SERIES A PREFERRED SHARE PURCHASE AGREEMENT
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OF CONTENTS
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THIS
SERIES A PREFERRED SHARE PURCHASE AGREEMENT (this “Agreement”)
is
made as of the 25th
day of
July, 2007 by and between
Unity Business Networks, L.L.C., an Arizona limited liability company (the
“Company”),
and
Zoom Technologies, Inc., a Delaware corporation (the “Purchaser”).
The
parties hereby agree as follows:
1. Purchase
and Sale of Series A Preferred Shares.
1.1 Sale
and
Issuance of Series A Preferred Shares.
Subject
to the terms and conditions of this Agreement, the Purchaser agrees to purchase
at the Closing and the Company agrees to sell and issue to the Purchaser at
the
Closing 18,154,412 Series A Preferred Shares (the “Preferred
Shares”),
at a
purchase price of $0.058388 per Preferred Share.
1.2 Closing;
Delivery.
(a) The initial
purchase and sale of the Preferred Shares shall take place remotely via the
exchange of documents and signatures, at 10:00 a.m., on July 25, 2007, or at
such other time and place as the Company and the Purchaser mutually agree upon,
orally or in writing (which time and place are designated as the “Closing”).
(b) At
the
Closing, the Company shall deliver to the Purchaser a letter confirming the
number of Preferred Shares being purchased by the Purchaser at the Closing,
against payment of the purchase price therefor by a wire transfer to a bank
account designated by the Company.
1.3 Use
of
Proceeds.
In
accordance with the directions of the Company’s board of managers (the
“Board
of Managers”),
the
Company will use the proceeds from the sale of the Preferred Shares for product
development and other general corporate purposes.
1.4 Defined
Terms Used in this Agreement.
In
addition to the terms defined above, the following terms used in this Agreement
shall be construed to have the meanings set forth or referenced
below.
“Affiliate”
means,
with respect to any specified Person, any other Person who, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person, including, without limitation, any general partner, managing member,
officer or director of such Person or any venture capital fund now or hereafter
existing that is controlled by one or more general partners or managing members
of, or shares the same management company with, such Person.
“Code”
means
the Internal Revenue Code of 1986, as amended.
“Company
Intellectual Property”
means
all patents, patent applications, trademarks, trademark applications, service
marks, tradenames, copyrights, trade secrets, licenses, domain names, mask
works, information and proprietary rights and processes as are necessary to
the
conduct of the Company’s business as now conducted and as presently proposed to
be conducted.
“Investor’s
Rights Agreement”
means
the agreement among the Company, the Purchaser and certain members of the
Company, dated as of the date of the Closing, in the form of Exhibit
A
attached
to this Agreement.
“Key
Employee”
means
any executive-level employee as well as any employee or consultant who either
alone or in concert with others develops, invents, programs or designs any
Company Intellectual Property.
“Knowledge,”
including
the phrase “to
the Company’s knowledge,” shall
mean as to Xxxxx Xxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx Xxxxxxx and Xxxx Xxxxxx,
their actual knowledge or information that they reasonably should have
known.
“Material
Adverse Effect”
means
a
material adverse effect on the business, assets (including intangible assets),
liabilities, financial condition, property, prospects or
results of operations of the Company.
“MT
Note”
means
that certain Multiple Advance Promissory Note dated October 1, 2003, as amended,
issued by the Company to the MT Family Partnership, an Arizona limited
partnership.
“Operating
Agreement” means
the
Second Amended and Restated Operating Agreement of the Company, as amended
from
time to time.
“Option
Agreement”
means
the Option Agreement dated as of the date hereof between the Company and the
Purchaser.
“Person”
means
any individual, corporation, partnership, trust, limited liability company,
association or other entity.
“Preferred
Shares”
means
the Series A Preferred Shares issued at the Closing.
“Securities
Act”
means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Transaction
Agreements”
means
this Agreement, the Investor’s Rights Agreement, the Option Agreement, the
Operating Agreement, [the
Indemnification Agreement],
and any
other agreements, instruments or documents entered into in connection with
this
Agreement.
2. Representations
and Warranties of the Company.
The
Company hereby represents and warrants to the Purchaser that, except as set
forth on the Disclosure Schedule which has been separately provided to the
Purchaser, which exceptions shall be deemed to be part of the representations
and warranties made hereunder, the following representations are true and
complete as of the date of the Closing, except as otherwise indicated. The
Disclosure Schedule shall be arranged in sections corresponding to the numbered
and lettered sections and subsections contained in this Section 2, and the
disclosures in any section or subsection of the Disclosure Schedule shall
qualify other sections and subsections in this Section 2 only to the extent it
is reasonably apparent from a reading of the disclosure that such disclosure
is
applicable to such other sections and subsections.
