1
Exhibit 10.19
SKILLSOFT CORPORATION
PREFERRED STOCK
PURCHASE AGREEMENT
This Agreement is made as of January 8th, 1998 among SkillSoft Corporation,
a Delaware corporation, (the "Company") G-Fund L.L.C., a Delaware limited
liability company ("Gartner"), Warburg, Xxxxxx Ventures, L.P., a Delaware
limited partnership, ("Warburg") and Warburg and Gartner ("Purchasers").
In consideration of the mutual promises, conditions and covenants
hereinafter set forth, the parties hereto agree as follows:
SECTION 1
AUTHORIZATION AND SALE OF PREFERRED STOCK
1.1 AUTHORIZATION OF SERIES A, SERIES B AND SERIES C PREFERRED STOCK. On
or before the Series A Closing (as defined in Section 2.1 below), the Company
will authorize the sale and issuance of up to 4,000,000 shares (the "Series A
Shares") of its Series A Preferred Stock (the "Series A Preferred"), up to
2,857,143 shares (the "Series B Shares") of its Series B Preferred Stock (the
"Series B Preferred") and up to 3,174,603 shares (the "Series C Shares") of its
Series C Preferred Stock (the "Series C Preferred"), in each case in accordance
with the terms of this Agreement and with each such series having the rights,
preferences, privileges and restrictions as set forth in the Amended and
Restated Certificate of Incorporation (the "Restated Certificate") in the form
attached to this Agreement as EXHIBIT A.
1.2 SALE OF SERIES A SHARES. Subject to the terms and conditions hereof
and at the Series A Closing (as defined in Section 2.1), the Company will issue
and sell to the Purchasers, and the Purchasers will buy from the Company,
4,000,000 shares of Series A Preferred, at a purchase price of $1.75 per share.
1.3 SALE OF SERIES B SHARES. Subject to the terms and conditions herein,
the Company may elect to issue and sell to the Purchasers, and the Purchasers
will buy from the Company, up to an aggregate of 2,857,143 shares of Series B
Preferred at a price of $2.10 per Share, in the amounts for the aggregate prices
set forth opposite each Purchaser's name in the Schedule of Purchasers attached
hereto. The first Series B Closing must be for at least 1,430,000 shares of
Series B Preferred and any subsequent Series B Closing must be for the balance
of the Series B Shares unsold after the first Series B Closing (each such
closing a "Series B Closing"). The Company may elect to sell fewer than
2,857,143 shares of Series B Preferred to the Purchasers provided, however, any
shares sold must be sold in the increments described in the preceding sentence.
Warburg and Gartner will purchase 90% and 10%, respectively, of the shares to be
sold at each Series B Closing. In order to effect any sale of Series B Preferred
to the Purchasers, the Company must for each closing provide written notice to
the Purchasers of its intent to effect such sale at least 30 calendar days prior
to each proposed closing date (each such date a "Series B Closing Date") for
such sale and indicate in such notice the total number of shares to be issued
and sold
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(each such notice a "Series B Notice of Sale"). If the Company provides a Series
B Notice of Sale to the Purchasers, the obligations of Purchasers to purchase
the number of Series B Shares set forth in such notice at each Series B Closing
shall be subject to Warburg's current approval of the Company's operating
performance from the date hereof through each Series B Closing Date and its then
financial and business condition (the "Warburg Approval"), which Warburg
Approval shall not be unreasonably withheld. For the purposes of this Section
1.3, Warburg's ability to reasonably withhold Warburg's Approval shall include,
but not be limited to those situations where: (i) the Company's revenues or
expenses for the quarter preceding each proposed closing date are more than 10
percent below or above, respectively, the level proposed in the business plan
provided to Warburg and attached hereto as EXHIBIT B or as modified approved by
the Board of Directors of the Company (the "Business Plan"); or (ii) Warburg
reasonably believes that any currently proposed acquisition by the Company of
any business, products or technologies will materially affect the business,
financial condition or results of operations of the Company or prospects
therefor.
1.4 SALE OF SERIES C SHARES. Subject to the terms and conditions herein,
the Company MAY elect to issue and sell to the Purchasers, and the Purchasers
WILL buy from the Company, up to an aggregate of 3,174,603 shares of Series C
Preferred at a price of $3.15 per Share, in the amounts and for the aggregate
prices set forth opposite each Purchaser's name in the Schedule of Purchasers.
Such shares may be sold in up to three separate closings (each such closing a
"Series C Closing"). Each Series C Closing must be for the lesser of 1,000,000
shares or the balance of the Series C Shares unsold after any previous Series C
Closing. The Company may elect to sell fewer than 3,174,603 shares of Series C
Preferred to the Purchasers provided, however, any shares sold must be sold in
the increments described in the preceding sentence. Warburg and Gartner will
purchase 90% and 10%, respectively, of the shares to be sold at each Series C
Closing. In order to effect any sale of Series C Preferred to the Purchasers,
the Company must for each closing provide notice to the Purchasers of its intent
to effect such sale at least 15 business days prior to each proposed closing
date (each such date a "Series C Closing Date") for such sale and indicate in
such notice the total number of shares to be issued and sold (each such notice a
"Series C Notice of Sale"). If the Company provides a Series C Notice of Sale to
the Purchasers, the obligations of Purchasers to purchase the number of Series C
Shares set forth in such notice at each Series C Closing shall be subject to the
Warburg Approval, which Warburg Approval shall not be unreasonably withheld. For
the purposes of this Section 1.4, Warburg's ability to reasonably withhold
Warburg's Approval shall include, but not be limited to, those situations where:
(i) the Company's revenues or expenses for the quarter preceding each proposed
closing date are more than 10 percent below or above, respectively, the level
proposed in the Business Plan; or (ii) if Warburg reasonably believes that any
then currently proposed acquisition by the Company of any business, products or
technologies will materially adversely affect the business, financial condition
or results of operations of the Company or prospects therefor.
