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EXHIBIT 10.5
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
made as of the ___ day of August, 1997, by and among INTERNET ACCESS FINANCIAL
CORPORATION, a California corporation (the "Company"), with its principal office
at 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000 and the
Investors whose names and addresses are set forth on the Investor Schedule
attached as Exhibit A hereto (each of whom is an "Investor," and collectively,
the "Investors").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Sale and Issuance of Series B Preferred Stock.
(a) The Company shall adopt and file with the Secretary of
State of California on or before the Closing (as defined below) the Amended and
Restated Articles of Incorporation in the form attached hereto as Exhibit B (the
"Restated Articles").
(b) Subject to the terms and conditions of this Agreement,
each Investor severally agrees to purchase at the Closing, and the Company
agrees to sell and issue to each Investor at the Closing, that number of shares
of the Company's Series B Preferred Stock (the "Series B Preferred") set forth
opposite such Investor's name on Exhibit A hereto for the purchase price set
forth thereon. The shares of Series B Preferred are referred to herein as the
"Shares."
1.2 Closing. The initial purchase and sale of the Shares shall
take place at the offices of Xxxxxx Xxxxxxx Xxxxxxxx and Xxxxxx, 000 Xxxx Xxxx
Xxxx, Xxxx Xxxx, Xxxxxxxxxx, at ____ p.m., on August __, 1997, or at such other
time and place as the Company and the Investors purchasing a majority of the
Series B Preferred hereunder mutually agree upon orally or in writing (which
time and place are designated as the "Closing"). At the Closing, the Company
shall deliver to each Investor a certificate, registered in such Investor's name
as set forth on Exhibit A, representing the number of shares designated on
Exhibit A to be purchased by such Investor against payment of the purchase price
therefor by check or wire transfer at the Company's instruction.
1.3 Additional Closings. The Company may sell up to the balance
of the authorized shares of Series B Preferred not sold at the Closing to such
individuals or entities as are mutually agreed upon by Brentwood Venture Capital
and the Company, at a price not less than $2.50 per share and on the terms
continued herein and in the exhibits hereto, provided the closing for the sale
of such additional shares of Series B Preferred is completed not later than
sixty (60) days after the date of this Agreement. Upon execution of a signature
page counterpart and without need for an amendment hereto or thereto except to
add such purchaser's name to Exhibit A hereto, any such purchaser shall become a
party to this Agreement, and shall be
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deemed an "Investor" for purposes of this Agreement, and shall become a party to
that certain Amended and Restated Investors' Rights Agreement dated of even date
herewith, by and among the Company and the Investors hereto and shall have the
rights and obligations hereunder and thereunder.
2. Representations and Warranties of the Company. Except as set forth in
the Schedule of Exceptions attached hereto as Exhibit C, the Company hereby
represents and warrants as follows:
2.1 Organization, Good Standing and Qualification. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of California and has all 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 to so qualify would have a material adverse effect on its
business or properties. True and accurate copies of the Restated Articles and
Bylaws, each as amended and in effect at the Closing, have been delivered to the
Investors and special counsel to the Investors.
2.2 Capitalization. The authorized capital stock of the Company,
immediately prior to the Closing, will consist of 20,000,000 shares of Common
Stock, of which 1,087,750 are issued and outstanding and 15,000 of which are
subject to an outstanding warrant (the "Warrant"); and 10,000,000 shares of
Preferred Stock, of which (a) 612,500 shares have been designated Series A
Preferred Stock, all of which are issued and outstanding; and (b) 1,600,000
shares have been designated Series B Preferred Stock, none of which are issued
and outstanding. All such issued and outstanding shares have been duly
authorized and validly issued and are fully paid and nonassessable. The Company
has reserved 1,400,000 shares of Series B Preferred for issuance hereunder. The
Company has further reserved 612,500 shares of Common Stock for issuance upon
conversion of the Series A Preferred, 1,600,000 shares of Common Stock for
issuance upon conversion of the Series B Preferred, 1,140,000 shares of Common
Stock for issuance under restricted stock purchase agreements and the Company's
1997 Stock Option Plan (the "Option Plan") for employees, officers, directors
and consultants of the Company as may be determined and approved by the
Company's Board of Directors from time to time, and 15,000 shares of Common
Stock for issuance upon exercise of the Warrant. Except as provided above, there
are no outstanding rights, options, warrants, preemptive rights, rights of first
refusal or similar rights for the purchase or acquisition from the Company of
any securities of the Company. All outstanding shares have been issued in
compliance with state and federal securities laws.