2
For
purposes of these representations and warranties (other than those in
Sections
2.2, 2.3, 2.4, 2.5, and 2.6),
the
term “the Company” shall include any subsidiaries of the Company, unless
otherwise noted herein.
2.1. Organization,
Good Standing, Corporate Power and Qualification.
The
Company is a limited liability company duly organized, validly existing and
in
good standing under the laws of the State of Arizona and has all requisite
power
and authority to carry on its business as presently conducted and as proposed
to
be conducted. The Company is duly qualified to transact business and is in
good
standing in each jurisdiction in which the failure to so qualify would have
a
Material Adverse Effect.
2.2. Capitalization.
The
authorized capital of the Company consists, immediately prior to the Closing,
of:
(a) 102,875,000
Common Shares (as such term is defined in the Operating Agreement) (the “Common
Shares”) issued and outstanding immediately prior to the Closing. All of the
outstanding Common Shares immediately prior to closing have been duly
authorized, are fully paid and nonassessable and were issued in compliance
with
all applicable federal and state securities laws.
(b) The
Company has issued 8,255,000 of units to officers, employees and consultants
of
the Company pursuant to its 2005 Stock Appreciation Rights Plan duly adopted
by
the Board of Managers (the “SAR Plan”). Of such SAR Plan units, 6,462,500 units
are vested as of the date hereof. The Company has furnished to the Purchaser
complete and accurate copies of the SAR Plan.
(c) Section
2.2(c) of the Disclosure Schedule sets forth the capitalization of the Company
immediately following the Closing including the number of shares of the issued
and outstanding Common Shares. Except for (A) the conversion privileges of
the
Preferred Shares to be issued under this Agreement, (B) the rights provided
in
the Operating Agreement, (C) rights provided in the Investor’s Rights Agreement,
and (D) the securities and rights described in Section 2.2(b) of this Agreement
and Section 2.2(c) of the Disclosure Schedule, there are no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal or similar rights) or agreements, orally or in writing, to purchase
or
acquire from the Company any membership interests, or any securities convertible
into or exchangeable for membership interests. All Common Shares are subject
to
(i) a right of first refusal in favor of the Company upon any proposed transfer
(other than transfers for estate planning purposes); and (ii) a lock-up or
market standoff agreement of not less than 180 days following the Company’s
initial public offering pursuant to a registration statement filed with the
Securities and Exchange Commission under the Securities Act
as
referenced in the Investor’s Rights Agreement.
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(d) Except
as
set forth on Section 2.2(d) of the Disclosure Schedule, the Company’s SAR Plan
does not contain a provision for acceleration of vesting or other changes in
the
vesting provisions or other terms of such agreement or understanding upon the
occurrence of any event or combination of events. Except as set forth on Section
2.2(d) of the Disclosure Schedule, the Company has never adjusted or amended
the
exercise price of any membership interest options previously awarded, whether
through amendment, cancellation, replacement grant, repricing, or any other
means. Except as set forth in the Operating Agreement, the Company has no
obligation (contingent or otherwise) to purchase or redeem any of its membership
interests.
(e) The
Company believes in good faith that the SAR Plan, as well as any other
“nonqualified deferred compensation plan” (as such term is defined under Section
409A(d)(1) of the Code and the guidance thereunder) under which the Company
makes, is obligated to make or promises to make, payments (each, a “409A Plan”)
complies in all material respects, in both form and operation, with the
requirements of Section 409A of the Code and the guidance thereunder. To the
knowledge of the Company, no payment that has been made under any 409A Plan
is,
or will be, subject to the penalties of Section 409A(a)(1) of the
Code.
2.3. Subsidiaries.
The
Company does not currently own or control, directly or indirectly, any interest
in any other corporation, partnership, trust, joint venture, limited liability
company, association, or other business entity. The Company is not a participant
in any joint venture, partnership or similar arrangement.
2.4. Authorization.
All
corporate action required to be taken by the Company’s members and managers in
order to authorize the Company to enter into the Transaction Agreements, and
to
issue the Preferred Shares at the Closing, has been taken or will be taken
prior
to the Closing. All action on the part of the members and managers of the
Company necessary for the execution and delivery of the Transaction Agreements,
the performance of all obligations of the Company under the Transaction
Agreements to be performed as of the Closing, and the issuance and delivery
of
the Preferred Shares has been taken or will be taken prior to the Closing.
The
Transaction Agreements, when executed and delivered by the Company, shall
constitute valid and legally binding obligations of the Company, enforceable
against the Company in accordance with their respective terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, or other laws of general application relating to or
affecting the enforcement of creditors’ rights generally, (ii) as limited by
laws relating to the availability of specific performance, injunctive relief,
or
other equitable remedies, or (iii) to the extent the indemnification provisions
contained in the Investor’s Rights Agreement and the Indemnification Agreement
may be limited by applicable federal or state securities laws.
