INFONOW CORPORATION
STOCK PURCHASE AGREEMENT
SERIES B CONVERTIBLE PARTICIPATING PREFERRED STOCK
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Dated as of December 31, 1999
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STOCK PURCHASE AGREEMENT
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STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of December 31, 1999,
by and among InfoNow Corporation, a Delaware corporation (the "Company"), and
the purchasers listed on Schedule 2.2 hereto (collectively, the "Purchasers").
WHEREAS, at the First Closing, the Company wishes to sell to certain
investors (the "Initial Purchasers"), and the Initial Purchasers wish to
purchase from the Company, shares of the Company's Series B Convertible
Participating Preferred Stock, par value $0.001 per share (the "Series B
Preferred Stock"), upon the terms and subject to the conditions set forth in
this Agreement (the "First Shares");
WHEREAS, at the Second Closing, the Company wishes to sell to certain
investors (each a "Second Closing Purchaser" and collectively the "Second
Closing Purchasers"), and the Second Closing Purchasers wish to purchase from
the Company, shares of Series B Preferred Stock, upon the terms and subject to
the conditions set forth in this Agreement (the "Second Shares," and together
with the First Shares, the "Shares"); and
WHEREAS, the Company wishes to grant holders of certain warrants
registration rights set forth in Section 9 hereof.
NOW, THEREFORE, in consideration of the mutual terms and conditions herein
contained, and for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
SECTION 1.
DEFINITIONS
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1.1 Definitions. As used in this Agreement, the following definitions shall
apply:
"1998 Form 10-KSB" has the meaning set forth in Section 3.1(a).
"Action" means any action, complaint, petition, investigation, suit or
other proceeding, whether civil or criminal, in law or in equity, or before any
arbitrator or Governmental Entity.
"Affiliate" shall mean any Person who is an "affiliate" (as defined in Rule
12b-2 of the General Rules and Regulations under the Exchange Act) of, and any
Person controlling, controlled by, or under common control with, any Person. For
the purposes of this Agreement, "control" includes the ability to have
investment discretion through contractual means or by operation of law.
"Agreement" means this Agreement as the same may be amended, supplemented
or modified in accordance with the terms hereof.
"Annual Reports" means the Company's Annual Reports on Form 10-KSB for the
years ended December 31, 1998, 1997 and 1996, each as filed with the SEC
(including, in each case, all amendments thereto filed with the SEC prior to the
date of this Agreement, all exhibits and schedules thereto and documents
incorporated by reference therein, but excluding any amendments thereto made
subsequent to the date hereof).
"Audited Financials" has the meaning set forth in Section 3.7 of this
Agreement.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in the State of New York are authorized or required by
law or executive order to close.
"By-Laws" means the amended and restated by-laws of the Company, as the
same may have been amended and as in effect on the First Closing Date.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock.
"Certificate of Designation" means the amendment to the Certificate of
Incorporation setting forth the designation, number and relative rights,
privileges and restrictions of the Series B Preferred Stock adopted by the Board
of Directors and filed with the Secretary of State of the State of Delaware
before the First Closing Date substantially in the form attached hereto as
Exhibit A.
"Certificate of Incorporation" means the Certificate of Incorporation of
the Company, as the same has been amended and as in effect on the First Closing
Date.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute thereto.
"Commission" means the Securities and Exchange Commission or any similar
agency then having jurisdiction to enforce the Securities Act.
"Common Stock" means the Common Stock, par value $0.001 per share, of the
Company and any other capital stock of the Company into which such stock is
reclassified or reconstituted.
"Condition of the Company" means the assets, business, properties,
operations or financial condition of the Company and the Subsidiaries, taken as
a whole. "Contract" means any agreement, arrangement, bond, commitment,
franchise, indemnity, indenture, instrument, lease, license or understanding,
whether or not in writing.
"Contract" means any agreement, arrangement, bond, commitment, franchise,
indemnity, indenture, instrument, lease, license or understanding, whether or
not in writing.
"Contractual Obligations" means as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument to which such Person is a
party or by which it or any of its property is bound.
"Encumbrance" means any claim, charge, easement, encumbrance, lease,
covenant, security interest, lien, option, pledge, rights of others, restriction
(whether on voting, sale, transfer, disposition or otherwise), whether imposed
by agreement, understanding, law, equity or otherwise, except for any
restrictions on transfer generally arising under any applicable United States
federal or state securities law.