2.3 Subsidiaries. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
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2.4 Authorization. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, the Amended and
Restated Investors' Rights Agreement attached hereto as Exhibit D (the
"Investors' Rights Agreement"), the performance of all obligations of the
Company hereunder and thereunder, and the authorization, issuance (or
reservation for issuance), sale and delivery of the Shares being sold hereunder
and the Common Stock issuable upon conversion of the Series B Preferred has been
taken or will be taken prior to the Closing, and this Agreement and the Amended
and Restated Investors' Rights Agreement constitute valid and legally binding
obligations of the Company, enforceable in accordance with their respective
terms, subject to: (i) judicial principles limiting the availability of specific
performance, injunctive relief, and other equitable remedies; (ii) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect generally relating to or affecting creditors' rights; and (iii)
limitations on the enforceability of the indemnification provisions of the
Amended and Restated Investors' Rights Agreement.
2.5 Valid Issuance of Preferred and Common Stock. The Shares that
are being purchased by the Investors hereunder, when issued, sold and delivered
in accordance with the terms of this Agreement for the consideration expressed
herein will be duly and validly issued, fully paid, and nonassessable, will have
the rights, preferences, privileges and restrictions described in the Restated
Articles, and will be free of restrictions on transfer other than restrictions
on transfer under this Agreement and the Amended and Restated Investors' Rights
Agreement and under applicable state and federal securities laws. The Common
Stock issuable upon conversion of the Series B Preferred purchased under this
Agreement has been duly and validly reserved for issuance and, upon issuance in
accordance with the terms of the Restated Articles, will be duly and validly
issued, fully paid, and nonassessable and will be free of restrictions on
transfer other than restrictions on transfer under this Agreement and the
Amended and Restated Investors' Rights Agreement and under applicable state and
federal securities laws. Subject to applicable restrictions on transfer under
this Agreement and the Amended and Restated Investors' Rights Agreement and
under applicable state and federal securities laws, the issuance and delivery of
the Shares and the Common Stock issuable upon conversion thereof, as applicable,
are not subject to any preemptive or other similar rights or any liens or
encumbrances.
2.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the offer, sale or issuance of the
Shares (and the Common Stock issuable upon conversion of the Series B
Preferred), or the consummation of any other transaction contemplated hereby,
except for the following: (i) the filing of the Restated Articles in the office
of the Secretary of State of the State of California, which shall be filed by
the Company on or prior to the Closing; (ii) the filing of such notices as may
be required under the Securities Act of 1933, as amended (the "Securities Act");
(iii) the filing of a notice of exemption pursuant to Section 25102(f) of the
California Corporate Securities Law of 1968, as amended (the "California
Securities Law"), which shall be
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filed by the Company promptly following the Closing; and (iv) the compliance
with other applicable state securities laws, which compliance will have occurred
within the appropriate time periods therefor. Based in part on the
representations of the Investors set forth in Section 3 below, the offer, sale
and issuance of the Shares in conformity with the terms of this Agreement are
exempt from the registration requirements of Section 5 of the Securities Act and
from the qualification requirements of Section 25110 of the California
Securities Law.
2.7 Litigation. There is no action, suit, proceeding or
investigation pending or, to the best of the Company's knowledge, currently
threatened before any court, administrative agency or other governmental body
against the Company which questions the validity of this Agreement or the
Amended and Restated Investors' Rights Agreement or the right of the Company to
enter into either of them, or to consummate the transactions contemplated hereby
or thereby, or which could result, either individually or in the aggregate, in
any material adverse change in the condition (financial or otherwise), business,
property, assets or liabilities of the Company. The foregoing includes, without
limitation, actions, suits, proceedings or investigations pending or threatened
(or any basis therefor known to the Company) involving the prior employment of
any of the Company's employees, their use in connection with the Company's
business of any intellectual property, information or techniques allegedly
proprietary to any of their former employers, or their obligations under any
agreements with their former employers. The Company is not a party or subject
to, and none of its assets is bound by, the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality.
2.8 Employees. Each founder and officer of the Company and each
employee of the Company has executed a Confidential Information and Invention
Assignment Agreement (the "Confidentiality Agreement"), and the Company has
delivered a true and accurate copy of the form of such Confidentiality Agreement
to the Investors and their special counsel. To the best knowledge of the
Company, no officer or key employee is in violation of his Confidentiality
Agreement or any contract, proprietary information agreement or obligation,
whether written or oral, with his former employers. Each holder of Common Stock
of the Company has entered into a Restricted Stock Purchase Agreement in the
form provided to the Investors and their special counsel. 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 or arrangement
with any collective bargaining agent. No employees of the Company are
represented by any labor union or covered by any collective bargaining
agreement. There is no pending or, to the best of the Company's knowledge,
threatened labor dispute involving the Company and any of its employees.