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2.5. Valid
Issuance of Preferred Shares.
The
Preferred Shares, when issued, sold and delivered in accordance with the terms
and for the consideration set forth in this Agreement, will be validly issued,
and free of restrictions on transfer other than restrictions on transfer under
the Transaction Agreements, applicable state and federal securities laws and
liens or encumbrances created by or imposed by the Purchaser. Assuming the
accuracy of the representations of the Purchaser in Section 3 of this Agreement
and subject to the filings described in Section 2.6 below, the Preferred Shares
will be issued in compliance with all applicable federal and state securities
laws.
2.6. Governmental
Consents and Filings.
Assuming
the accuracy of the representations made by the Purchaser in Section 3 of this
Agreement, no consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any federal, state
or
local governmental authority is required on the part of the Company in
connection with the consummation of the transactions contemplated by this
Agreement, except for filings pursuant to Regulation D of the Securities Act,
and applicable state securities laws, which have been made or will be made
in a
timely manner.
2.7. Litigation.
There is
no claim, action, suit, proceeding, arbitration, complaint, charge or
investigation pending or to the Company’s knowledge, currently threatened
against the Company or any officer, manager or Key Employee of the Company
arising out of their employment or managerial relationship with the Company.
There is no claim, action, suit, proceeding, arbitration, complaint, charge
or
investigation pending or to the Company’s knowledge, currently threatened, that
questions the validity of the Transaction Agreements or the right of the Company
to enter into them, or to consummate the transactions contemplated by the
Transaction Agreements; or to the Company’s knowledge, that would reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect. There is no action, suit, proceeding or investigation by the Company
pending or which the Company currently intends to initiate.
2.8. Intellectual
Property.
The
Company owns or possesses or reasonably believes it can acquire on commercially
reasonable terms sufficient legal rights to all Company Intellectual Property
without any known conflict with, or infringement of, the rights of others.
To
the knowledge of the Company, no product or service marketed or sold (or
proposed to be marketed or sold) by the Company violates or will violate any
license or infringes or will infringe any intellectual property rights of any
other party. Section 2.8 of the Disclosure Schedule lists all registered
patents, trademarks and copyrights of the Company. The Company has not received
any communications alleging that the Company has violated or, by conducting
its
business, would violate any of the patents, trademarks, service marks,
tradenames, copyrights, trade secrets, mask works or other proprietary rights
or
processes of any other Person. The Company has obtained and possesses valid
licenses to use all of the software programs present on the computers and other
software-enabled electronic devices that it owns or leases or that it has
otherwise provided to its employees for their use in connection with the
Company’s business. The Company has not embedded any open source, copyleft or
community source code in any of its products generally available or in
development, including but not limited to any libraries or code licensed under
any General Public License, Lesser General Public License or similar license
arrangement.
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2.9. Compliance
with Other Instruments.
The
Company is not in violation or default (i) of any provisions of its Operating
Agreement, (ii) of any instrument, judgment, order, writ or decree, (iii) under
any note, indenture or mortgage, or (iv) under any lease, agreement, contract
or
purchase order to which it is a party or by which it is bound that is required
to be listed on the Disclosure Schedule, or, of any provision of federal or
state statute, rule or regulation applicable to the Company, the violation
of
which would have a Material Adverse Effect. The execution, delivery and
performance of the Transaction Agreements and the consummation of the
transactions contemplated by the Transaction Agreements will not result in
any
such violation or be in conflict with or constitute, with or without the passage
of time and giving of notice, either (i) a default under any such provision,
instrument, judgment, order, writ, decree, contract or agreement or (ii) an
event which results in the creation of any lien, charge or encumbrance upon
any
assets of the Company or the suspension, revocation, forfeiture, or nonrenewal
of any material permit or license applicable to the Company.
2.10. Agreements;
Actions.
(a) Except
for the Transaction Agreements, there are no agreements, understandings,
instruments, contracts or proposed transactions to which the Company is a party
or by which it is bound that involve (i) obligations (contingent or otherwise)
of, or payments to, the Company in excess of 100,000.00, other than the MT
Note,
(ii) the license of any patent, copyright, trademark, trade secret or other
proprietary right to or from the Company, (iii) the grant of rights to license,
market, or sell its products to any other Person that limit the Company’s right
to develop, distribute, market or sell its products, or (iv) indemnification
by
the Company with respect to infringements of proprietary rights.
(b) Other
than the MT Note, the Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its membership interests, other than distributions in the ordinary course
of
business to satisfy the tax obligations of the members of the Company (ii)
since
January 1, 2007, incurred any indebtedness for money borrowed or incurred any
other liabilities on a calendar year basis, individually in excess of 15,000.00
or in excess of 50,000.00 in the aggregate, (iii) made any loans or advances
to
any Person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than
the
sale of its inventory or otherwise in the ordinary course of
business.