1.5 FINANCING PREFERENCE. Notwithstanding any other provision in this
Agreement, the Company may not seek any outside financing from third parties
through the sale of the Series B Preferred or Series C Preferred at a price
equal or greater than $2.10 or $3.15, respectively, or any other security of the
Company for which the consideration per share of such security is greater than
the conversion price per share of the most recent series of the Company's
preferred stock sold by the Company, until the Company has in good faith first
offered the entire tranche of Series B Shares and the Series C Shares to the
Purchasers pursuant to this Section 1, PROVIDED, HOWEVER,
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that after the Company has offered such shares to the Purchasers, each Purchaser
shall have 10 business days from the date such shares were offered to confirm to
the Company that it is its good faith intention to consummate, and that it has
no reason to believe that it will not consummate, the purchase in accordance
with the terms of this Agreement its entire pro rata portion of the shares
offered. Any Purchaser who fails to provide such confirmation within such 10-day
period shall forfeit its right to purchase shares under the terms of this
Agreement, and the Company shall be free to offer and sell to any third party
such Purchaser's shares unless the Purchasers agree that Warburg shall purchase
such Purchaser's entire pro rata portion.
SECTION 2
CLOSING DATES; DELIVERY
2.1. SERIES A CLOSING. The closing of the purchase and sale of the Series A
Preferred hereunder shall be held at the offices of Xxxxxxxx & Xxxxxxxx LLP, 755
Page Mill Road, Palo Alto, California at 2:00 p.m., local time, on January __,
1998 (the "Series A Closing") or at such other time and place upon which the
Company and the Purchasers shall agree. The date of the Series A Closing is
sometimes hereinafter referred to as the "Series A Closing Date," and the Series
A Closing Date, the Series B Closing Date and the Series C Closing Date are
sometimes hereinafter referred to together as the "Closing Dates." The Series A
Closings, Series B Closings and Series C Closings are sometimes hereinafter
referred to together as the "Closings" and individually as a "Closing."
2.2. SERIES B CLOSINGS. Subject to Section 1.3 above, each Series B Closing
shall occur on the first business day following the thirtieth calendar day after
the Company provides a notice of sale as described in Section 1.3 hereof or at
such other time and place as the Company and the Purchasers mutually agree upon
in writing.
2.3. SERIES C CLOSINGS. Subject to Section 1.4 above, each Series C Closing
shall occur on the first business day following the thirtieth calendar day after
the Company provides a notice of sale as described in Section 1.4 hereof or at
such other time and place as the Company and the Purchasers mutually agree upon
in writing.
2.4. DELIVERY. At each Closing, the Company shall deliver to each Purchaser
a certificate or certificates, registered in such Purchaser's name representing
the number of Series A Preferred, Series B Preferred or Series C Preferred to be
purchased by such Purchaser, against payment of the purchase price therefor, by
check payable to the Company or wire transfer per the Company's instructions.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Schedule of Exceptions attached hereto as
EXHIBIT C ("Schedule of Exceptions"), which Schedule of Exceptions the Company
shall have the right to amend and restate in connection with each Closing
subsequent to the Series A Closing, the Company represents and warrants to each
Purchaser, as of the Series A Closing Date, each Series B Closing Date, and each
Series C Closing Date as applicable (subject to changes occurring
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in the normal and ordinary course of the Company's business that are not
materially adverse to the Company, its financial position or prospects) or as
otherwise contemplated herein or by the Business Plan, as follows:
3.1 ORGANIZATION AND STANDING. The Company is a corporation duly organized
and existing under, and by virtue of, the laws of the State of Delaware and is
in good standing under such laws. The Company has requisite corporate power and
authority to own and operate its properties and assets, and to carry on its
business as currently 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 so to qualify would have a material adverse effect on its
business or properties. The Company has furnished copies of its Certificate of
Incorporation and By-Laws, as amended. Said copies are true, correct and
complete and contain all amendments through the Closing Dates, as applicable.
3.2 CORPORATE POWER. The Company has now, or will have at the Closing
Dates, as applicable, all requisite legal and corporate power and authority to
execute and deliver this Agreement, the Stockholders Agreement, the Investor
Rights Agreement in substantially the form attached hereto as EXHIBIT D (the
"Rights Agreement"), to sell and issue the Series A Shares, Series B and Shares
and Series C Shares hereunder, to issue the Common Stock issuable upon
conversion of the Series A Shares and Series B Shares ("Conversion Shares"), and
to carry out and perform all of its obligations under the terms of this
Agreement and such other agreements and instruments.
3.3 SUBSIDIARIES. The Company has no subsidiaries or affiliated companies
and does not otherwise control, directly or indirectly, or have any ownership
interest in any corporation, partnership, business trust, association or
business entity.