2.9 Patents and Trademarks. The Company has sufficient title and
ownership of all patents, trademarks, service marks, trade names, copyrights,
trade secrets, information, proprietary rights and processes necessary for its
business as now conducted and as proposed to be conducted. There are no
outstanding options, licenses, or agreements of any kind relating to
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the foregoing, nor is the Company bound by or a party to any options, licenses
or agreements of any kind with respect to the patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other person or entity. The Company has
not received any communications alleging that the Company has violated or, by
conducting its business as now conducted or as proposed to be conducted, would
violate any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity. None
of the Company's employees are obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of his or her best efforts to promote the interests of
the Company or that would conflict in any manner with the Company's business as
conducted. Neither the execution nor delivery of this Agreement or the Amended
and Restated Investors' 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, 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 employees is now obligated. The Company does
not and will not need to utilize any inventions of any of its employees (or
people it currently intends to hire) made prior to their employment by the
Company that have not previously been fully and exclusively assigned to the
Company without restrictions.
2.10 Compliance with Other Instruments.
(a) The Company is not in violation or default of any
provision of its Articles of Incorporation or Bylaws, each as amended and in
effect on and as of the Closing. The Company is not in violation or default of
any material provision of any instrument, mortgage, deed of trust, loan,
contract, commitment, judgment, decree, order or obligation to which it is a
party or by which it or any of its properties or assets are bound which
violation or default would materially adversely affect the condition (financial
or otherwise), business, property, assets or liabilities of the Company or, to
the best of its knowledge, of any provision of any federal, state or local
statute, rule or governmental regulation which violation or default would
materially adversely affect the condition (financial or otherwise), business,
property, assets or liabilities of the Company. The execution, delivery and
performance of and compliance with this Agreement and the Amended and Restated
Investors' Rights Agreement, and the issuance and sale of the Shares and the
issuance of Common Stock upon the conversion thereof, will not result in any
such violation, be in conflict with or constitute, with or without the passage
of time or giving of notice, a default under any such provision, require any
consent or waiver under any such provision (other than any consents or waivers
that have been obtained), or result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon any of the properties or assets of the Company
pursuant to any such provision.
(b) The Company has avoided every condition, and has not
performed any act, the occurrence of which would result in the Company's loss of
any right granted under any assignment, license, distribution or other
agreement, the loss of which would materially
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adversely affect the condition (financial or otherwise), business, property,
assets or liabilities of the Company.
2.11 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 the
Company believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. The
Company is not in default under any of such franchises, permits, licenses, or
other similar authority and neither the execution, delivery nor performance of
this Agreement and the Amended and Restated Investors' Rights Agreement and the
consummation of the transactions contemplated hereby and thereby will result in
any suspension, revocation, impairment, forfeiture or nonrenewal of any permit,
license, authorization or approval applicable to the Company, its business or
operations or any of its assets or properties.
2.12 Registration Rights. Except as provided in the Amended and
Restated Investors' Rights Agreement, the Company has not granted or agreed to
grant any registration rights, including piggyback rights, to any person or
entity.
2.13 Title to Property and Assets. The Company has good and
marketable title to all of its properties and assets free and clear of all
mortgages, liens and encumbrances, except liens for current taxes and
assessments not yet due and possible minor liens and encumbrances which do not,
in any case, in the aggregate, materially detract from the value of the property
subject thereto or materially impair the operations of the Company. With respect
to the properties and assets it leases, the Company is in compliance with such
leases and holds a valid leasehold interest free of all liens, claims or
encumbrances, and to the best knowledge of the Company, all other parties to the
leases are in compliance with all material terms of such leases. The Company's
properties and assets are in good condition and repair in all material respects.
2.14 Brokers or Finders. The Company has not agreed to incur,
directly or indirectly, any liability for brokerage or finders' fees, agents'
commissions or other similar charges in connection with this Agreement or any of
the transactions contemplated hereby.
2.15 Corporate Documents. Except for amendments necessary to
satisfy representations and warranties or conditions contained herein (the form
of which amendments has been approved by the special counsel to the Investors),
the Restated Articles and Bylaws of the Company are in the form previously
provided to the Investors or their counsel.
