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XXXXXXXXXXX.XXX, INC.
000 XXXX XXXXXX XXXXXX, XXXXX XXXXX
XXXXXXX, XXXXXXXX 00000-0000
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
MARCH 28, 2000
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TABLE OF CONTENTS
Page
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Section 1 Authorization and Sale of Preferred Stock................................................................1
1.1 Authorization.......................................................................................1
1.2 Sale of Shares......................................................................................1
Section 2 Closing Dates; Delivery..................................................................................1
2.1 Closing.............................................................................................1
2.2 Delivery............................................................................................2
Section 3 Representations and Warranties of the Company............................................................2
3.1 Organization and Standing; Certificate and Bylaws...................................................2
3.2 Corporate Power.....................................................................................2
3.3 Subsidiaries........................................................................................2
3.4 Capitalization......................................................................................2
3.5 Authorization.......................................................................................3
3.6 Financial Statements................................................................................4
3.7 Material Obligations................................................................................4
3.8 Changes.............................................................................................4
3.9 Material Contracts and Commitments..................................................................5
3.10 Intellectual Property, Trademarks, etc..............................................................6
3.11 Title to Properties and Assets; Liens, etc..........................................................6
3.12 Compliance with Other Instruments, None Burdensome, etc.............................................7
3.13 Litigation, etc.....................................................................................7
3.14 Registration Rights.................................................................................7
3.15 Governmental Consent, etc...........................................................................7
3.16 Offering............................................................................................7
3.17 Brokers or Finders..................................................................................7
3.18 Employees...........................................................................................8
3.19 Proprietary Information and Inventions Agreement....................................................8
3.20 Compliance with Laws; Permits.......................................................................8
3.21 Environmental and Safety Laws.......................................................................9
3.22 Obligations to Related Parties......................................................................9
3.23 Tax Returns and Payments............................................................................9
3.24 Minute Books........................................................................................9
3.25 Insurance...........................................................................................9
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Section 4 Representations and Warranties of the Purchasers.........................................................9
4.1 Experience; Speculative Nature of Investment........................................................9
4.2 Investment.........................................................................................10
4.3 Rule 144...........................................................................................10
4.4 No Public Market...................................................................................10
4.5 Access to Data.....................................................................................10
4.6 Authorization......................................................................................10
4.7 Brokers or Finders.................................................................................10
4.8 Tax Liability......................................................................................11
Section 5 Conditions to Purchasers' Obligations to Close..........................................................11
5.1 Representations and Warranties Correct.............................................................11
5.2 Covenants..........................................................................................11
5.3 Blue Sky...........................................................................................11
5.4 Certificate of Incorporation.......................................................................11
5.5 Stockholder Rights Agreement.......................................................................11
5.6 Compliance Certificate.............................................................................11
5.7 Opinion of Company Counsel.........................................................................12
Section 6 Conditions to Company's Obligations to Close............................................................12
6.1 Representations....................................................................................12
6.2 Covenants..........................................................................................12
6.3 Blue Sky...........................................................................................12
6.4 Certificate of Incorporation.......................................................................12
6.5 Stockholder Rights Agreement.......................................................................12
Section 7 Miscellaneous...........................................................................................12
7.1 Governing Law......................................................................................12
7.2 Survival...........................................................................................12
7.3 Expenses...........................................................................................12
7.4 Successors and Assigns.............................................................................13
7.5 Entire Agreement; Amendment........................................................................13
7.6 Notices, etc.......................................................................................13
7.7 Delays or Omissions................................................................................13
7.8 Counterparts.......................................................................................14
7.9 Severability.......................................................................................14
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7.10 Exculpation Among Purchasers.......................................................................14
7.11 Titles and Subtitles...............................................................................14
EXHIBITS
A Schedule of Purchasers.................................................................................A-1
B Certificate of Incorporation...........................................................................B-1
C Stockholder Rights Agreement...........................................................................C-1
D Compliance Certificate.................................................................................D-1
E Opinion of Company Counsel.............................................................................E-1
F Schedule of Approved Investors.........................................................................F-1
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XXXXXXXXXXX.XXX, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
This Series C Preferred Stock Purchase Agreement (the "AGREEMENT") is
made as of March 28, 2000 by and among Xxxxxxxxxxx.xxx, Inc., a Delaware
corporation (the "COMPANY"), and the persons and entities listed on the Schedule
of Purchasers, Initial Closing, attached hereto as EXHIBIT A (each a
"PURCHASER," and collectively, the "PURCHASERS").