3.4 CAPITALIZATION. The authorized capital stock of the Company consists,
or will, upon the filing of the Restated Certificate, which will be filed prior
to the Series A Closing Date, consist of 30,000,000 shares of Common Stock,
$.001 par value per share, of which 24,000,000 shares will be designated "Class
A Common Stock" and 6,000,000 shares will be designated "Class B Common Stock,"
and 11,000,000 shares of Preferred Stock, $.001 par value per share, of which
4,000,000 shares will be designated "Series A Preferred", 2,857,143 shares will
be designated "Series B Preferred" and 3,174,603 shares will be designated
"Series C Preferred." Prior to the Series A Closing, 2,010,000 shares of Common
Stock were issued and outstanding and no shares of Preferred Stock will be
issued and outstanding. All outstanding shares have been duly authorized and
validly issued, are fully paid and nonassessable, were issued in compliance with
all federal and state securities laws, and were not issued in violation of any
preemptive rights. The Company has reserved 3,990,000 shares of its Common Stock
for issuance to employees, consultants, or directors under stock option plans,
stock purchase plans or arrangements approved by the Board of Directors. The
Series A Preferred, Series B Preferred and Series C Preferred shall have the
rights, preferences, privileges and restrictions set forth in the Restated
Certificate. Except as set forth above, there are no other authorized or
outstanding subscription, warrant, option or other rights or rights or
commitments (including, without limitation, preemptive rights or rights of first
refusal) to purchase or acquire from the Company any shares of any class of
capital stock of the Company or securities convertible into or exchangeable for
such capital stock. The Company is under no duty to redeem or to repurchase any
shares of any class or series of stock.
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3.5 AUTHORIZATION. All corporate action on the part of the Company, its
directors and stockholders necessary for the authorization, execution, delivery
and performance of this Agreement, the Stockholders Agreement and the Rights
Agreement by the Company, the authorization, sale, issuance and delivery of the
Series A Shares, the Series B Shares or the Series C Shares, as the case may be,
and the Conversion Shares and the performance of all of the Company's
obligations hereunder and thereunder has been taken or will be taken prior to
the Closings, as applicable. Each of this Agreement, the Stockholders Agreement
and the Rights Agreement, when each is executed and delivered by the Company,
shall constitute a valid and binding obligation of the Company, enforceable in
accordance with its terms, except this Agreement, the Stockholders Agreement and
the Rights Agreement may be limited by principles of public policy, and subject
to laws of general application relating to bankruptcy, insolvency and the relief
of debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies. The Series A Shares, Series B Shares and Series C
Shares, as the case may be, when issued in compliance with the provisions of
this Agreement, will be validly issued, fully paid and nonassessable, and will
have the rights, preferences, privileges and restrictions described in the
Restated Certificate. The Conversion Shares have been duly and validly reserved
and, when issued in compliance with the provisions of this Agreement and the
Restated Certificate, as the case may be, will be validly issued, fully paid and
nonassessable. The issuance and delivery of the Series A Shares, Series B Shares
and Series C Shares, as the case may be, and the Conversion Shares, as
applicable, are not subject to any preemptive rights or any liens or
encumbrances; provided, however, that the Series A Shares, Series B Shares,
Series C Shares and the Conversion Shares, as applicable, may be subject to
restrictions on transfer under state and/or federal securities laws as set forth
herein or in the Rights Agreement or in the Stockholders Agreement attached
hereto as EXHIBIT E (the "Stockholders Agreement").
3.6 FINANCIAL STATEMENTS. Prior to any Series B and Series C Closing, the
Company shall furnish to each Purchaser its unaudited balance sheet and the
related statements of operations, stockholders' equity and cash flows for the
most recently ended quarter (the "Financial Statements"). The Financial
Statements shall be prepared in accordance with generally accepted accounting
principles (except for the omission of footnotes) and fairly present the
financial position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended. Except for liabilities and
obligations that are accrued or reserved against in the Financial Statements,
the Company will have no material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except liabilities and
obligations which are incurred in the ordinary course of business subsequent to
the end of such quarter which have not been, either in any case or in the
aggregate, materially adverse.
3.7 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good and
marketable title to its properties and assets, and has good title to all its
leasehold interests, in each case subject to no mortgage, lien, or encumbrance,
other than the lien of current taxes not yet due and payable. All leases
pursuant to which the Company leases real or personal property are valid and
effective in accordance with their respective terms, and there exists no
material default on the part of the Company under any thereof.
3.8 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The Company
is not in breach or violation of any term of its Certificate of Incorporation or
By-Laws, of any term or provision of any mortgage, deed of trust, indebtedness,
indenture, contract, agreement, instrument,
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judgment or decree, or any order, statute, rule or regulation, in each case
where such breach or violation would have a material adverse effect on the
Company. No event or failure of performance has occurred that, with the passage
of time or the giving of notice, would constitute such a breach or violation by
the Company. The execution, delivery and performance of and compliance with this
Agreement, the Stockholders Agreement and the Rights Agreement and the issuance,
sale and delivery of the Series A Shares, Series B Shares, Series C Shares and
the Conversion Shares, do not conflict with, and will not result in a breach or
violation of the terms, conditions or provisions of, or constitute a default (or
an event that, with the giving of notice or passage of time, or both, could
result in a default) under, or result in the creation or imposition of any lien
pursuant to the terms of, the Company's Certificate of Incorporation or Bylaws,
or any statute, law, rule or regulation, any state or federal order, judgment or
decree, or any indenture, mortgage, deed of trust, lease or other agreement or
instrument to which the Company, or any of its properties, is subject.
3.9 LITIGATION, ETC. There is no action, proceeding or investigation
pending or threatened against the Company or any of its properties or assets or
that questions the validity of this Agreement, the Stockholders Agreement or the
Rights Agreement or any action taken or to be taken in connection herewith. The
foregoing includes, without limitation, actions pending or threatened involving
the prior employment of any of the Company's employees, their use in connection
with the Company's business of any information or techniques allegedly
proprietary to any of their former employers, or their obligations under any
agreements with prior employers. The Company is not a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. No action, suit or proceeding has been
instituted or is threatened by the Company.
3.10 REGISTRATION RIGHTS. Except as set forth in the Rights Agreement, the
Company is not under any contractual obligation to register (as defined in
Section 1 of the Rights Agreement) any of its currently outstanding securities
or any of its securities which hereafter may be issued.