2.16 Financial Statements. The Company has delivered its
financial statements to the Investors, consisting of: (i) an unaudited balance
sheet as of June 30, 1997, and (ii) an unaudited income statement for the six
(6) month period ended June 30, 1997. The Financial Statements are complete and
correct in all material respects, present fairly the financial position and
results of operations of the Company at the dates and for the periods to which
they relate,
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have been prepared in accordance with generally accepted accounting principles
consistently followed throughout the periods involved, and show all material
liabilities, absolute or contingent, of the Company required to be recorded
therein in accordance with generally accepted accounting principles consistently
applied, except that the Financial Statements have been prepared by the Company
have not been audited and are subject to normal year-end audit adjustments, and
do not contain footnotes normally associated with year-end financial statements.
Except as set forth in the Financial Statements, the Company has no liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to June 30, 1997, which, individually or in the
aggregate, are not material to the financial condition or operating results of
the Company (ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally accepted accounting
principles to be reflected in the Financial Statements, which, individually or
in the aggregate, are not material to the financial condition or operating
results of the Company and (iii) obligations under contracts or arrangements
described in this Agreement or in the Schedule of Exceptions.
2.17 Changes. Since June 30, 1997, there has not been:
(a) Any material adverse change in the business, property,
assets, liabilities, financial condition or results of operations of the Company
or its subsidiary;
(b) Any change (individually or in the aggregate), except
in the ordinary course of business, in the contingent obligations of the Company
or its subsidiary by way of guarantee, endorsement, indemnity, warranty or
otherwise;
(c) Any damage, destruction, or loss, whether or not
covered by insurance, materially and adversely affecting the condition of the
business, property, assets or liabilities of the Company;
(d) Any waiver or compromise by the Company or its
subsidiary of a valuable right or of a material debt owed to it;
(e) Any loans made by the Company or its subsidiary to its
employee, officers, or directors other than travel advances and other advances
made in the ordinary course of business;
(f) Any extraordinary increase in the compensation or
benefits payable to any of the Company's or its subsidiary's employees, officers
or directors;
(g) Any declaration or payment of any dividend by the
Company or its subsidiary on its capital stock, any redemption, purchase or
other acquisition of shares of its capital stock or any other distribution of
assets of the Company or its subsidiary, other then the
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repurchase of shares at cost from terminated employees or consultants pursuant
to the terms of written stock purchase agreements calling for such repurchase;
(h) Any receipt of notice by the Company or its subsidiary
that there has been a cancellation of an order for its products or a loss of a
customer of the Company or its subsidiary, the cancellation or loss of which
would materially adversely affect the condition, business, property, assets or
liabilities of the Company;
(i) Any resignation or termination of employment of any
key officer to employee of the Company or its subsidiary and any impending
resignation or termination of employment known by the Company or its subsidiary
of any key officer or employee of the Company or its subsidiary in either case
which, if consummated, would materially adversely affect the condition
(financial or otherwise), business, property, assets or liabilities of the
Company;
(j) Any labor dispute involving the Company or its
subsidiary or any of its employees;
(k) Any other event or condition of any character known to
the Company or its subsidiary that has materially and adversely affected the
Company's or its subsidiary's business or prospects;
(l) Any amendment or other change to the Articles of
Incorporation or Bylaws of the Company or charter and organizational documents
of its subsidiary (except as contemplated by this Agreement);
(m) Any sale or other disposition of any right, title or
interest in or to any assets or properties of the Company or its subsidiary or
any revenues derived therefrom other than in the ordinary course of business and
consistent with past practice;
(n) Any creation, incurrence or assumption of any
indebtedness for money borrowed by the Company or its subsidiary exceeding
$25,000;
(o) Any capital expenditures by the Company or its
subsidiary; or
(p) Any agreement or commitment by the Company or its
subsidiary to do any of the things described in this Section 2.17.
2.18 Disclosures. The Company has provided the Purchasers with
all the information which the Purchasers have requested for deciding whether to
purchase the Shares. To the best of the Company's knowledge, after reasonable
investigation, no representation or warranty of the Company contained in this
Agreement and the Exhibits attached hereto, or any certificate furnished or to
be furnished to the Purchasers at the Closing contains any untrue
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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.