SECTION 1
AUTHORIZATION AND SALE OF PREFERRED STOCK
1.1 AUTHORIZATION. The Company will, prior to the Initial Closing (as
defined below), authorize the sale and issuance of up to 3,843,624 shares (the
"SHARES") of the Company's Series C Preferred Stock (the "SERIES C PREFERRED"),
and the issuance of such shares of common stock of the Company (the "COMMON
STOCK") issuable upon conversion of the Shares having the rights, privileges and
preferences as set forth in the Amended and Restated Certificate of
Incorporation (the "CERTIFICATE OF INCORPORATION") in the form attached to this
Agreement as EXHIBIT B.
1.2 SALE OF SHARES. Subject to the terms and conditions of this
Agreement, each of the Purchasers agrees to purchase, severally and not jointly,
and the Company agrees to sell and issue to each Purchaser, severally and not
jointly, the number of shares set forth in the column designated "Number of
Series C Shares" opposite such Purchaser's name on the Schedule of Purchasers,
at a cash purchase price of $5.40 per share (the "PURCHASE PRICE").
SECTION 2
CLOSING DATES; DELIVERY
2.1 CLOSING. The purchase and sale of the Shares hereunder shall take
place at one or more closings (each of which is referred to in this Agreement as
a "CLOSING"). The initial closing (the "INITIAL CLOSING") shall take place on
the date hereof and the subsequent closing(s) shall take place on such date or
dates as shall be approved by the Company's Board of Directors (the "BOARD OF
DIRECTORS") no later than NINETY (90) days following the Initial Closing (each
such closing date is referred to in this Agreement as a "CLOSING DATE") The
Company may sell up to the balance of the authorized shares of Series C
Preferred not sold at the Initial Closing to such persons in any subsequent
closing as may be approved by the Board of Directors; provided that the approval
of Diamond Technology Partners Incorporated shall be required to for (x) the
sale of Series C Preferred to any investors not listed on EXHIBIT F and (y) the
sale of Series C Preferred to an investor listed on EXHIBIT F in excess of the
shares indicated on such exhibit. All such sales shall be made on the terms and
conditions set forth in this Agreement. Any shares of Series C Preferred sold at
subsequent closings shall be deemed to be "SHARES" for all purposes under this
Agreement and any purchasers thereof shall be deemed to be "PURCHASERS" for all
purposes under this Agreement. Each Closing
shall be held at the offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, 000 Xxxx Xxxx
Xxxx, Xxxx Xxxx, Xxxxxxxxxx, at 2:00 p.m. local time, on each Closing Date, or
at such other time and place upon which the Company and the Purchasers agree.
2.2 DELIVERY. At each Closing, the Company will deliver to each
Purchaser a certificate registered in such Purchaser's name representing the
number of Shares that such Purchaser is purchasing against payment of the
purchase price therefor as set forth in the column designated "Purchase Price"
opposite such Purchaser's name on the Schedule of Purchasers, 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 on the Schedule of Exceptions dated as of the date
of this Agreement and delivered to the Purchasers (the "SCHEDULE OF
EXCEPTIONS"), the Company represents and warrants to each Purchaser as follows,
in each case as of the date hereof and as of the Closing Date (except as
otherwise specified below):
3.1 ORGANIZATION AND STANDING; CERTIFICATE AND BYLAWS. 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 presently conducted. The Company is
presently qualified to do business as a foreign corporation in each jurisdiction
where the failure to be so qualified would have a material adverse effect on the
Company's business as now conducted.
3.2 CORPORATE POWER. The Company will have at each Closing Date all
requisite legal and corporate power and authority to execute and deliver this
Agreement and that certain Amended and Restated Stockholder Rights Agreement
entered into among the Company, the Purchasers and the stockholders party
thereto and attached as EXHIBIT C (the "STOCKHOLDER RIGHTS AGREEMENT"), to sell
and issue the Shares hereunder, to issue the shares of Common Stock issuable
upon conversion of the Shares, and to carry out and perform its obligations
under the terms of this Agreement and the Stockholder Rights Agreement
(together, the "AGREEMENTS") and the Certificate of Incorporation.
3.3 SUBSIDIARIES. The Company has no subsidiaries and does not
otherwise own or control, directly or indirectly, any equity interest in any
corporation, association or business entity. The Company is not a participant in
any joint venture, partnership or similar arrangement.