3.11 CERTAIN TRANSACTIONS. Neither the Company nor, to the Company's
knowledge, any of its officers or directors has any interest (other than as
holders of less than 1% of the voting securities of a publicly-traded company),
either directly or indirectly, in any entity that currently (i) provides any
services or designs, produces or sells any products or product lines that are
the same, similar to or competitive with any activity or business in which the
Company is engaged or proposes to engage; (ii) is a supplier, customer, or
creditor of the Company; or (iii) has any direct or indirect interest in any
asset or property, real or personal, tangible or intangible, of the Company or
any property, real or personal, tangible or intangible, that is necessary for
the Company's business as currently conducted or proposed to be conducted. No
employee, stockholder, officer or director of the Company, or their spouses or
children, is indebted to the Company in any amount in excess of $5,000, nor is
the Company indebted to any of them other than for payment of salary for
services rendered and reasonable expenses.
3.12 INTANGIBLE PROPERTY. The Company has taken all appropriate security
measures to protect the secrecy, confidentiality and value of all trade secrets,
know-how, inventions, designs, masks, processes and technical data required to
conduct its business. The Company has not received any communication alleging
that the Company has violated any third party's patent, maskwork right, moral
right, trademark, trade secret, trade name or copyright. The Company owns
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and possesses or has sufficient license to (or is able to obtain on reasonable
terms and terms not materially adverse to the financial condition of the Company
sufficient license to) all patents, patent applications, licenses, trademarks,
service marks, trade names, inventions, processes and copyrights necessary for
the operation of its business as currently conducted or proposed to be
conducted. None of the Company's officers or employees has improperly used or is
making improper use of any confidential information or trade secrets of others,
including those of any former employer of such officer or employee. The Company
is not aware of any violation by a third party of any of its patents, licenses,
trademarks, trade names, service marks, copyrights, trade secrets or other
proprietary rights.
3.13 EMPLOYEES. The Company does not have any collective bargaining
agreements with any of its employees, and no labor union organizing activity is
pending or threatened with respect to the Company. No employee is obligated
under any agreement or judgment that would conflict with such employee's
obligation to use his or her best efforts to promote the interests of the
Company or that would conflict with the Company's business as currently
conducted or proposed to be conducted. No employee is in violation of any term
of any employment agreement, proprietary information agreement, non-competition
agreement or any other agreement relating to such employee's relationship with
any previous employer. Neither the execution nor delivery of this Agreement, the
Stockholders Agreement or the Rights Agreement nor the carrying on of the
Company's business by the employees of the Company, nor the conduct of the
Company's business as proposed, will 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 of such employee is now obligated. The
Company does not believe it is or will be necessary to utilize any inventions of
any of its employees (or people it currently intends to hire) made prior to
their employment by the Company. The Company is not a party to or bound by any
currently effective employment contract, deferred compensation agreement, bonus
plan, incentive plan, profit sharing plan, retirement agreement or other
employee compensation agreement, except as included in the Schedule of
Exceptions. The Company is not aware that any officer or key employee, or that
any group of key employees, intends to terminate their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any of the foregoing. Subject to general principles related to
wrongful termination of employees, the employment of each officer and employee
of the Company is terminable at the will of the Company except as otherwise
provided in any employment contract listed in the Schedule of Exceptions.
3.14 INSURANCE. The Company has fire, casualty and liability insurance
policies sufficient in amount to allow it to replace any of its tangible
properties that might be damaged or destroyed and adequate to protect the
Company and its financial condition against the risks involved in the business
of the Company.
3.15 SECURITIES LAWS; GOVERNMENTAL CONSENT. Based in part on the accuracy
of the Purchaser' representations and warranties set forth in Section 4, the
offer, sale and issuance of the Shares as provided in this Agreement are and
will be exempt from the registration and prospectus delivery requirements of the
Securities Act of 1933 as amended (the "Securities Act"), and have been
qualified (or are exempt from qualification) under all applicable state
securities qualification requirements. Except for the filing of (a) Restated
Certificate with the Secretary of State of the State of Delaware, and (b)
notices required or permitted to be filed after each Closing Date with certain
United States federal and state securities commissions, which notices the
Company will file
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on a timely basis, no consent, approval or authorization of, or designation,
declaration or filing with, any governmental authority on the part of the
Company is required in connection with the valid execution, delivery and
performance of this Agreement, the Stockholders Agreement, or the Rights
Agreement, the offer, sale or issuance of the Series A Shares, the Series B
Shares and the Series C Shares (and the issuance of the Common Stock issuable
upon conversion of the Shares), or the consummation of any other transaction
contemplated hereby or by the Rights Agreement.
3.16 CONTRACTS AND OTHER COMMITMENTS. The Company is not a party to any:
(a) agreement for the purchase of fixed assets that involves an
expenditure by the Company in excess of $10,000 or for the purchase of
materials, supplies or equipment in excess of that amount;
(b) lease or agreement under which the Company is lessee of or holds
or operates any property, real or personal, owned by any other person under
which payments to such person exceed $10,000 per year; or
(c) agreement or other commitment or arrangement with any person
continuing for a period of more than three months from each applicable Closing
Date which involves an expenditure or receipt by the Company in excess of
$10,000.
3.17 DISCLOSURE. The Company has fully provided each Purchaser with all the
information that such Purchaser has requested for deciding whether to purchase
the Series A Shares, Series B Shares and Series C Shares. This Agreement with
the Exhibits hereto, when taken as a whole, does not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained herein not misleading.
3.18 ENVIRONMENTAL AND SAFETY LAWS. The Company is not in violation of any
applicable statute, law, or regulation relating to the environment or
occupational health and safety, and no material expenditures are or will be
required in order to comply with any such existing statute, law, or regulation.