2.19 No Conflict of Interest. The Company is not indebted,
directly or indirectly, to any of its officers or directors or to their
respective spouses or children, in any amount whatsoever other than in
connection with expenses or advances of expenses incurred in the ordinary course
of business or relocation expenses of employees. None of said officers or
directors, or any members of their immediate families are indebted to the
Company (other than in connection with purchases of the Company's stock) or, to
the Company's knowledge, have any direct or indirect ownership interest in any
firm or corporation with which the Company is affiliated or with which the
Company has a business relationship, or any firm or corporation which competes
with the Company except that officers, directors and/or shareholders of the
Company may own stock in publicly traded companies which may compete with the
Company. No officer or director or any member of their immediate families, is,
directly or, to the Company's knowledge, indirectly, interested in any material
contract with the Company. The Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
2.20 Company's Contracts. All of the contracts and agreements
with expected receipts or expenditures in excess of $25,000 or involving a
license or grant of rights to or from the Company or its subsidiary involving
patents, trademarks, service marks, trade names, copyrights, trade secrets or
other proprietary information applicable to the business of the Company other
than non-disclosure agreements signed in the ordinary course with prospective
investors, suppliers, customers and licensees concerning prospective
relationships, to which the Company is a party as of the date of the Closing are
listed on the Schedule of Exceptions. To the Company's knowledge, all such
contracts and agreements are legally binding, valid and in full force and effect
in all material respects, and the Company is not aware of reduced activity
relating to any such contract or agreement (other than in the ordinary course of
business) by any of the parties to any such contract or agreement.
2.21 ERISA. The Company has no employee benefit plan subject to
the Employee Retirement Income Security Act of 1974.
2.22 Environmental Regulations. Except for failures which will
not materially adversely affect the business of the Company, the Company has
met, and continues to meet, all applicable local, state, federal and national
environmental regulations and has disposed of its waste products and effluents
and/or has caused others to dispose of such waste products and effluents, in
accordance with all applicable state, local, federal and national environmental
regulations and in such a manner that no harm has resulted or will result to any
of its respective employees or properties or to any other person or entities or
their properties.
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2.23 Confidentiality and Inventions Agreements. Each employee
with access to confidential information regarding the Company's operations
("Designated Employee") and each founder and officer of the Company has executed
a Confidentiality and Inventions Agreement. Each consultant of the Company has
executed a Consulting Agreement. All such Confidentiality and Inventions
Agreements and Consulting Agreements have been delivered to counsel for the
Purchasers. The Company, after reasonable investigation, is not aware that any
of its Designated Employees, officers or consultants are in violation of such
agreements.
2.24 Insurance. The Company maintains fire and casualty insurance
policies, with extended coverage, sufficient in amount (subject to reasonable
deductibles) to allow it to replace any of its properties that might be damaged
or destroyed. The Company maintains products liability and errors and omissions
insurance in amounts customary for companies similarly situated.
2.25 Agreements; Action. The Company has not engaged in the past
three months in any discussion (i) with any representative of any corporation or
corporations regarding the merger of the Company with or into any such
corporation or corporations, (ii) with any corporation, partnership, association
or other business entity or individual regarding the sale, conveyance or
disposition of all or substantially all of the assets of the Company or a
merger, consolidation or other transaction or series of related transactions in
which more than fifty percent (50%) of the voting power of the Company would be
disposed of (other than with respect to the financing that is the subject of
this Agreement), or (iii) regarding any other form of liquidation, dissolution
or winding up of the Company.
2.26 Section 83(b) Elections. To the best of the Company's
knowledge, all elections and notices required by Section 83(b) of the 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.
2.27 Distributions. There has been no declaration or payment by
the Company of any dividend, nor any distribution by the Company of any assets
of any kind, to any class or series of its capital stock.
2.28 Qualified Small Business Stock.
(a) As of and immediately following the Closing, the
Series B Preferred Stock will meet each of the requirements for qualification as
"qualified small business stock" set forth in Section 1202(c) of the Internal
Revenue Code of 1986, as amended (the "Code"), including without limitation the
following: (i) the Company will be a domestic C corporation, (ii) the Company
will not have made any purchases of its own stock described in Code Section
1202(c)(3)(B) during the one-year period preceding the Closing and (iii) the
Company's (and any predecessor's) aggregate gross assets, as defined by Code
Section 1202(d)(2), at no time between August 10, 1993 and through the Closing
have exceeded
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$50 million, taking into account the assets of any corporations required to be
aggregated with the Company in accordance with Code Section 1202(d)(3).
