EXHIBIT 10.5
RESTRICTED STOCK PURCHASE AGREEMENT
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THIS RESTRICTED STOCK PURCHASE AGREEMENT (the "Agreement") is made and
entered into as of July 24, 2002 by and FS2 Limited, a limited company
registered in England and Wales under Registration # 4102584 ("Company"), and
Cornerstone Alliance LLC, a California limited liability company ("Purchaser").
This Agreement is entered into to memorialize an allotment of the ordinary
shares ((pound)1.00 par value) of the capital stock of Company, made and agreed
upon on April 15, 2002 by and among Company, Purchaser and others.
THE PARTIES AGREE AS FOLLOWS:
1. Purchase of Shares.
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Company hereby sells to Purchaser, and Purchaser hereby buys from Company,
Two Thousand (2,000) shares (the "Shares") of the ordinary shares ((pound)1.00
par) of capital stock of Company on the terms and conditions set forth herein.
2. Purchase Price.
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Purchaser shall purchase the Shares from Company, and Company shall sell
the Shares to Purchaser, at a price of (pound)1.00 per share, for a total
purchase price of (pound)_2,000 (the "Purchase Price"). Purchaser shall pay the
full amount of the Purchase Price in cash to Company upon execution of this
Agreement.
3. Right of Company to Repurchase Shares.
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3.1 Repurchase Right.
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The Shares shall be subject to a fully assignable right (but not
obligation) of repurchase by Company (the "Right of Repurchase"), at the
repurchase price of (pound)1.00 per Share (the "Repurchase Price"), if Company
has received less than US$5,000,000 in Equity Capital by 17:00 (GMT) on December
13, 2002 (the "Performance Period"). For purposes of this Agreement, "Equity
Capital" means capital invested in capital stock of the Company or loaned to the
Company and convertible into capital stock of the Company, measured beginning
from the date of Company's formation (but excluding the first US$500,000 of
"Seed Funding") through the end of the Performance Period, and including capital
invested in a parent corporation which acquires Company with respect to amounts
invested from the time of the acquisition. The Right of Repurchase set forth in
this Section 3.1 shall apply to that percentage of the Shares, if any, which
equals: (a) the amount by which the Equity Capital falls short of US$5,000,000,
(b) divided by US$5,000,000. Company's rights under this Section 3.1 shall be
freely assignable to any other third party, in whole or in part, and may be
exercised as to all or any portion of the Shares subject to the Right of
Repurchase at the election of Company.
3.2 Repurchase Procedure.
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The Right of Repurchase shall commence on the date the Performance Period
ends and shall continue until March 13, 2003. If the Right of Repurchase is
exercised, Purchaser shall endorse and deliver to the exercising party the
certificates representing the Shares being repurchased, and such party shall
then promptly pay the total Repurchase Price to the Purchaser in cash or by
check.
3.3 Binding Effect.
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The Right of Repurchase shall inure to the benefit of the successors,
assigns, representatives, executors, administrators, heirs and legatees of
Company and shall be binding upon any representative, executor, administrator,
heir, legatee or permitted assignee of Purchaser. The restrictions imposed on
the Shares under this Agreement, including without limitation the Right of
Repurchase, shall continue to apply to any consideration received by Purchaser
with respect to the Shares during the Performance Period, and Purchaser shall
cooperate with any reasonable request of Company to confirm that the terms of
this Agreement are applicable to any such consideration, including by placing
legends upon any stock certificates Purchaser may receive in exchange for the
Shares.
3.4 Illustration.
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To illustrate the operation of this Section 3, assume that Company and
Company's parent corporation have received US$4,700,000 in Equity Capital as of
17:00 GMT on December 13, 2002. The shortfall below US$5,000,000 in Equity
Capital would be US$300,000. The percentage of the shortfall is six percent
(6%)(i.e., US$300,000/US$5,000,000=.06=6%). Under the formula set forth in
Section 3.1, six percent (6%) of the Shares or 120 Shares (i.e., 2,000 Shares x
6% = 120 Shares) would be subject to the Right of Repurchase. At any time on or
before March 13, 2003, Company could exercise its Right of Repurchase and pay
Purchaser (pound)1.00 per Share for up to 120 Shares. The remaining Shares would
not be subject to the Right of Repurchase.
4. Restrictions on Transfer; Share Certificate Restrictive Legends.
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During the Performance Period and continuing until March 13, 2003, no
Shares which remain subject to the Right of Repurchase shall be transferred by
Purchaser to any other person without the written consent of Company. To assure
compliance with this restriction, in addition to any other restrictive legends
required to appear on the certificates evidencing Shares, such certificates
shall bear the following restrictive legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON TRANSFER, INCLUDING A RIGHT OF REPURCHASE, PURSUANT TO THE
PROVISIONS OF THE AGREEMENT RELATING TO THE ACQUISITION OF SUCH
SHARES.
Upon the lapse of the Right of Repurchase with respect to a portion of the
Shares, Purchaser may submit the Share certificates to Company with a request
for removal of the above legend, and Company shall, within a reasonable time
after such request, reissue certificates for those Shares which are no longer
subject to the Right of Repurchase without the above legend.