3.4 CAPITALIZATION. The authorized capital stock of the Company
consists or will, upon the filing of the Certificate of Incorporation, consist
of 24,000,000 shares of Common Stock, of which 8,507,646 shares are issued and
outstanding as of the date of this Agreement, 624,000 shares of Series A
Preferred Stock (the "SERIES A PREFERRED"), all of which are issued and
outstanding as of the date of this Agreement, 8,701,980 shares of Series B
Preferred (the "SERIES B PREFERRED"), all of which are issued and outstanding as
of the date of this Agreement, and 3,843,624 shares of Series C Preferred, none
of which are issued and outstanding prior to the Initial Closing. All
outstanding
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shares of Common Stock, Series A Preferred and Series B Preferred have been
duly authorized and validly issued in compliance with applicable laws, and
are fully paid and non-assessable. The Company has reserved (a) 3,843,624
shares of Series C Preferred for issuance hereunder, (b) 8,701,980 shares of
Common Stock for issuance upon conversion of the Series B Preferred, (c)
3,843,624 shares of Common Stock for issuance upon conversion of the Series C
Preferred, and (d) 2,694,680 shares of its Common Stock for issuance to
employees, consultants or directors pursuant to its 1999 Stock Option Plan,
of which options to purchase 1,430,104 shares of Common Stock are currently
outstanding as of the date of this Agreement. The Common Stock, the Series A
Preferred, the Series B Preferred and the Series C Preferred shall have the
rights, preferences, privileges and restrictions set forth in the Certificate
of Incorporation. Except as set forth in the Schedule of Exceptions and the
Stockholder Rights Agreement there are no options, warrants or other rights
to purchase any of the Company's authorized and unissued capital stock.
Except as set forth in the Schedule of Exceptions and the Stockholder Rights
Agreement no stock plan, stock purchase, stock option or other agreement or
understanding between the Company and any holder of any equity securities or
rights to purchase equity securities provides for acceleration or other
changes in the vesting provisions or other terms of such agreement or
understanding as the result of any merger, consolidated sale of stock or
assets, change in control or any other transaction(s) by the Company.
3.5 AUTHORIZATION. All corporate action on the part of the Company and
its directors necessary for the authorization, execution, delivery and
performance of the Agreements by the Company, the authorization, sale, issuance
and delivery of the Shares, the Common Stock issuable upon conversion of the
Shares, and the performance of all of the Company's obligations under the
Agreements has been taken or will be taken prior to the Closing. The Agreements,
when executed and delivered by the Company, shall constitute valid and binding
obligations of the Company, enforceable in accordance with their terms, 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, except that the indemnification provisions of Section
1.10 of the Stockholder Rights Agreement may be further limited by principles of
public policy.
The Shares, when issued in compliance with the provisions of this
Agreement, will be validly issued, will be fully paid and non-assessable, and
will have the rights, preferences and privileges described in the Certificate of
Incorporation; the Common Stock issuable upon conversion of the Shares has been
duly and validly reserved and, when issued in compliance with the provisions of
this Agreement and the Certificate of Incorporation will be validly issued, and
will be fully paid and non-assessable; and the Shares and the Common Stock
issued upon conversion of the Shares will be free of any liens or encumbrances,
other than any liens or encumbrances created by or imposed upon the Purchaser;
PROVIDED, HOWEVER, that the Shares, and the Common Stock issuable upon
conversion of the Shares, are subject to restrictions on transfer under state
and/or federal securities laws as set forth herein and in the Stockholder Rights
Agreement. The sale of the Shares and the Common Stock issuable upon conversion
of the Shares are not subject to any preemptive rights or rights of first
refusal.
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3.6 FINANCIAL STATEMENTS. The Company has delivered to each Investor
the audited financial statements (balance sheet and profit and loss statement,
statement of stockholders' equity and statement of cash flows, including notes
thereto) of Extranet Solutions, LLC, a Delaware limited liability company ("OLD
PARTICIPATE") for the fiscal year ended December 31, 1998, and the unaudited
financial statements (balance sheet, statement of operations and statement of
Cash Flows) for the Company for the fiscal year ended December 31, 1999 (the
"FINANCIAL STATEMENTS"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated and with each other, except that
unaudited Financial Statements may not contain all footnotes required by
generally accepted accounting principles. The Financial Statements fairly
present the financial condition and operating results of Old Participate and the
Company, as the case may be, as of the dates, and for the periods, indicated
therein, subject in the case of unaudited Financial Statements, to normal
year-end audit adjustments. Except as set forth in the Financial Statements,
neither the Company nor Old Participate has any material liabilities, contingent
or otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to December 31, 1999 and (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, in both cases, individually or in the aggregate, are not
material to the financial condition or operating results of the Company or Old
Participate. Except as disclosed in the Financial Statements, the Company is not
a guarantor or indemnitor of any indebtedness of any other person, firm or
corporation. The Company maintains and will continue to maintain a standard
system of accounting established and administered in accordance with generally
accepted accounting principles.
3.7 MATERIAL OBLIGATIONS. The Company has no material liabilities or
obligations, absolute or contingent (individually or in the aggregate), except
(a) liabilities and obligations which have been incurred in the ordinary course
of business which have not been, either in any case or in the aggregate,
material and (b) liabilities and obligations under a lease for its principal
offices.