3.19 MANUFACTURING AND MARKETING RIGHTS. The Company has not granted rights
to manufacture, produce, assemble, license, market, or sell its products to any
other person and is not bound by any agreement that affects the Company's
exclusive right to develop, manufacture, assemble, distribute, market, or sell
its products.
3.20 SECTION 83(b) ELECTIONS. To the best of the Company's knowledge, all
elections and notices required by Section 83(b) of the Internal Revenue Code and
any analogous provisions of applicable state tax laws have been timely filed by
all individuals who have purchased shares of the Company's Common Stock.
3.21 QUALIFIED SMALL BUSINESS STOCK. So long as the shares of Series A,
Series B or Series C Preferred Stock are held by a Purchaser (or a transferee)
in whose hands the Series A or Series B Shares are eligible to qualify as
"qualified small business stock" ("Small Business Stock"), within the meaning of
Section 1202(c) of the Internal Revenue Code of 1986, as amended (the "Code")),
(i) the Company will use its best efforts not to cause it to lose its status as
a "qualified small business" (provided it has such status), as defined in
Section 1202(d) of the Code;
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and (ii) the Company agrees not to repurchase any stock of the Company if such
repurchase would cause the shares of Series A, Series B or Series C Preferred
Stock not to be treated as Small Business Stock. Notwithstanding anything to the
contrary in this Section 3.20, the Company shall not be obligated to take any
action or refrain from taking any action which the Company has determined, in
good faith, is not in its best commercial interests.
3.22 PERMITS. The Company has all franchises, permits, licenses and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company, and
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as presently planned to be conducted. The
Company is not in default in any material respect under any of such franchises,
permits, licenses or other similar authority.
3.23 NO FINANCIAL STATEMENT AND NEWLY INCORPORATED. The Company was
incorporated on October 15, 1997 (the "Inception Date"). Since the Inception
Date, the Company has not engaged in active operations and the Company does not
have any material assets or liabilities, except as disclosed on the Schedule of
Exceptions. Except as disclosed on the Schedule the Exceptions, the Company has
not entered into any agreements (written or verbal) with any third parties,
including employees and consultants. The Company has not prepared any financial
statements for the interim period from the Inception Date to the date of this
Agreement .
3.24 CHANGES. Since the Inception Date, there has not been, except as duly
approved by the Board of Directors:
(a) any damage, destruction or loss, whether or not covered by
insurance. materially and adversely affecting the business, properties,
prospects, assets, liabilities or financial condition of the Company (as such
business is presently conducted and as it is presently proposed to be
conducted);
(b) any waiver or compromise by the Company of a material right or of
material debt owed to it;
(c) any sale, assignment, or transfer by the Company of any patents,
trademarks, copyrights, trade secrets, or other intangible assets;
(d) except as disclosed on the Schedule of Exceptions, any
resignation or termination of employment of any key officer of the Company,
including but not limited to Xxxxxxx X. Xxxxx, and the Company, to the best of
its knowledge, does not know of the impending resignation or termination of
employment of any such officer;
(e) any material 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;
(f) any material loans or guarantees made by the Company to or for
the benefit of its employees, stockholders, officers, or directors, or any
members of their immediate families, other than travel advances and other
advances made in the ordinary course of its business;
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(g) any declaration, setting aside, or payment of any dividend or
other distribution of the Company's capital stock, or any material direct or
indirect redemption, purchase, or other acquisition of any of such stock by the
Company;
(h) any material adverse change in the business, property, assets,
liabilities, financial condition or results of operations of the Company, except
as disclosed on the Schedule of Exceptions;
(i) any change or changes that are individually or in the aggregate
material and not in the ordinary course of business in the contingent
obligations of the Company by way of guarantee, endorsement, indemnity, warranty
or otherwise;
(j) except as disclosed on the Schedule of Exceptions, any material
change in the compensation arrangement of any of the Company's employees,
officers or directors; or
(k) any other event or condition of any character that has materially
and adversely affected the business, properties, prospects, or financial
condition of the Company (as such business is presently conducted and as it is
presently proposed to be conducted).
3.25 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each employee and
officer of the Company has executed a Proprietary Information and Inventions
Agreement substantially in the form or forms which are attached as Exhibit E and
have been delivered to the special counsels to the Purchasers. Each consultant
to the Company has executed a Consulting Agreement containing confidentiality
and assignment of inventions provisions similar to those included in the
Proprietary Information and Inventions Agreement.
3.26 TAX RETURNS, PAYMENTS, AND ELECTIONS. The Company has timely filed all
tax returns and reports (federal, state and local) as required by law. These
returns and reports are true and correct in all material respects. The Company
has paid all taxes and other assessments due, except those contested by it in
good faith. The Company has not elected pursuant to the Internal Revenue Code of
1986, as amended ("Code"), to be treated as an S corporation or a collapsible
corporation pursuant to Section 1362(a) or Section 341(f) of the Code, nor has
it made any other elections pursuant to the Code (other than elections that
relate solely to methods of accounting, depreciation or amortization) that would
have a material effect on the business, properties, prospects or financial
condition of the Company. The Company has never had any tax deficiency proposed
or assessed against it and has not executed any waiver of any statute of
limitation son the assessment or collection of any tax or governmental charge.
None of the Company's federal income tax returns and none of its state income of
franchise tax or sales or use tax returns has ever been audited by governmental
authorities.
SECTION 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS
Each Purchaser hereby represents and warrants severally and not
jointly, and Warburg with respect to Section 4.8 hereby covenants to the Company
with respect to the purchase of the Series A Shares, Series B Shares and Series
C Shares as follows:
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4.1 INVESTMENT EXPERIENCE. It is aware of the Company's business affairs
and financial condition and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the Series A
Shares, Series B Shares, Series C Shares and the underlying Common Stock.