(b) As of the Closing, at least 80% (by value) of the
assets of the Company are used by it in the active conduct of one or more
qualified trades or business, as defined by Code Section 1202(e)(3), and the
Company is an eligible corporation, as defined by Code Section 1202(e)(4). [THIS
SECTION 2.28 MAY BE REMOVED BASED ON ANALYSIS OF TAX ATTORNEY]
3. Representations and Warranties of the Investors. Each Investor hereby
severally represents and warrants to the Company with the respect to the
transactions contemplated hereby that:
3.1 Experience. Such Investor is experienced in evaluating
start-up companies such as the Company, is able to fend for itself in
transactions such as the one contemplated by this Agreement, has such knowledge
and experience in financial and business matters that Investor is capable of
evaluating the merits and risks of Investor's prospective investment in the
Company, and has the ability to bear the economic risks of the investment.
3.2 Investment. Such Investor is acquiring the Shares (and the
Common Stock issuable upon conversion of the Shares) for investment for such
Investor's own account and not with the view to, or for resale in connection
with, any distribution thereof. Such Investor understands that the Shares (and
the Common Stock issuable upon conversion of the Shares) have not been
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 as expressed herein. Such
Investor further represents that it does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participation to any third person with respect to any of the Shares (or any
Common Stock acquired upon conversion of the Shares). Such Investor understands
and acknowledges that the offering of the Shares pursuant to this Agreement and
any issuance of Common Stock on conversion of the Shares will not be registered
under the Securities Act on the ground that the sale provided for in this
Agreement and the issuance of securities hereunder is exempt from the
registration requirements of the Securities Act.
3.3 Rule 144. Such Investor acknowledges that the Shares (and the
Common Stock issuable upon conversion of the Shares) must be held indefinitely
unless subsequently registered under the Securities Act or an exemption from
such registration is available. Such Investor 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. Such Investor covenants that, in the absence of an effective
registration statement covering the stock in question, such Investor will sell,
transfer, or otherwise dispose of the Shares (and any Common Stock issued on
conversion of the Series B Preferred) only in a manner consistent with such
Investor's representations and covenants set forth in this Section 3. In
connection therewith, such Investor acknowledges that the Company will make a
notation on
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its stock books regarding the restrictions on transfers set forth in this
Section 3 and will transfer securities on the books of the Company only to the
extent not inconsistent therewith.
3.4 No Public Market. Such Investor 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 any of
the Company's securities.
3.5 Access to Data. Such Investor has received and reviewed
information about the Company and has had an opportunity to discuss the
Company's business, management and financial affairs with its management and to
review the Company's facilities.
3.6 Authorization. This Agreement when executed and delivered by
such Investor will constitute a valid and legally binding obligation of the
Investor, enforceable in accordance with its terms, subject to: (i) judicial
principles respecting election of remedies or limiting the availability of
specific performance, injunctive relief, and other equitable remedies; (ii)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect generally relating to or affecting creditors' rights; and
(iii) limitations on the enforceability of the indemnification provisions of the
Amended and Restated Investors' Rights Agreement.
3.7 Brokers or Finders. Such Investor has agreed not to incur,
directly or indirectly, any liability for brokerage or finder's fees, agents'
commissions or other similar charges in connection with this Agreement or any of
the transactions contemplated hereby.
4. Conditions of Investors' Obligations at Closing. The obligations of
the Investors under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective unless Investors purchasing a majority of
the Series B Preferred Stock hereunder consent in writing thereto:
4.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
4.2 Performance. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing.
4.3 Compliance Certificate. The President of the Company shall
deliver to each Investor at the Closing a certificate stating that the
conditions specified in Sections 4.1 and 4.2 have been fulfilled.
4.4 Bylaws. The Bylaws of the Company shall provide that the
Board of Directors of the Company shall consist of between three and five
persons, currently fixed at five, and Xxxxxxx X. Xxxxx shall have been elected
to the Board as a representative of the Investors.
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4.5 Opinion of Company Counsel. The Investors shall have received
from Wilson, Sonsini, Xxxxxxxx & Xxxxxx, counsel for the Company, an opinion,
dated as of the Closing, in the form attached hereto as Exhibit E.
4.6 Investors' Rights Agreement. The Company and the Investors
shall have entered into the Amended and Restated Investors' Rights Agreement.
4.7 Blue Sky. The Company shall have obtained all necessary
permits and qualifications, if any, or secured an exemption therefrom, required
by any state or country for the offer and sale of the Shares.
4.8 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby, and all documents and instruments incident to these transactions, shall
be reasonably satisfactory in substance to the Investors and its special
counsel.
4.9 Restated Articles. The Restated Articles shall have been
filed with and approved by the Secretary of State of California.
5. Conditions of the Company's Obligations at Closing. The obligations
of the Company to the Investors under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by each
Investor:
5.1 Representations and Warranties. The representations and
warranties of each Investor contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.