3.8 CHANGES. To the best of the Company's knowledge, since December 31,
1999, there has not been:
(a) Any change in the assets, liabilities, financial condition
or operations of Old Participate or the Company from that reflected in the
Financial Statements, other than changes in the ordinary course of business,
none of which individually or in the aggregate has had or is expected to have a
material adverse effect on such assets, liabilities, financial condition,
operations or prospects of Old Participate or the Company;
(b) Any resignation or termination of employment any officer
or key employee of Old Participate or the Company; and the Company, to the best
of its knowledge, does not know of the impending resignation or termination of
employment of any such officer or key employee;
(c) Any material change, except in the ordinary course of
business, in the contingent obligations of Old Participate or the Company by way
of guaranty, endorsement, indemnity, warranty or otherwise;
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(d) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, business,
prospects or financial condition of Old Participate or the Company (as such
business is presently conducted and as it is presently proposed to be conducted;
(e) Any waiver by Old Participate or the Company of a valuable
right or of a material debt owed to it;
(f) Any direct or indirect loans made by Old Participate or
the Company to any stockholder, member, employee, officer or director of Old
Participate or the Company, other than advances made in the ordinary course of
business;
(g) Any material change in any compensation arrangement or
agreement with any employee, officer, member or stockholder or Old Participate
or the Company;
(h) Any declaration or payment of any dividend or other
distribution of the assets of Old Participate or the Company;
(i) Any labor organization activity;
(j) Any debt, obligation or liability incurred, assumed or
guaranteed by Old Participate or the Company, except those for immaterial
amounts and for current liabilities incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets by Old
Participate or the Company;
(l) Any change in any material agreement to which Old
Participate or the Company is a party or by which it is bound which materially
and adversely affects the business, assets, liabilities, financial condition,
operations or prospects of Old Participate the Company;
(m) Any other event or condition of any character that, either
individually or cumulatively, has materially and adversely affected the
business, assets, liabilities, financial condition, operations or prospects of
Old Participate or the Company; or
(n) Any arrangement or commitment by Old Participate or the
Company to do any of the acts described in this Section 3.8.
3.9 MATERIAL CONTRACTS AND COMMITMENTS. To the Company's knowledge, all
of the material contracts, agreements and instruments to which the Company is a
party are valid, binding and in full force and effect in all material respects,
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. Except for agreements explicitly
contemplated hereby and agreements between the Company and its shareholders and
employees with respect to the sale of the Common Stock, there are no agreements,
understanding or proposed transactions between the
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Company and any of its officers, directors, affiliates or any affiliate
thereof. There are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which Old
Participate or the Company is a party or, to its knowledge, by which it is
bound which may involve (i) obligations (contingent or otherwise) of, or
payments to, Old Participate or the Company in excess of $50,000 (other than
obligations of, or payments to, Old Participate or the Company arising from
purchase or sale agreements entered into in the ordinary course of business),
(ii) the transfer or license of any patent, copyright, trade secret or other
proprietary right to or from Old Participate or the Company (other than
licenses arising from the purchase of "off the shelf" or other standard
products), (iii) provisions restricting the development, manufacture or
distribution of Old Participate's or the Company's products or services, or
(iv) indemnification by Old Participate or the Company with respect to
infringements of proprietary rights (other than indemnification obligations
arising from purchase, sale or license agreements entered into in the
ordinary course of business). For the purposes of the foregoing, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including
persons or entities the Company has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual
minimum dollar amounts.
3.10 INTELLECTUAL PROPERTY, TRADEMARKS, ETC. The Company has the right
to use, free and clear of all liens, charges, claims and restrictions, all
intellectual property, patents, trademarks, service marks, trade names,
copyrights, licenses and rights necessary to the business of the Company as
presently conducted. There are no outstanding options, licenses or agreements of
any kind relating to 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 and other proprietary rights and processes of any other person or
entity other than such licenses or agreements arising from the purchase of "off
the shelf" or standard products. Neither Old Participate nor the Company has
received any communications alleging that Old Participate or the Company has
violated or, by conducting its business as presently proposed, 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 nor is aware
of any such violation. The Company does not believe it is or will be necessary
to utilize any inventions, trade secrets or proprietary information of any of
its employees made prior to their employment by the Company, except for
inventions, trade secrets or proprietary information that have been assigned to
the Company. Section 3.10 of the Schedule of Exceptions contains a list of all
patents, trademarks and licenses of the Company.
3.11 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, pledge, lien, lease,
encumbrance or charge, other than (a) the lien of current taxes not yet due and
payable and (b) possible minor liens and encumbrances which do not in any case
materially detract from the value of the property subject thereto or materially
impair the operations of the Company, and which have not arisen otherwise than
in the ordinary course of business. The Company is in compliance with all
material terms of each lease to which it is a party or is otherwise bound.