(c) The
Company is not a guarantor or indemnitor of any indebtedness of any other
Person.
(d) Since
July 18, 2007, the Company has not engaged in any discussion with any
representative of any Person regarding (i) a sale or exclusive license of all
or
substantially all of the Company’s assets, or (ii) any merger, consolidation or
other business combination transaction of the Company with or into another
Person.
2.11. Certain
Transactions.
6
(a) Other
than (i) standard employee benefits generally made available to all employees,
(ii) standard manager and officer indemnification agreements approved by the
Board of Managers, (iii) the MT Note, and (iv) the purchase of membership
interests and the issuance of units under the SAR Plan, there are no agreements,
understandings or proposed transactions between the Company and any of its
officers, managers, consultants or Key Employees, or any Affiliate
thereof.
(b) Other
than pursuant to the MT Note and certain capital leases with Positive Ventures,
L.L.C., the Company is not indebted, directly or indirectly, to any of its
managers, officers or employees or to their respective spouses or children
or to
any Affiliate of any of the foregoing, other than in connection with expenses
or
advances of expenses incurred in the ordinary course of business or employee
relocation expenses and for other customary employee benefits made generally
available to all employees.
2.12. Rights
of Registration and Voting Rights.
Except
as provided in the Investor’s Rights Agreement, the Company is not under any
obligation to register under the Securities Act any of its currently outstanding
securities or any securities issuable upon exercise or conversion of its
currently outstanding securities. To the Company’s knowledge, except as
contemplated in the Operating Agreement, no member of the Company has entered
into any agreements with respect to the voting of the securities of the
Company.
2.13. Absence
of Liens.
The
property and assets that the Company owns are free and clear of all mortgages,
deeds of trust, liens, loans and encumbrances, except for statutory liens for
the payment of current taxes that are not yet delinquent and encumbrances and
liens that arise in the ordinary course of business and do not materially impair
the Company’s ownership or use of such property or assets. With respect to the
property and assets it leases, the Company is in compliance with such leases
and, to its knowledge, holds a valid leasehold interest free of any liens,
claims or encumbrances other than those of the lessors of such property or
assets.
2.14. Financial
Statements.
The
Company has delivered to the Purchaser its unaudited financial statements for
the fiscal year ended December 31, 2006 and for the 6-month period ended June
30, 2007 (the “Statement Date”) (collectively, the “Financial Statements”). The
Financial Statements have been prepared in accordance with the books and records
of the Company, and fairly present in all material respects the financial
condition and operating results of the Company as of the dates, and for the
periods, indicated therein, subject to normal year-end audit adjustments. Except
as set forth in the Financial Statements, the Company has no material
liabilities or obligations, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to the Statement Date
(ii) obligations under contracts and commitments incurred in the ordinary course
of business, which, in all such cases, individually and in the aggregate would
not have a Material Adverse Effect.
2.15. Changes.
Since
the Statement Date there has not been:
(a) any
change in the assets, liabilities, financial condition or operating results
of
the Company from that reflected in the Financial Statements, except changes
in
the ordinary course of business that have not caused, in the aggregate, a
Material Adverse Effect;
7
(b) any
damage, destruction or loss, whether or not covered by insurance, that would
have a Material Adverse Effect;
(c) any
waiver or compromise by the Company of a valuable right or of a material debt
owed to it;
(d) any
satisfaction or discharge of any lien, claim, or encumbrance or payment of
any
obligation by the Company, except in the ordinary course of business and the
satisfaction or discharge of which would not have a Material Adverse
Effect;
(e) any
material change to a material contract or agreement by which the Company or
any
of its assets is bound or subject;
(f) any
material change in any compensation arrangement or agreement with any employee,
officer, manager or member;
(g) any
resignation or termination of employment of any officer or Key Employee of
the
Company;
(h) any
mortgage, pledge, transfer of a security interest in, or lien, created by the
Company, with respect to any of its material properties or assets, except liens
for taxes not yet due or payable and liens that arise in the ordinary course
of
business and do not materially impair the Company’s ownership or use of such
property or assets;
(i) any
loans
or guarantees made by the Company to or for the benefit of its employees,
officers or managers, or any members of their immediate families, other than
travel advances and other advances made in the ordinary course of its
business;
(j) any
declaration, setting aside or payment or other distribution in respect of any
of
the Company’s securities (other than tax distributions), or any direct or
indirect redemption, purchase, or other acquisition of any of such securities
by
the Company;
(k) any
sale,
assignment or transfer of any Company Intellectual Property that could
reasonably be expected to result in a Material Adverse Effect;
(l) receipt
of notice that there has been a loss of, or material order cancellation by,
any
major customer of the Company;
(m) to
the
Company’s knowledge, any other event or condition of any character, other than
events affecting the economy or the Company’s industry generally, that could
reasonably be expected to result in a Material Adverse Effect; or
(n) any
arrangement or commitment by the Company to do any of the things described
in
this Section 2.15.