4.2 INVESTMENT INTENT. It is acquiring the Series A Shares, Series B
Shares, Series C Shares and the underlying Common Stock for investment only for
its own account, and not with the view to, or for resale in connection with, any
distribution thereof. It understands that the Series A Shares, Series B Shares
and Series C Shares to be purchased and the underlying Common Stock 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, the
availability of which depends upon, among other things, the bona fide nature of
the investment intent of the Purchaser as expressed herein.
4.3 RULE 144. It acknowledges that the Series A Shares, Series B Shares,
Series C Shares and the underlying Common Stock must be held indefinitely unless
subsequently registered under the Securities Act or unless an exemption from
such registration is available. It is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market for
the shares, the availability of certain current public information about the
Company, the resale occurring not less than one year after the security was last
held by the Company or an affiliate of the Company, the sale being effected
through a "broker's transaction" or in transactions directly with a "market
maker" and the number of shares being sold during any three-month period not
exceeding specified limitations.
4.4 NO PUBLIC MARKET. It understands that no public market now exists for
any of the securities issued by the Company, and that the Company has made no
assurances that a public market will ever exist for the Company's securities.
4.5 ACCESS TO DATA. It has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management and the
opportunity to review the Company's facilities. It has also had an opportunity
to ask questions of officers of the Company.
4.6 AUTHORIZATION. Each of this Agreement, the Rights Agreement and the
Stockholders Agreement when executed and delivered by the Purchaser will
constitute a valid and legally binding obligation of the Purchaser, enforceable
in accordance with its terms, except as the indemnification provisions of
Section 5.6 of the Rights Agreement may be limited by principles of public
policy, and subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies.
4.7 LEGEND.
(a) Each certificate representing (i) the Series A Shares, Series B
and Series C Shares purchased hereunder, (ii) the Conversion Shares and (iii)
any other securities issued in respect of the Series A Shares, Series B Shares
or Series C Shares upon any stock split, stock
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dividend, recapitalization, merger or similar event (unless no longer required
in the opinion of counsel for the Company) shall be stamped or otherwise
imprinted with a legend substantially in the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION UNLESS THE COMPANY RECEIVES AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE
OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SAID ACT."
(b) Such certificates shall also bear any legend required by the
applicable laws of any state.
4.8 VOTING LIMITATIONS. Notwithstanding any provision of the Restated
Certificate, Warburg covenants that it shall only vote such number of shares of
Series A Preferred Stock, Series B Preferred, Series C Preferred Stock and Class
A Common Stock issuable upon conversion of the Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock as would equal up to 49.9% of the
Voting Shares (as defined in the Restated Certificate) then issued and
outstanding and shall abstain from voting any additional shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Class A
Common Stock issuable upon conversion of the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock that it would otherwise be entitled
to vote under the Restated Certificate in excess of such 49.9% of the Voting
Shares.
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SECTION 5
CONDITIONS TO CLOSING
5.1 CONDITIONS TO BOTH THE PURCHASERS' AND THE COMPANY'S OBLIGATIONS. The
obligations of each Purchaser to purchase and of the Company to issue and sell
the Series A Shares, Series B Shares and Series C Shares are subject to the
fulfillment, on or prior to each Closing Date, of all of the following
conditions, any of which may be waived in whole or in part by mutual agreement
of the Purchasers and the Company:
(a) The Company shall have obtained all consents, permits and waivers
necessary or appropriate on the part of the Company for consummation of the
transactions contemplated by this Agreement, the Rights Agreement and the
Stockholders Agreement. Except for the notices required to be filed after each
Closing Date with certain federal and state securities commissions, which
notices the Company will file on a timely basis, the Company shall have obtained
all approvals of any federal or state governmental authority or regulatory body
that are required on the part of the Company in connection with the lawful sale
and issuance of the Series A Shares, Series B Shares, Series C Shares and the
Common Stock issuable upon conversion of the Series A Shares, Series B Shares
and Series C Shares.
(b) At each Closing, the purchase of the Series A Shares, Series B
Shares and Series C Shares by the Purchasers hereunder shall be legally
permitted by all laws and regulations to which the Purchasers or the Company is
subject.
(c) The Restated Certificate shall have been filed with the Secretary
of State of the State of Delaware.
(d) The Company and the Purchasers shall have entered into the Rights
Agreement.
(e) The Purchasers, the Company and the Existing Stockholders (as
defined in the Stockholder Agreement) shall have entered into the Stockholder
Agreement.
5.2 ADDITIONAL CONDITIONS TO THE PURCHASERS' OBLIGATIONS AT THE SERIES A
CLOSING. In addition to the conditions set forth in Section 5.1 hereof, the
Purchasers' obligation to purchase the Series A Shares is subject to the
fulfillment, on or prior to the Series A Closing Date, of all of the following
conditions (except as otherwise provided below), any of which may be waived in
whole or in part by the Purchasers:
(a) The representations and warranties made by the Company in Section
3 hereof shall be true and correct when made, and shall be true and correct on
the Series A Closing Date with the same force and effect as if they had been
made on and as of the same date.
(b) The Company shall have performed all obligations and conditions
herein required to be performed or observed by it on or prior to the Series A
Closing Date.
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(c) The Purchasers shall have received from Xxxxxxxx & Xxxxxxxx LLP,
counsel to the Company, an opinion letter addressed to them, dated the Series A
Closing Date and in substantially the form attached hereto as EXHIBIT F.
(d) The Company shall have delivered to the Purchasers a certificate,
executed by the President of the Company and dated the Series A Closing Date,
certifying to the fulfillment of the conditions specified in Sections 5.1(a),
5.2(a) and 5.2(b).