5. Representations, Warranties, Covenants, and Acknowledgments of
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Purchaser.
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Purchaser hereby represents, warrants, covenants, acknowledges and agrees
that:
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5.1 Investment.
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Purchaser is acquiring the Shares for Purchaser's own account, and not for
the account of any other person. Purchaser is acquiring the Shares for
investment and not with a view to distribution or resale thereof except in
compliance with applicable laws regulating securities.
5.2 Business Experience.
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Purchaser is capable of evaluating the merits and risks of Purchaser's
investment in Company evidenced by the purchase of the Shares.
5.3 Relation of Company.
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Purchaser is currently a consultant, service provider or supplier of
Company and in such capacity has become personally familiar with the business,
affairs, financial conditions, and results of operations of Company. There have
been no representations or warranties by Company or any other person or entity,
upon which Purchaser is relying in connection with the transactions contemplated
by this Agreement, which are not fully set forth in this Agreement.
5.4 Access to Information.
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Purchaser has had the opportunity to ask questions of, and to receive
answers from the Company's Directors and management with respect to the terms
and conditions of the transactions contemplated hereby and with respect to the
business, affairs, financial conditions, and results of operations of Company.
Purchaser has had access to such financial and other information as is necessary
in order for Purchaser to make a fully-informed decision as to investment in
Company by way of purchase of the Shares, and has had the opportunity to obtain
any additional information necessary to verify any of such information to which
Purchaser has had access.
5.5 Speculative Investment.
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Purchaser's investment in Company represented by the Shares is highly
speculative in nature and is subject to a high degree of risk of loss in whole
or in part. The amount of such investment is within Purchaser's risk capital
means and is not so great in relation to Purchaser's total financial resources
as would jeopardize the personal financial needs of Purchaser or Purchaser's
family in the event such investment were lost in whole or in part.
5.6 Tax Advice.
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Company has made no warranties or representations to Purchaser with respect
to the income tax consequences of the transactions contemplated by this
Agreement and Purchaser is in no manner relying on Company or its
representatives for an assessment of such tax consequences.
6. Sale of Business.
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In the event Company determines to sell all or substantially all of its
assets, or to enter into a merger, reorganization, consolidation or other sale
of its business (regardless of form), or if Company's shareholders determine to
sell more than 50% of the shares of Company owned by them at the time of such
determination to a third party, then in any such case, Purchaser shall (i) at
Company's request, sell or transfer all (or such portion as requested by
Company) of the Shares to the acquiring person or entity at the same per share
purchase price and on the same terms received by the Company's other
shareholders for their shares, and (ii) at Company's request, take such other
action, and execute such documents and instruments, as are necessary or
appropriate to cooperate with Company and to facilitate such transaction.
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7. No Contract of Employment, Partnership or Joint Venture.
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Purchaser acknowledges and agrees that this Agreement does not create any
contract of employment, partnership, joint venture and that the existing terms
of Purchaser's contractual relationship with Company are not modified by this
Agreement, except with respect to the treatment of the Shares and the rights of
Purchaser and Company with respect to the Shares
8. Binding Effect.
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Subject to the limitations set forth in this Agreement, this Agreement
shall be binding upon, and inure to the benefit of, the executors,
administrators, heirs, legal representatives, successors and assigns of the
parties hereto.
9. Governing Law :
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This Agreement shall be construed and governed in accordance with English
law. In any arbitration or legal action brought to enforce the provisions
hereof, the prevailing party in such action shall be entitled to have its
reasonable attorney's fees, arbitration costs, and litigation expenses paid by
the non-prevailing party.
10. Notices.
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All notices and other communications under this Agreement shall be in
writing. Unless and until Purchaser is notified in writing to the contrary, all
notices, communications and documents directed to Company and related to the
Agreement, if not delivered by hand, shall be mailed, addressed as follows:
FS2 Limited
Fifth Floor Carlton Tower
▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇
Attention: Corporate Secretary
Unless and until Company is notified in writing to the contrary, all notices,
communications and documents intended for Purchaser and related to this
Agreement, if not delivered by hand, shall be mailed to Purchaser's last known
address as shown on Company's books. Notices and communications shall be mailed
by registered mail, return receipt requested, postage prepaid. All mailings and
deliveries related to this Agreement shall be deemed received only when actually
received.
11. Entire Agreement.
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This Agreement constitutes the entire agreement of the parties and
supersedes any and all prior and contemporaneous negotiations, correspondence,
understandings and agreements between the parties respecting the subject matter
hereof. This Agreement may only be amended by a written instrument signed by the
parties hereto. In the event of any legal or equitable action or arbitration
arising our of this Agreement, the prevailing party shall be entitled to
attorneys' fees and costs in addition to any other relief to which the
prevailing party may be entitled.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
COMPANY: FS2 LIMITED
By:
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Its:
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PURCHASER: CORNERSTONE ALLIANCE LLC, a California
Limited liability company
By:
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F. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Manager
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