2.16. Employee
Matters.
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(a) As
of the
date hereof, the Company employs 17 full-time employees and 0 part-time
employees and engages 3 consultants or independent contractors. Section 2.16
of
the Disclosure Schedule sets forth a description of all compensation, including
salary, bonus, severance obligations and deferred compensation paid or payable
for each officer, employee, consultant and independent contractor of the Company
who received compensation in excess of $60,000 for the fiscal year ended
December 31, 2006 or is anticipated to receive compensation in excess of $75,000
for the fiscal year ending December 31, 2007.
(b) To
the
Company’s knowledge, none of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would materially interfere with such employee’s ability to promote
the interest of the Company or that would conflict with the Company’s business.
Neither the execution or delivery of the Transaction Agreements, nor the
carrying on of the Company’s business by the employees of the Company, nor the
conduct of the Company’s business as now conducted and as presently proposed to
be conducted, will, to the Company’s knowledge, conflict with or result in a
breach of the terms, conditions, or provisions of, or constitute a default
under, any contract, covenant or instrument under which any such employee is
now
obligated.
(c) The
Company is not delinquent in payments to any of its employees, consultants,
or
independent contractors for any wages, salaries, commissions, bonuses, or other
direct compensation for any service performed for it to the date hereof or
amounts required to be reimbursed to such employees, consultants, or independent
contractors. The Company has complied in all material respects with all
applicable state and federal equal employment opportunity laws and with other
laws related to employment, including those related to wages, hours, worker
classification, and collective bargaining. The Company has withheld and paid
to
the appropriate governmental entity or is holding for payment not yet due to
such governmental entity all amounts required to be withheld from employees
of
the Company and is not liable for any arrears of wages, taxes, penalties, or
other sums for failure to comply with any of the foregoing.
(d) To
the
Company’s knowledge, no Key Employee intends to terminate employment with the
Company or is otherwise likely to become unavailable to continue as a Key
Employee, nor does the Company have a present intention to terminate the
employment of any of the foregoing. Except as set forth in Section 2.16 of
the
Disclosure Schedule, the employment of each employee of the Company is
terminable at the will of the Company. Except as set forth in Section 2.16
of
the Disclosure Schedule or as required by law, upon termination of the
employment of any such employees, no severance or other payments will become
due. Except as set forth in Section 2.16 of the Disclosure Schedule, the Company
has no policy, practice, plan, or program of paying severance pay or any form
of
severance compensation in connection with the termination of employment
services.
(e) All
representations regarding equity incentives to any officer, employees, member,
manager or consultant have been described in reasonable accuracy to the
Purchaser.
9
(f) The
Company has no Knowledge that any Key Employee whose employment was terminated
by the Company has advised the Company of any potential claims against the
Company.
(g) Section
0
of
the Disclosure
Schedule sets forth each employee benefit plan maintained, established or
sponsored by the Company, or which the Company participates in or contributes
to, which is subject to the Employee Retirement Income Security Act of 1974,
as
amended (“ERISA”).
The
Company has made all required contributions and has no liability to any such
employee benefit plan, other than liability for health plan continuation
coverage described in Part 6 of Title I(B) of ERISA.
(h) The
Company is not bound by or subject to (and none of its assets or properties
is
bound by or subject to) any written or oral, express or implied, contract,
commitment or arrangement with any labor union, and no labor union has requested
or, to the knowledge of the Company, has sought to represent any of the
employees, representatives or agents of the Company. There is no strike or
other
labor dispute involving the Company pending, or to the Company’s knowledge,
threatened, which could have a Material Adverse Effect, nor is the Company
aware
of any labor organization activity involving its employees.
2.17. Insurance.
The
Company has in full force and effect general commercial, product liability,
fire
and casualty insurance policies with coverage customary for companies similarly
situated to the Company.
2.18. Confidential
Information and Invention Assignment Agreements.
Each Key
Employee of the Company has executed an agreement with the Company regarding
confidentiality and proprietary information as disclosed in the Disclosure
Schedules. The Company is not aware that any of its Key Employees is in
violation thereof.
2.19. Permits.
The
Company has all franchises, permits, licenses and any similar authority
necessary for the conduct of its business, the lack of which could reasonably
be
expected to have a Material Adverse Effect. The Company is not in default in
any
material respect under any of such franchises, permits, licenses or other
similar authority.
2.20. Corporate
Documents.
The
Operating Agreement is in the form provided to the Purchaser. A copy of the
minute books of the Company has been provided to the Purchaser.