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3.12 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The
Company is not in violation of any term of its Certificate of Incorporation or
Bylaws or of any term or provision of any material mortgage, indebtedness,
indenture, contract, agreement, instrument, judgment or decree applicable to the
Company, and to the Company's knowledge, the Company is not in violation of any
order, statute, rule or regulation applicable to the Company. The execution,
delivery and performance of and compliance with the Agreements, and the issuance
of the Shares and the Common Stock issuable upon conversion of the Shares, have
not resulted and will not result in (i) any violation of or conflict with the
Company's Certificate of Incorporation or Bylaws or (ii) any material violation
of or conflict with, or constitute a default under any agreements to which the
Company is a party, nor result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company.
3.13 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court or
governmental agency nor, to the Company's knowledge, is there any threat
thereof. 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. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
3.14 REGISTRATION RIGHTS. Except as provided in the Stockholder Rights
Agreement, the Company is not under any contractual obligation to register any
of its presently outstanding securities or any of its securities, which may
hereafter be issued.
3.15 GOVERNMENTAL CONSENT, ETC. 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 and
delivery of the Agreements or the offer, sale or issuance of the Shares, and the
Common Stock issuable upon conversion of the Shares, or the consummation of any
other transaction contemplated hereby or thereby, except (a) filing of the
Certificate of Incorporation in the office of the Delaware Secretary of State
and (b) qualification (or taking such action as may be necessary to secure an
exemption from qualification, if available) of the offer and sale of the Shares,
and the Common Stock issuable upon conversion of the Shares, under applicable
state Blue Sky laws, which filings and qualifications, if required, will be
accomplished in a timely manner.
3.16 OFFERING. Subject to the accuracy of the each Purchaser's
representations in Section 4 hereof, the offer, sale and issuance of the Shares
to be issued in conformity with the terms of this Agreement, and the issuance of
the Common Stock to be issued upon conversion of the Shares, constitute
transactions exempt from the registration requirements of Section 5 of the
Securities Act of 1933, as amended (the "SECURITIES ACT").
3.17 BROKERS OR FINDERS. The Company has not engaged any brokers,
finders or agents, and the Purchasers have not incurred, and will not incur,
directly or indirectly, as a result of any action taken by the Company, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with the Agreements. In the event that the preceding
sentence is in any way inaccurate, the Company hereby agrees to indemnify and
hold harmless each Purchaser
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from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability
or asserted liability) for which such Purchaser or any of its officers,
partners, employees or representatives is responsible.
3.18 EMPLOYEES. The Company has no collective bargaining agreements
with any of its employees. There is no labor union organizing activity pending
or, to the Company's knowledge, threatened with respect to the Company. Except
as set forth in the Schedule of Exceptions, the Company is not a party to or
bound by any currently effective employment contract, deferred compensation
arrangement, bonus plan, incentive plan, profit sharing plan, retirement
agreement or other employee compensation plan or agreement. To the Company's
knowledge, no employee of the Company, nor any consultant with whom the Company
has contracted, is in violation of any term of any employment contract,
proprietary information agreement or any other agreement relating to the right
of any such individual to be employed by, or to contract with, the Company
because of the nature of the business to be conducted by the Company; and to the
Company's knowledge the continued employment by the Company of its present
employees, and the performance of the Company's contracts with its independent
contractors, will not result in any such violation. Neither Old Participate nor
the Company has received any notice alleging that any such violation has
occurred. No employee of the Company has been granted the right to continued
employment by the Company or to any material compensation following termination
of employment with the Company. The Company is not aware that any officer or key
employee, or that any group of key employees, intends to terminate his, her or
their employment with the Company, nor does the Company have a present intention
to terminate the employment of any officer, key employee or group of key
employees.
3.19 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. Each current and
former employee, officer and consultant of Old Participate and the Company has
executed a Proprietary Information and Inventions Agreement in the form
previously provided to the Purchasers' special counsel. No current or former
employee, officer or consultant of Old Participate or the Company has excluded
works or inventions made prior to his or her employment with Old Participate or
the Company from his or her assignment of inventions pursuant to such employee,
officer or consultant's Proprietary Information and Inventions Agreement.
3.20 COMPLIANCE WITH LAWS; PERMITS. To the Company's knowledge, neither
Old Participate nor the Company is in violation of any applicable statute, rule,
regulation, order or restriction of any domestic or foreign government or any
instrumentality or agency thereof in respect of the conduct of its business or
the ownership of its properties which violation would materially and adversely
affect the business, assets, liabilities, financial condition, operations or
prospects of the Company. 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 planned to be conducted.