5.3 ADDITIONAL CONDITION TO OBLIGATIONS OF THE COMPANY AT THE SERIES A
CLOSING. In addition to the conditions set forth in Section 5.1 hereof, the
Company's obligation to issue and sell the Series A Shares to the Purchasers is
subject to the fulfillment to the Company's satisfaction, on or prior to the
Series A Closing Date, of the conditions, which may be waived in whole or in
part by the Company:
(a) The representations and warranties made by the Purchasers in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Series A Closing Date with the same force and effect as if they
had been made on and as of the same date.
(b) The Purchasers shall have performed all obligations and
conditions herein required to be performed or observed by them on or prior to
the Series A Closing Date.
(c) The Purchasers shall have paid the consideration for the Series A
Shares to be sold to the Purchasers as set forth in Section 1.2 hereof.
5.4 ADDITIONAL CONDITIONS TO THE PURCHASERS' OBLIGATIONS AT THE SERIES B
CLOSINGS. In addition to the conditions set forth in Section 5.1 hereof, the
Purchasers' obligation to purchase the Series B Shares is subject to the
fulfillment, on or prior to each Series B Closing Date, of all of the following
conditions (except as otherwise provided below), any of which may be waived in
whole or in part by the Purchasers:
(a) The representations and warranties made by the Company in Section
3 hereof shall be true and correct when made, and shall be true and correct on
the subject Series B Closing Date with the same force and effect as if they had
been made on and as of the same date, subject to changes occurring in the normal
and ordinary course of the Company's business that are not materially adverse to
the Company, its financial position or prospects or as otherwise contemplated
herein.
(b) The Company shall have performed all obligations and conditions
herein required to be performed or observed by it on or prior to the subject
Series B Closing Date.
(c) The Company shall have delivered to the Purchasers a certificate,
executed by the President of the Company and dated the subject Series B Closing
Date, certifying to the fulfillment of the conditions specified in Sections
5.1(a), 5.4(a) and 5.4(b).
(d) The Purchasers shall have received from Xxxxxxxx & Xxxxxxxx LLP,
counsel to the Company, an opinion letter addressed to them, dated the Series B
Closing Date and in substantially the form attached hereto as EXHIBIT F.
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5.5 ADDITIONAL CONDITION TO OBLIGATIONS OF THE COMPANY AT SERIES B
CLOSINGS. In addition to the conditions set forth in Section 5.1 hereof, the
Company's obligation to issue and sell the Series B Shares to the Purchasers is
subject to the fulfillment to the Company's satisfaction, on or prior to each
Series B Closing Date, of the following conditions, which may be waived in whole
or in part by the Company:
(a) The representations and warranties made by the Purchasers in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the subject Series B Closing Date with the same force and effect as
if they had been made on and as of the same date.
(b) The Purchasers shall have performed all obligations and
conditions herein required to be performed or observed by them on or prior to
the subject Series B Closing Date.
(c) The Purchasers shall have paid the consideration for the Series B
Shares to be sold to the Purchasers as set forth in the subject Series B Notice
of Sale.
5.6 ADDITIONAL CONDITIONS TO THE PURCHASERS' OBLIGATIONS AT THE SERIES C
CLOSINGS. In addition to the conditions set forth in Section 5.1 hereof, the
Purchasers' obligation to purchase the Series C Shares is subject to the
fulfillment, on or prior to each Series C Closing Date, of all of the following
conditions (except as otherwise provided below), any of which may be waived in
whole or in part by the Purchasers:
(a) The representations and warranties made by the Company in Section
3 hereof shall be true and correct when made, and shall be true and correct on
the subject Series C Closing Date with the same force and effect as if they had
been made on and as of the same date, subject to changes occurring in the normal
and ordinary course of the Company's business that are not materially adverse to
the Company, its financial position or prospects or as otherwise contemplated
herein.
(b) The Company shall have performed all obligations and conditions
herein required to be performed or observed by it on or prior to the subject
Series C Closing Date.
(c) The Company shall have delivered to the Purchasers a certificate,
executed by the President of the Company and dated the subject Series C Closing
Date, certifying to the fulfillment of the conditions specified in Sections
5.1(a), 5.4(a) and 5.4(b).
(d) The Purchasers shall have received from Xxxxxxxx & Xxxxxxxx LLP,
counsel to the Company, an opinion letter addressed to them, dated the Series C
Closing Date and in substantially the form attached hereto as EXHIBIT F.
5.7 ADDITIONAL CONDITION TO OBLIGATIONS OF THE COMPANY AT SERIES C
CLOSINGS. In addition to the conditions set forth in Section 5.1 hereof, the
Company's obligation to issue and sell the Series C Shares to the Purchasers is
subject to the fulfillment to the Company's satisfaction, on or prior to each
Series C Closing Date, of the following conditions, which may be waived in whole
or in part by the Company:
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(a) The representations and warranties made by the Purchasers in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the subject Series C Closing Date with the same force and effect as
if they had been made on and as of the same date.
(b) The Purchasers shall have performed all obligations and
conditions herein required to be performed or observed by them on or prior to
the subject Series C Closing Date.
(c) The Purchasers shall have paid the consideration for the Series C
Shares to be sold to the Purchasers as set forth in the subject Series C Notice
of Sale.
SECTION 6
MISCELLANEOUS
6.1 GOVERNING LAW. This Agreement shall be governed in all respects by the
laws of the State of Delaware as such laws are applied to agreements between
Delaware residents entered into and to be performed entirely within Delaware.
6.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by any Purchasers and the
closing of the transactions contemplated hereby. All statements as to factual
matters contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder as of the date of such certificate or instrument.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successor and assigns of the parties hereto.