2.21 Disclosure.
The
Company has made available to the Purchaser all the information reasonably
available to the Company that the Purchaser has requested for deciding whether
to acquire the Preferred Shares, including certain of the Company’s projections
describing its proposed business plan (the “Business Plan”). No representation
or warranty of the Company contained in this Agreement, as qualified by the
Disclosure Schedule, and no certificate furnished or to be furnished to
Purchaser at the Closing contains any untrue statement of a material fact or
omits 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 were made. The Business Plan was prepared in good faith; however,
the
Company does not warrant that it will achieve any results projected in the
Business Plan. It is understood that this representation is qualified by the
fact that the Company has not delivered to the Purchaser, and has not been
requested to deliver, a private placement or similar memorandum or any written
disclosure of the types of information customarily furnished to purchasers
of
securities.
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3. Representations
and Warranties of the Purchaser.
The
Purchaser hereby represents and warrants to the Company that:
3.1 Authorization.
The
Purchaser has full power and authority to enter into the Transaction Agreements.
The Transaction Agreements to which the Purchaser is a party, when executed
and
delivered by the Purchaser, will constitute valid and legally binding
obligations of the Purchaser, enforceable in accordance with their terms, except
(a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, and any other laws of general application
affecting enforcement of creditors’ rights generally, and as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies, or (b) to the extent the indemnification
provisions contained in the Investor’s Rights Agreement may be limited by
applicable federal or state securities laws.
3.2 Purchase
Entirely for Own Account.
This
Agreement is made with the Purchaser in reliance upon the Purchaser’s
representation to the Company, which by the Purchaser’s execution of this
Agreement, the Purchaser hereby confirms, that the Preferred Shares to be
acquired by the Purchaser will be acquired for investment for the Purchaser’s
own account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that the Purchaser has no present
intention of selling, granting any participation in, or otherwise distributing
the same. By executing this Agreement, the Purchaser further represents that
the
Purchaser does not presently have any contract, undertaking, agreement or
arrangement with any Person to sell, transfer or grant participations to such
Person or to any third Person, with respect to any of the Preferred Shares.
The
Purchaser has not been formed for the specific purpose of acquiring the
Preferred Shares.
3.3 Disclosure
of Information.
The
Purchaser has had an opportunity to discuss the Company’s business, management,
financial affairs and the terms and conditions of the offering of the Preferred
Shares with the Company’s management and has had an opportunity to review the
Company’s facilities. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section
2
of this
Agreement or the right of the Purchaser to rely thereon.
3.4 Restricted
Securities.
The
Purchaser understands that the Preferred Shares have not been, and will not
be,
registered under the Securities Act, by reason of a specific exemption from
the
registration provisions of the Securities Act which depends upon, among other
things, the bona fide nature of the investment intent and the accuracy of the
Purchaser’s representations as expressed herein. The Purchaser understands that
the Preferred Shares are “restricted securities” under applicable U.S. federal
and state securities laws and that, pursuant to these laws, the Purchaser must
hold the Preferred Shares indefinitely unless they are registered with the
Securities and Exchange Commission and qualified by state authorities, or an
exemption from such registration and qualification requirements is available.
The Purchaser acknowledges that the Company has no obligation to register or
qualify the Preferred Shares, or the membership interests into which they may
be
converted, for resale except as set forth in the Investor’s Rights Agreement.
The Purchaser further acknowledges that if an exemption from registration or
qualification is available, it may be conditioned on various requirements
including, but not limited to, the time and manner of sale, the holding period
for the Preferred Shares, and on requirements relating to the Company which
are
outside of the Purchaser’s control, and which the Company is under no
obligation and
may
not be able to satisfy.
11
3.5 No
Public Market.
The
Purchaser understands that no public market now exists for the Preferred Shares,
and that the Company has made no assurances that a public market will ever
exist
for the Preferred Shares.
3.6 Legends.
The
Purchaser understands that the Preferred Shares and any securities issued in
respect of or exchange for the Preferred Shares, may bear one or all of the
following legends:
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH
A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT
SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”
Any
legend set forth in, or required by, the other Transaction
Agreements.
Any
legend required by the securities laws of any state to the extent such laws
are
applicable to the Preferred Shares represented by the certificate so
legended.
3.7 Accredited
Investor.
The
Purchaser is an accredited investor as defined in Rule 501(a) of Regulation
D
promulgated under the Securities Act.
3.8 No
General Solicitation.
Neither
the Purchaser, nor any of its officers, directors, employees, agents,
stockholders or partners has either directly or indirectly, including through
a
broker or finder (a) engaged in any general solicitation, or
(b) published any advertisement in connection with the offer and sale of
the Preferred Shares.
3.9 Residence.
The
Purchaser’s principal place of business is identified in the address of the
Purchaser set forth herein.
4. Conditions
to the Purchaser’s Obligations at Closing.