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3.21 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 to the best of its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.
3.22 OBLIGATIONS TO RELATED PARTIES. There are no obligations of the
Company to officers, directors, stockholders, members or employees of the
Company or Old Participate other than (a) for payment of salary for services
rendered, (b) reimbursement for reasonable expenses incurred on behalf of the
Company or Old Participate and (c) for other standard employee benefits made
generally available to all employees (including stock option agreements
outstanding under any stock option plan approved by the Board of Directors of
the Company). To the best of the Company's knowledge, no officer, director or
stockholder, member or any member of their immediate families, is, directly or
indirectly, interested in any material contract with Old Participate or the
Company (other than such contracts as relate to any such person's ownership of
capital stock or other securities of the Company). Neither the Company nor Old
Participate is a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
3.23 TAX RETURNS AND PAYMENTS. Old Participate and the Company have
timely filed all tax returns (federal, state and local) required to be filed by
them. All taxes shown to be due and payable on such returns, any assessments
imposed, and to the Company's knowledge, all other taxes due and payable by Old
Participate or the Company on or before the Closing, have been paid, or will be
paid, prior to the time they become delinquent. Neither Old Participate nor the
Company have been advised (a) that any of their returns, federal, state or
other, have been or are being audited as of the date hereof or (b) of any
deficiency in assessment or proposed judgment to its federal, state or other
taxes. The Company has no knowledge of any liability of any tax to be imposed
upon its properties or assets as of the date of this Agreement that is not
adequately provided for.
3.24 MINUTE BOOKS. The minute books of the Company made available to
the Purchasers contain a complete summary of all actions and meetings of
directors and stockholders since the time of incorporation.
3.25 INSURANCE. The Company has fire and casualty insurance policies
with coverage customary for companies similarly situated to the Company.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby severally represents and warrants to the Company
with respect to the purchase of Shares by such Purchaser, and with respect only
to such Purchaser, as follows:
4.1 EXPERIENCE; SPECULATIVE NATURE OF INVESTMENT. The Purchaser has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that it is
capable of evaluating the merits and risks of its investment in the Company and
has the capacity to protect its own interests. The Purchaser acknowledges that
its
- 9 -
investment in the Company is highly speculative and entails a substantial
degree of risk and the Purchaser is in a position to lose the entire amount of
such investment.
4.2 INVESTMENT. The Purchaser is acquiring the Shares and the
underlying Common Stock for investment for its own account, not as a nominee or
agent, and not with the view to, or for resale in connection with, any
distribution thereof. The Purchaser understands that the Shares 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 and the accuracy of
the Purchaser's representations as expressed herein. The Purchaser is an
"accredited investor" within the meaning of Regulation D, Rule 501(a),
promulgated by the Securities and Exchange Commission.
4.3 RULE 144. The Purchaser acknowledges that the 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. The Purchaser 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 a party has purchased and paid for the
security to be sold, 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. The Purchaser 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. The Purchaser has had an opportunity to discuss the
Company's business, management and financial affairs with its management. The
Purchaser has also had an opportunity to ask questions of officers of the
Company, which questions were answered to its satisfaction. The Purchaser
understands that such discussions, as well as any written information issued by
the Company, were intended to describe certain aspects of the Company's business
and prospects but were not a thorough or exhaustive description.
4.6 AUTHORIZATION. The Agreements, when executed and delivered by the
Purchaser, will constitute valid and legally binding obligations of the
Purchaser, enforceable in accordance with their terms, except as the
indemnification provisions of Section 1.10 of the Stockholder 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 BROKERS OR FINDERS. The Purchaser has not engaged any brokers,
finders or agents, and the Company has not, and will not, incur, directly or
indirectly, as a result of any action taken by the Purchaser, any liability for
brokerage or finders' fees or agents' commissions or any similar charges
- 10 -
in connection with the Agreements. In the event that the preceding sentence is
in any way inaccurate, such Purchaser agrees to indemnify and hold harmless the
Company and each other Purchaser from any liability for any commission or
compensation in the nature of a finder's fee (and the costs and expenses of
defending against such liability) for which the Company, any other Purchaser, or
any of their officers, directors, employees or representatives, is responsible.
4.8 TAX LIABILITY. The Purchaser has reviewed with its own tax advisors
the federal, state, local and foreign tax consequences of this investment and
the transactions contemplated by the Agreements. With respect to such matters,
the Purchaser relies solely on such advisors and not on any statements or
representations of the Company or any of its agents other than the
representations and warranties set forth herein. The Purchaser understands that
it (and not the Company) shall be responsible for its own tax liability that may
arise as a result of this investment or the transactions contemplated by the
Agreements.