5.2 Payment of Purchase Price. Each Investor shall have delivered
the purchase price specified on Exhibit A hereto against delivery of the Shares
by the Company to such Investor.
5.3 Blue Sky. The Company shall have obtained all necessary
permits and qualifications, if any, or secured an exemption therefrom, required
by any state or country for the offer and sale of the Shares.
5.4 Investors' Rights Agreement. Each Investor shall have
executed the Amended and Restated Investors' Rights Agreement on or prior to the
date of the Closing.
5.5 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby, and all documents and instruments incident to these transactions, shall
be reasonably satisfactory in substance to the Company and its counsel.
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14
6. Miscellaneous.
6.1 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of California.
6.2 Successors and Assigns. Except as otherwise provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
6.3 Entire Agreement; Amendment. This Agreement and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement among the parties with regard to the subjects hereof and thereof.
Neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought.
6.4 Notices, Etc. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, return receipt requested, or otherwise
delivered by hand or by messenger, addressed (a) if to an Investor, at such
Investor's address set forth on Exhibit A, or at such other address as such
Investor shall have furnished to the Company in writing, or (b) if to any other
holder of any Shares, at such address as such holder shall have furnished the
Company in writing, or, until any such holder so furnishes an address to the
Company, then to and at the address of the last holder of such Shares who has so
furnished an address to the Company, or (c) if to the Company, at its address
set forth on the first page of this Agreement addressed to the attention of the
President, or at such other address as the Company shall have furnished to the
Investors. If notice is provided by mail, notice shall be deemed to be given
upon proper deposit with the United States mail.
6.5 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any holder of any Shares upon any breach or
default of the Company under this Agreement shall impair any such right, power
or remedy of such holder, 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 holder of any breach or default under this
Agreement, or any waiver on the part of any holder 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 or as provided in this
Agreement. All remedies, either under this Agreement or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
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6.6 California Corporate Securities Law. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES
IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS
SO EXEMPT.
6.7 Expenses. At the Closing, following receipt from Venture Law
Group, counsel to the Investors, of an itemized xxxx for legal services in
connection with the transactions contemplated hereby, the Company shall pay
Venture Law Group the expenses and legal fees incurred on behalf of the
Investors with respect to this Agreement and the transactions contemplated
hereby up to an amount not to exceed $7,500.
6.8 Finder's Fee. The Company and each Investor shall each
indemnify and hold the other harmless from any liability for any commission or
compensation in the nature of a finder's fee (including the costs, expenses and
legal fees of defending against such liability) for which the Company or the
Investor, or any of their respective partners, employees, or representatives, as
the case may be, is responsible.
6.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all parties hereto,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
6.10 Severability of this Agreement. In the event that any
provision of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement will continue
in full force and effect without said provision and the parties agree to replace
such provision with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of such provisions;
provided that no such severability will be effective against a party if it
materially and adversely changes the economic benefits of this Agreement to such
party.
(This space intentionally left blank.)
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
INTERNET ACCESS FINANCIAL CORPORATION
By:
-------------------------------------------
Xxxxxx Xxxx, Chief Executive Officer
[SIGNATURE PAGE TO THE STOCK PURCHASE AGREEMENT]
17
INVESTORS:
-------------------------------------------
BRENTWOOD ASSOCIATES VII, L.P.
By: Brentwood VII Ventures, L.P.
Its General Partner
By:
----------------------------------------
Name:
Title:
-------------------------------------------
BRENTWOOD AFFILIATES FUND, L.P.
By: Brentwood VII Ventures, L.P.
Its General Partner
By:
----------------------------------------
Name:
Title:
18
[SIGNATURE PAGE TO THE STOCK PURCHASE AGREEMENT]
19
EXHIBIT A
INVESTOR SCHEDULE
FIRST CLOSING
AUGUST __, 1997
NAME NO. OF SHARES OF AGGREGATE
SERIES B PREFERRED CONSIDERATION PAID
Brentwood Associates VII, L.P. 1,000,000 $ 2,500,000
0000 Xxxx Xxxx Xxxx, Xxxx. 0, Xxx. 000
Xxxxx Xxxx, XX 00000
Brentwood Affiliates Fund, L.P. 40,000 $ 100,000
0000 Xxxx Xxxx Xxxx, Xxxx. 0, Xxx. 000
Xxxxx Xxxx, XX 00000
20
EXHIBIT B
AMENDED AND RESTATED ARTICLES OF INCORPORATION
21
EXHIBIT C
SCHEDULE OF EXCEPTIONS
This disclosure of exceptions is made and given pursuant to Section 2 of
the Series B Preferred Stock Purchase Agreement dated as of August __, 1997 (the
"Agreement"), by and between INTERNET ACCESS FINANCIAL CORPORATION (the
"Company") and the Investors named therein. Unless the context otherwise
requires, all capitalized terms are used herein as defined in the Agreement. The
numbers below correspond to the section numbers of representations and
warranties in the Agreement that are most directly modified by the disclosures,
but all disclosures are intended to modify all of the Company's representations
and warranties.