The
obligations of the Purchaser to purchase the Preferred Shares at the Closing
are
subject to the fulfillment, on or before the Closing, of each of the following
conditions, unless otherwise waived:
12
4.1 Representations
and Warranties.
The
representations and warranties of the Company contained in Section 2
shall be
true and correct in all respects as of the Closing.
4.2 Performance.
The
Company shall have performed and complied with all covenants, agreements,
obligations and conditions contained in this Agreement that are required to
be
performed or complied with by the Company on or before the Closing.
4.3 Compliance
Certificate.
A
manager of the Company shall deliver to the Purchaser at the Closing a
certificate certifying that the conditions specified in Sections
4.1 and 4.2
have
been fulfilled.
4.4 Qualifications.
All
authorizations, approvals or permits, if any, of any governmental authority
or
regulatory body of the United States or of any state that are required in
connection with the lawful issuance and sale of the Preferred Shares pursuant
to
this Agreement shall be obtained and effective as of the Closing.
4.5 Opinion
of Company Counsel.
The
Purchaser shall have received from Faegre & Xxxxxx LLP, counsel for the
Company, an opinion, dated as of the Closing, in form generally satisfactory
to
the Purchaser.
4.6 Board
of Managers.
As of
the Closing, the authorized size of the Board shall be 5, and the Board shall
be
comprised of Xxxxxxx Xxxxxxxx, Xxxxxx Xxxxxxx, Xxxxxxx Xxxxxx, Xxxxx Xxxxxxx,
and Xxxxx Xxxxxxx.
4.7 INTENTIONALLY
OMITTED
4.8 Investor’s
Rights Agreement.
The
Company and the members of the Company named as parties thereto shall have
executed and delivered the Investor’s Rights Agreement.
4.9 Option
Agreement.
The
Company shall have executed and delivered the Option Agreement.
4.10 Secretary’s
Certificate.
A
manager of the Company shall have delivered to the Purchaser at the Closing
a
certificate certifying (i) the Operating Agreement, (ii) resolutions of the
Board of Managers of the Company approving the Transaction Agreements and the
transactions contemplated under the Transaction Agreements, and (iii)
resolutions of the members of the Company approving the Transaction Agreements
and the transactions contemplated under the Transaction Agreements.
4.11 Proceedings
and Documents.
All
limited liability company and other proceedings in connection with the
transactions contemplated at the Closing and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Purchaser, and
the
Purchaser (or its counsel) shall have received all such counterpart original
and
certified or other copies of such documents as reasonably requested. Such
documents may include good standing certificates.
13
5. Conditions
of the Company’s Obligations at Closing.
The
obligations of the Company to sell the Preferred Shares to the Purchaser at
the
Closing are subject to the fulfillment, on or before the Closing, of each of
the
following conditions, unless otherwise waived:
5.1 Representations
and Warranties.
The
representations and warranties of the Purchaser contained in Section 3
shall be
true and correct in all respects as of the Closing.
5.2 Performance.
The
Purchaser shall have performed and complied with all covenants, agreements,
obligations and conditions contained in this Agreement that are required to
be
performed or complied with by it on or before the Closing.
5.3 Qualifications.
All
authorizations, approvals or permits, if any, of any governmental authority
or
regulatory body of the United States or of any state that are required in
connection with the lawful issuance and sale of the Preferred Shares pursuant
to
this Agreement shall be obtained and effective as of the Closing.
5.4 Investor’s
Rights Agreement.
The
Purchaser shall have executed and delivered the Investors’ Rights
Agreement.
5.5 Option
Agreement.
The
Purchaser shall have executed and delivered the Option Agreement.
6. Miscellaneous.
6.1 Survival
of Warranties.
Unless
otherwise set forth in this Agreement, the representations and warranties of
the
Company and the Purchaser contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the Closing until
the
earlier of the Purchaser’s exercise of the Option (as such term is defined in
the Option Agreement) or the expiration of the Option, and shall in no way
be
affected by any investigation or knowledge of the subject matter thereof made
by
or on behalf of the Purchaser or the Company.
6.2 Successors
and Assigns.
The
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. Nothing
in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
6.3 Governing
Law.
This
Agreement and any controversy arising out of or relating to this Agreement
shall
be governed by and construed in accordance with the internal laws of the State
of Delaware, without regard to conflict of law principles that would result
in
the application of any law other than the law of the State of
Delaware.
14
6.4 Counterparts;
Facsimile.
This
Agreement may be executed and delivered by facsimile signature and in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.5 Titles
and Subtitles.
The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.
