1,612,627.50 $4,877,505.00
VII, Limited Partnership
Oak VII Affiliates Fund, 10,933 $40,500.00 $122,497.50
Limited Partnership
Oak Investment Partners 652,000 Surrender for
V, Limited Partnership cancellation
Certificate No. 1
evidencing 2,573,684
shares of Series A
Preferred Stock
Oak V Affiliates Fund, 14,667 Surrender for
Limited Partnership cancellation
Certificate No. 2
evidencing 57,895
shares of Series A
Preferred Stock
Microsoft Corporation 446,250 $1,653,127.50 $5,000,002.50
ANNEX B
[Certificate of Determination]
ANNEX C
[Convertible Promissory Note]
ANNEX D
[Registration Rights Agreement]
ANNEX E
1. The Corporation has been duly incorporated and is validly existing and
in good standing under the laws of the State of California with full corporate
power and authority to own or lease its properties and conduct its business as
presently being conducted.
2. The Corporation has corporate power and authority to enter into and
perform its obligations under the Documents.
3. Each of the Documents has been duly authorized, executed and delivered
by the Corporation and is the legally valid and binding obligation of the
Corporation enforceable against the Corporation in accordance with its terms.
4. The execution and delivery by the Corporation of the Documents (A)
does not conflict with or violate any provision of (i) the Governing Documents
or (ii) any presently existing law, rule or regulation or, to the best of our
knowledge, any order, writ, injunction or decree applicable to the Corporation
and (B) does not require the consent or approval of, or registration,
declaration or filing with, any California or federal court, or California or
federal governmental agency or body except for such consent, approval,
registration, declaration or filing, as have been made or secured on or prior to
the date hereof.
5. Based solely, as to factual matters, upon the representations and
warranties of the Investors contained in Sections 4.1 and 6 of the Purchase
Agreement and on a certificate from an officer of the Corporation, and without
any independent investigation of the accuracy of such representations, it is not
necessary to register the initial issuance and sale of the shares of Preferred
Stock to you and the Convertible Promissory Notes by the Corporation under the
circumstances contemplated by the Purchase Agreement, under the Securities Act
of 1933, as amended (the "Securities Act").
6. Except as set forth in the Company Disclosure Schedule, the execution,
delivery and performance by the Corporation of each of the Documents does not
conflict with or constitute a breach of or default under (with due notice or
passage of time or otherwise) any Material Agreement of the Corporation, which
conflict, breach, or default could reasonably be expected to have a material
adverse effect on the Company and its subsidiaries taken as a whole, or on the
ability of the Corporation to perform its material obligations under the
Documents.
7. To the best of our knowledge and except as set forth in the Company
Disclosure Schedule or the Company SEC Documents, there is no material action,
suit, proceeding or investigation pending or threatened against or affecting the
Corporation or any of its properties or assets that seeks to restrain, enjoin,
prevent the consummation of or otherwise challenge any of the Documents or the
issuance, sale and delivery of the shares of Preferred Stock and the Convertible
Promissory Notes pursuant thereto, or that seeks material damages in
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connection therewith. We expressly advise you that with respect to this
paragraph 7, we have not undertaken any search of court dockets or other
public records in any jurisdiction with respect to the claims or other
matters referred to herein.
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