22
EXHIBIT D
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
23
EXHIBIT E
OPINION OF COMPANY COUNSEL
24
INTERNET ACCESS FINANCIAL CORPORATION
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
AUGUST __, 1997
25
TABLE OF CONTENTS
PAGE
----
1. Purchase and Sale of Stock........................................................... 1
1.1 Sale and Issuance of Series B Preferred Stock................................. 1
1.2 Closing....................................................................... 1
1.3 Additional Closings........................................................... 1
2. Representations and Warranties of the Company........................................ 2
2.1 Organization, Good Standing and Qualification................................. 2
2.2 Capitalization................................................................ 2
2.3 Subsidiaries.................................................................. 2
2.4 Authorization................................................................. 2
2.5 Valid Issuance of Preferred and Common Stock.................................. 3
2.6 Governmental Consents......................................................... 3
2.7 Litigation.................................................................... 4
2.8 Employees..................................................................... 4
2.9 Patents and Trademarks........................................................ 4
2.10 Compliance with Other Instruments............................................. 5
2.11 Permits....................................................................... 5
2.12 Registration Rights........................................................... 6
2.13 Title to Property and Assets.................................................. 6
2.14 Brokers or Finders............................................................ 6
2.15 Corporate Documents........................................................... 6
2.16 Financial Statements.......................................................... 6
2.17 Changes....................................................................... 7
2.18 Disclosures................................................................... 8
2.19 No Conflict of Interest....................................................... 8
2.20 Company=s Contracts........................................................... 9
2.21 ERISA......................................................................... 9
2.22 Environmental Regulations..................................................... 9
2.23 Confidentiality and Inventions Agreements..................................... 9
2.24 Insurance..................................................................... 9
2.25 Agreements; Action............................................................ 10
2.26 Section 83(b) Elections....................................................... 10
2.27 Distributions................................................................. 10
2.28 Qualified Small Business Stock................................................ 10
3. Representations and Warranties of the Investors...................................... 10
3.1 Experience.................................................................... 10
3.2 Investment.................................................................... 11
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PAGE
----
3.3 Rule 144 ..................................................................... 11
3.4 No Public Market.............................................................. 11
3.5 Access to Data................................................................ 11
3.6 Authorization................................................................. 11
3.7 Brokers or Finders............................................................ 12
4. Conditions of Investors= Obligations at Closing...................................... 12
4.1 Representations and Warranties................................................ 12
4.2 Performance................................................................... 12
4.3 Compliance Certificate........................................................ 12
4.4 Bylaws........................................................................ 12
4.5 Opinion of Company Counsel.................................................... 12
4.6 Investors= Rights Agreement................................................... 12
4.7 Blue Sky...................................................................... 12
4.8 Proceedings and Documents..................................................... 12
4.9 Restated Articles............................................................. 13
5. Conditions of the Company=s Obligations at Closing................................... 13
5.1 Representations and Warranties................................................ 13
5.2 Payment of Purchase Price..................................................... 13
5.3 Blue Sky...................................................................... 13
5.4 Investors= Rights Agreement................................................... 13
5.5 Proceedings and Documents..................................................... 13
6. Miscellaneous........................................................................ 13
6.1 Governing Law................................................................. 13
6.2 Successors and Assigns........................................................ 13
6.3 Entire Agreement; Amendment................................................... 13
6.4 Notices, Etc.................................................................. 14
6.5 Delays or Omissions........................................................... 14
6.6 California Corporate Securities Law........................................... 14
6.7 Expenses...................................................................... 14
6.8 Finder=s Fee.................................................................. 14
6.9 Counterparts.................................................................. 15
6.10 Severability of this Agreement................................................ 15
Exhibit A Investor Schedule
Exhibit B Amended and Restated Articles of Incorporation
Exhibit C Schedule of Exceptions
Exhibit D Investors' Rights Agreement
Exhibit E Opinion of Company Counsel
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