SECTION 5
CONDITIONS TO PURCHASERS' OBLIGATIONS TO CLOSE
The Purchasers' obligations to purchase the Shares at each Closing are,
unless waived by the Purchasers, subject to the fulfillment on or before the
Closing of each of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct in
all material respects as of the Closing Date except representations and
warranties that are qualified as to materiality, which shall be true and correct
as of the Closing Date.
5.2 COVENANTS. All covenants, agreements and conditions contained in
the Agreements to be performed by the Company on or prior to the Closing shall
have been performed or complied with in all material respects.
5.3 BLUE SKY. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Shares, and the
Common Stock issuable upon conversion of the Shares.
5.4 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation
shall have been duly authorized, executed and filed with the Secretary of State
of the State of Delaware.
5.5 STOCKHOLDER RIGHTS AGREEMENT AMENDMENT. The Company, the Purchasers
and the requisite stockholders of the Company shall have executed and delivered
the Stockholder Rights Agreement.
5.6 COMPLIANCE CERTIFICATE. The President of the Company shall have
executed a Compliance Certificate, in the form of EXHIBIT D hereto, certifying
the satisfaction of the conditions to closing listed in Sections 5.1 and 5.2
hereof.
- 11 -
5.7 OPINION OF COMPANY COUNSEL. Each Purchaser shall have received from
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, counsel for the Company, an opinion, dated as
of the Closing, in the form attached hereto as EXHIBIT E.
SECTION 6
CONDITIONS TO COMPANY'S OBLIGATIONS TO CLOSE
The Company's obligation to sell and issue the Shares at each Closing
is, unless waived by the Company, subject to the fulfillment of the following
conditions:
6.1 REPRESENTATIONS. The representations and warranties made by each
Purchaser in Section 4 hereof shall be true and correct as of the Closing Date.
6.2 COVENANTS. All covenants, agreements and conditions contained in
the Agreements to be performed by the Purchasers on or prior to the Closing Date
shall have been performed or complied with in all material respects.
6.3 BLUE SKY. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Shares, and the
Common Stock issuable upon conversion of the Shares.
6.4 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation
shall have been duly authorized, executed and filed with the Secretary of State
of the State of Delaware.
6.5 STOCKHOLDER RIGHTS AGREEMENT. The Company, the Purchasers and the
requisite stockholders of the Company shall have executed and delivered the
Stockholder Rights Agreement.
SECTION 7
MISCELLANEOUS
7.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the internal laws of the State of Delaware without reference to conflicts of
laws principles.
7.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by the Purchasers and the
closing of the transactions contemplated hereby.
7.3 EXPENSES. If the Initial Closing is effected, the Company shall
reimburse the reasonable fees of Xxxxxx & Xxxxxxx, special counsel for the
Purchasers, not to exceed $20,000, and shall, upon receipt of a xxxx therefor,
reimburse the reasonable out of pocket expenses for such counsel. If any action
at law or in equity is necessary to enforce or interpret the terms of the
Agreements, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
- 12 -
7.4 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;
PROVIDED, HOWEVER, that the rights of each Purchaser to purchase the Shares
shall not be assignable without the consent of the Company except to any entity
controlled by such Purchaser.
7.5 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other documents
delivered pursuant hereto at each Closing constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
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;
PROVIDED, HOWEVER, that Purchasers holding a majority of the Common Stock issued
or issuable upon conversion of the outstanding Shares may, with the Company's
prior written consent, waive, modify, or amend on behalf of all Purchasers, any
provision hereof.
7.6 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, or otherwise delivered by hand or by messenger,
addressed (a) if to a Purchaser, at such Purchaser's address, as shown on the
Schedule of Purchasers, or at such other address as such Purchaser 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, one copy should be sent to its address set
forth on the cover page of this Agreement and addressed to the attention of the
President, or at such other address as the Company shall have furnished to the
Purchasers.
Each such notice or other communication shall for all purposes
of this Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or 72
hours after the same has been deposited in a regularly maintained receptacle for
the deposit of the United States mail, addressed and mailed as aforesaid.
7.7 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay
or omission to exercise any right, power or remedy accruing to any party to this
Agreement upon any breach or default of any other party under this Agreement,
shall impair any such right, power or remedy of such non-defaulting party nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any party of any provisions or conditions of this agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any party to this Agreement, shall be cumulative and not
alternative.
- 13 -
7.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
7.9 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.
7.10 SEVERABILITY. 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 shall continue in full force and effect
without said provision; PROVIDED THAT no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
7.11 EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges that it
is not relying upon any person, firm, or corporation, other than the Company and
its officers and directors, in making its investment or decision to invest in
the Company. Each Purchaser agrees that no Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
Purchaser shall be liable to any other Purchaser for any action heretofore or
hereafter taken or omitted to be taken by any of them in connection with the
Shares and Common Stock issuable upon conversion of the Shares.