6.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
Neither this Agreement nor any provision hereof may be amended, changed, waived,
discharged or terminated other than by a written instrument signed by the party
against who enforcement of any such amendment, change, waiver, discharge or
termination is sought. Any amendment or waiver effected in accordance with this
section shall be binding upon the holder of any securities purchased under this
Agreement at the time outstanding (including securities into which such
securities have been converted), each future holder of all such securities and
the Company.
6.5 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be effective upon receipt and shall be in writing and
may be delivered in person, by telecopy, electronic mail, express delivery
service or U.S. mail, in which event it may be mailed by first-class, certified
or registered, postage prepaid, addressed (a) if to Warburg, at 000 Xxxxxxxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, facsimile: (000) 000-0000,
Attention: Xxxxxxx Xxxxx or at such other address as Warburg shall have
furnished the Company in writing, with a copy to Wilson, Sonsini, Xxxxxxxx &
Xxxxxx Professional Corporation ("WSGR"), 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, XX
00000; (b) if to Gartner, at 00 Xxxxxxxxxx Xxxx, Xxxxxxxx, Xxxxxxxxxxx
00000-0000; (c) if to the Company, at 0 Xxxxxxxx Xxxxx, Xxxxxxx, Xxx Xxxxxxxxx
00000, or at
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such other address as the Company shall have furnished to the Purchasers in
writing, with a copy to Xxxxxxx X. Xxxxxxxx, Esq., Xxxxxxxx & Xxxxxxxx LLP, 000
Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000, facsimile (000) 000-0000.
6.6 SEVERABILITY. If any provision of this Agreement shall be judicially
determined to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
6.7 FINDER'S FEES.
(a) The Company (i) represents and warrants that it has retained no
finder or broker in connection with the transactions contemplated by this
Agreement and (ii) hereby agrees to indemnify and to hold the Purchasers
harmless of and from any liability for commission or compensation in the nature
of a finder's fee to any broker or other person or firm (and the costs and
expenses of defending against such liability or asserted liability) for which
the Company, or any of its employees or representatives, is responsible.
(b) Each Purchaser (i) represents and warrants that it has retained
no finder or broker in connection with the transactions contemplated by this
Agreement and (ii) hereby agrees to indemnify and to hold the Company harmless
of and from any liability for commission or compensation in the nature of a
finder's fee to any broker or other person or firm (and the costs and expenses
of defending against such liability or asserted liability) for which such
Purchaser, or any of its employees or representatives, is responsible.
6.8 TITLES AND SUBTITLES. The titles of the Restated Certificate and
Sections of this Agreement are for convenience of reference only and in no way
define, limit, extend, or describe the scope of this Agreement or the intent of
any of its provisions.
6.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.10 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party upon any breach or
default of any other party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed to be a waiver of any such breach or
default, or any acquiescence therein, or of 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. It is further agreed that any waiver, permit, consent or approval of
any kind or character of any breach or default under this Agreement, or any
waiver of any provisions or conditions of this Agreement must be in writing and
shall be effective only to the extent specifically set forth in writing, and
that all remedies, either under this Agreement, by law or otherwise, shall be
cumulative and not alternative.
6.11 CONSENTS. Any permission, consent, or approval of any kind or
character under this Agreement shall be in writing or detrimentally relied upon
and proved by clear and convincing evidence (other than alleged reliance) and
shall be effective only to the extent specifically set forth in such writing or
proved.
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6.12 PAYMENT OF FEES AND EXPENSES. Each party shall be responsible for
paying its own fees, costs and expenses in connection with this Agreement and
the transactions herein contemplated; provided however, that if the Series A
Closing is effected, the Company agrees to pay the reasonable fees and expenses
of special counsel to the Warburg in an amount not to exceed $20,000.
6.13 CONSTRUCTION OF AGREEMENT. No provision of this Agreement shall be
construed against either party as the drafter thereof.
6.14 SECTION REFERENCES. Unless otherwise stated, any reference contained
herein to a Section or subsection refers to the provisions of this Agreement.
6.15 VARIATIONS OF PRONOUNS. All pronouns and all variations thereof shall
be deemed to refer to the masculine, feminine, or neuter, singular or plural, as
the context in which they are used may require.
6.16 EXHIBITS. All Exhibits and attachments hereto shall be deemed to be a
part of this Agreement and are fully incorporated herein by this reference.
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SCHEDULE OF PURCHASERS
Number Aggregate
Purchaser of Shares Consideration
--------- --------- -------------
SERIES A Warburg, Xxxxxx Ventures, L.P. 3,600,000 $6,300,000.00
CLOSING G-Fund L.L.C. 400,000 700,000.00
--------- -------------
TOTAL 4,000,000 $7,000,000.00
SERIES B Warburg, Xxxxxx Ventures, L.P. 2,571,429 $5,400,000.90
CLOSING G-Fund L.L.C. 285,714 599,999.40
--------- -------------
TOTAL 2,857,143 $6,000,000.30
SERIES C Warburg, Xxxxxx Ventures, L.P. 2,857,143 $9,000,000.40
CLOSING G-Fund L.L.C. 317,460 999,999.00
--------- -------------
TOTAL 3,174,603 $9,999,999.40
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first written above.
"COMPANY" "PURCHASERS"
SkillSoft Corporation, Warburg, Xxxxxx Ventures, L.P.
a Delaware corporation
By: Warburg, Xxxxxx & Co.
Its: General Partner
By: /s/ Xxxxxxx X. Xxxxx By: /s/ Xxxxxxx Xxxxx
---------------------------------- ----------------------------
Title: President and Chief Executive Title: Partner
Officer
-------------------------------
G-Fund L.L.C.
a Delaware limited liability
company
By: /s/ [illegible]
----------------------------
Title: Manager
-------------------------
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