6.6 Notices. All
notices and other communications given or made pursuant to this Agreement shall
be in writing and shall be deemed effectively given
upon the
earlier of actual receipt or: (i) personal delivery to the party to be notified;
(ii) when sent, if sent by electronic mail or facsimile during the recipient’s
normal business hours, and if not sent during normal business hours, then on
the
recipient’s next business day; (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid; or
(iv)
one (1) business
day
after deposit
with a nationally recognized overnight courier, freight prepaid, specifying
next-business day delivery, with written verification of receipt. All
communications shall be sent to the respective parties at their addresses as
set
forth on the
signature pages or Schedule A (as applicable) hereto, or to the
principal office of the Company and to the attention of the Chief Executive
Officer, in the case of the Company, or to such
email address, facsimile number, or address as subsequently modified by written
notice given in accordance with this Section 6.6. If notice is given to the
Company, a copy shall also be sent to Faegre & Xxxxxx LLP, 0000 Xxxxxxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, Attention: Xxxxxxx X. Xxxxx, and if notice
is
given to the Investor, a copy shall also be given to Xxxxx, Xxxxxx-Xxxxx &
Xxxxxxxxx, P.C., Reservoir Place, 0000 Xxxxxxx Xxxx, Xxxxxxx, Xxxxxxxxxxxxx
00000, Attention: Xxxxxxx X. Xxxxxx.
6.7 No
Finder’s Fees.
Each
party represents that it neither is nor will be obligated for any finder’s fee
or commission in connection with this transaction. The Purchaser agrees to
indemnify and to hold harmless the Company from any liability for any commission
or compensation in the nature of a finder’s or broker’s fee arising out of this
transaction (and the costs and expenses of defending against such liability
or asserted liability) for which the Purchaser or any of its officers,
employees, or representatives is responsible. The Company agrees to indemnify
and hold harmless the Purchaser from any liability for any commission or
compensation in the nature of a finder’s or broker’s fee arising out of
this transaction (and the costs and expenses of defending against such liability
or asserted liability) for which the Company or any of its officers, employees
or representatives is responsible.
6.8 Fees
and Expenses.
Each
party hereto shall bear its own fees and expenses relating to the Transaction
Agreements.
6.9 Attorneys’
Fees.
If any
action at law or in equity (including arbitration) is necessary to enforce
or
interpret the terms of any of the Transaction Agreements, the prevailing party
shall be entitled to reasonable attorneys’ fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
15
6.10 Amendments
and Waivers.
Any term
of this Agreement may be amended, terminated or waived solely with the written
consent of the Company and the Purchaser.
6.11 Severability.
The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision.
6.12 Delays
or Omissions.
No delay
or omission to exercise any right, power or remedy accruing to any party under
this Agreement, upon any breach or default of any other party under this
Agreement, shall impair any such right, power or remedy of such non-breaching
or
non-defaulting party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only
to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any party, shall be cumulative
and not alternative.
6.13 Entire
Agreement.
This
Agreement (including the Exhibits hereto), the Operating Agreement and the
other
Transaction Agreements constitute the full and entire understanding and
agreement between the parties with respect to the subject matter hereof, and
any
other written or oral agreement relating to the subject matter hereof existing
between the parties are expressly canceled.
6.14 No
Commitment for Additional Financing.
The
Company acknowledges and agrees that the Purchaser has not made any
representation, undertaking, commitment or agreement to provide or assist the
Company in obtaining any financing, investment or other assistance, other than
the purchase of the Preferred Shares as set forth herein and subject to the
conditions set forth herein. In addition, the Company acknowledges and agrees
that (i) no statements, whether written or oral, made by the Purchaser or
its representatives on or after the date of this Agreement shall create an
obligation, commitment or agreement to provide or assist the Company in
obtaining any financing or investment, (ii) the Company shall not rely on
any such statement by the Purchaser or its representatives and (iii) an
obligation, commitment or agreement to provide or assist the Company in
obtaining any financing or investment may only be created by a written
agreement, signed by the Purchaser and the Company, setting forth the terms
and
conditions of such financing or investment and stating that the parties intend
for such writing to be a binding obligation or agreement. The Purchaser shall
have the right, in its sole and absolute discretion, to refuse or decline to
participate in any other financing of or investment in the Company, and shall
have no obligation to assist or cooperate with the Company in obtaining any
financing, investment or other assistance.
16
IN
WITNESS WHEREOF, the parties have executed this Series A Preferred Share
Purchase Agreement as of the date first written above.
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COMPANY:
UNITY
BUSINESS NETWORKS, L.L.C.
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| By: | /s/ Xxxxxxx Xxxxxxxx | |
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Name: Xxxxxxx Xxxxxxxx |
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(print)
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| Title: Manager | ||
| Address: 0000 X. Xxxxxx Xxxxxx, Xxxxx 000 | ||
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Xxxxxx,
XX 00000
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PURCHASER:
ZOOM
TECHNOLOGIES, INC.
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| By: | /s/ Xxxxx X. Xxxxxxx, Chief Executive Officer | |
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Address: |
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