7.12 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
(THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK.)
- 14 -
The foregoing Agreement is hereby executed as of the date first above
written.
"COMPANY"
XXXXXXXXXXX.XXX, INC.
a Delaware corporation
By:
-----------------------------------------------
Xxxx X. Warms
President
"PURCHASERS"
Diamond Technology Partners Incorporated
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
DTP Investments, LLC
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
BREAKAWAY CAPITAL I LLC
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
BREAKAWAY CAPITAL FRIENDS I LLC
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
INTERWEST PARTNERS VII, LP
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
INTERWEST INVESTORS VII, LP
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
TL VENTURES IV LP
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
TL VENTURES IV INTERFUND LP
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
CEA CAPITAL PARTNERS USA, LP
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
CEA CAPITAL PARTNERS USA CI, LP
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
(SIGNATURE PAGE TO SERIES C PREFERRED STOCK PURCHASE AGREEMENT)
EXHIBIT A
SCHEDULE OF PURCHASERS, INITIAL CLOSING
NO. OF SERIES C
INVESTOR PREFERRED SHARES PURCHASE PRICE
---------------------------------------------- -------------------------- ----------------
Diamond Technology Partners Incorporated 740,741 $5.40
DTP Investments, LLC 740,741 $5.40
Breakaway Capital I LLC 131,617 $5.40
Breakaway Capital Friends I LLC 53,568 $5.40
InterWest Partners VII, LP 670,691 $5.40
InterWest Investors VII, LP 32,118 $5.40
TL Ventures IV LP 479,300 $5.40
TL Ventures IV Interfund LP 12,666 $5.40
CEA Capital Partners USA, LP 376,010 $5.40
CEA Capital Partners USA CI, LP 115,956 $5.40
A-1
EXHIBIT B
FORM OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
B-1
EXHIBIT C
FORM OF AMENDED AND RESTATED STOCKHOLDER RIGHTS AGREEMENT
C-1
EXHIBIT D
FORM OF COMPLIANCE CERTIFICATE
Pursuant to Section 5.6 of that certain Series C Preferred Stock
Purchase Agreement dated March 28, 2000 among Xxxxxxxxxxx.xxx, Inc., a
Delaware corporation (the "COMPANY"), and the Purchaser listed therein (the
"AGREEMENT"), the undersigned, Xxxx X. Warms, does hereby certify on behalf
of the Company as follows:
1. He is the duly elected President of the Company;
2. The Company has fulfilled all of the conditions specified in
Sections 5.1 and 5.2 of the Agreement; and
3. Except as set forth in the Schedule of Exceptions to
Representations and Warranties attached to the Agreement as Exhibit B, the
representations and warranties of the Company set forth in Section 3 of the
Agreement are true and correct as of the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this certificate
this 28th day of March, 2000.
----------------------------------------
Xxxx X. Warms
President
D-1
EXHIBIT E
FORM OF OPINION OF COMPANY COUNSEL
E-1
EXHBIT F
SCHEDULE OF APPROVED INVESTORS
Diamond Technology Partners Incorporated 740,741 4,000,001.40
DTP Investments, LLC 740,741 4,000,001.40
c/o Diamond Technology Partners Incorporated
Suite 3000
000 Xxxxx Xxxxxxxx Xxx
Xxxxxxx, XX 00000
Breakaway Capital I LLC 131,617 710,731.80
Breakaway Capital Friends I LLC 53,568 289,267.20
c/o Breakaway Solutions
00 Xxxxx Xxxxx
Xxxxxx, XX 00000
Tel. (000) 000-0000
InterWest Partners VII, LP 670,691 3,621,731.40
InterWest Investors VII, LP 32,118 173,437.20
c/o InterWest Partners
0000 Xxxx Xxxx Xxxx #0-000
Xxxxx Xxxx, XX 00000
TL Ventures IV LP 479,300 2,588,220.00
TL Ventures IV Interfund LP 12,666 68,396.40
c/o TL Ventures IV LLC
700 Building
000 Xxxxx Xxxx Xxxxx
Xxxxx, XX 00000
CEA Capital Partners USA, LP 376,010 2,030,454.00
CEA Capital Partners USA CI, LP 115,956 626,162.40
c/o CEA Management Corp
00 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Employees of Xxxxxxxxxxx.xxx, Inc. 185,186 1,000,004.40
Other Investors* 258,733 1,397,158.20
Other New Investors** 46,296 249,998.40
------ ----------
Totals 3,843,623 20,755,564.20
--------- -------------
_______________________________________________________________
*limited to current holders of Series A Preferred Stock.
**limited to selected investment bankers.
F-1