"Environmental Laws" means federal, state and local laws, principles of
common law, regulations and codes, as well as orders, decrees, judgments or
injunctions issued, promulgated, approved or entered thereunder relating to
pollution, protection of the environment or public health and safety.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended (or any successor statute thereto).
"Exchange Act" means the Securities Exchange Act of 1934, as amended (or
any successor statute thereto), and the rules and regulations of the Commission
promulgated thereunder.
"Financials" has the meaning set forth in Section 3.7 of this Agreement.
"First Closing" has the meaning set forth in Section 2.1 of this Agreement.
"First Closing Date" has the meaning set forth in Section 2.1 of this
Agreement.
"First Purchase Price" has the meaning set forth in Section 2.2 of this
Agreement.
"First Shares" has the meaning assigned to such term in the Recitals to
this Agreement.
"GAAP" means generally accepted United States accounting principles in
effect from time to time.
"Governmental Authority" means the government of any federal, state, city,
locality or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"Governmental Entity" means any government or any agency, bureau, board,
commission, court, department, official, political subdivision, tribunal or
other instrumentality of any government of or within the United States, whether
federal, state or local.
"Initial Purchasers" has the meaning assigned to such term in the Recitals
to this Agreement.
"Knowledge of the Company" means the actual knowledge of the executive
officers of the Company without investigation.
"Law" means any constitutional provision, statute or other law, rule,
regulation, or interpretation of any Governmental Entity and any Order.
"Licenses" means any certificates, permits, licenses, franchises, consents,
approvals, orders, authorizations and clearances from appropriate Governmental
Authorities.
"Loss" means any action, cost, damage, disbursement, expense, liability,
loss, deficiency, diminution in value, obligation, penalty or settlement of any
kind or nature, whether foreseeable or unforeseeable, including but not limited
to, interest or other carrying costs, penalties, legal, accounting and other
professional fees and expenses incurred in the investigation, collection,
prosecution and defense of claims and amounts paid in settlement, that may be
imposed on or otherwise incurred or suffered by the specified Person.
"Material Adverse Effect" means a circumstance, fact, change, development
or effect (i) that could or could reasonably be expected to have a materially
adverse effect on the properties, results of operations, business, prospects or
condition (financial or otherwise) of the Company taken as a whole or (ii) that
materially adversely affects the ability of the Company to consummate the
transaction contemplated by this Agreement in any material respect or impairs or
delays the ability of the Company to effect the First Closing or the Second
Closing.
"Nasdaq" means The Nasdaq Stock Market, Inc.
"Order" means any decree, injunction, judgment, order, ruling, assessment
or writ of any Governmental Entity.
"Person" means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, Governmental Authority or other entity of any
kind, and shall include any successor (by merger or otherwise) of such entity.
"Purchasers" has the meaning ascribed to such term in the Recitals to this
Agreement.
"Quarterly Reports" means the Company's Quarterly Reports on Form 10-QSB
for the quarters ended March 31, 1999, June 30, 1999 and September 30, 1999,
each as filed with the SEC.
"Requirements of Law" means as to any Person, any law, treaty, rule,
regulation, right, privilege, qualification, license or franchise or
determination of an arbitrator or a court or other Governmental Authority or a
stock exchange, in each case applicable or binding upon such Person or any of
its property or to which such Person or any of its property is subject or
pertaining to any or all of the transactions contemplated or referred to herein.
"SEC" means the Securities and Exchange Commission.
"SEC Documents" means the Annual Reports, the Quarterly Reports and all
other documents required to be filed by the Company with the SEC on or after
January 1, 1998 and prior to the date hereof pursuant to Section 13 or 15(d) of
the Exchange Act (including all exhibits and schedules thereto and documents
incorporated by reference therein), but shall not include any portion of any
document which is not deemed to be filed under applicable SEC rules and
regulations.
"Second Closing" has the meaning set forth in Section 2.3 of this
Agreement.
"Second Closing Date" has the meaning set forth in Section 2.3 of this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended (or any
successor statute thereto), and the rules and regulations of the Commission
promulgated thereunder.
"Subsidiary" means, as of the relevant date of determination, with respect
to any Person, a corporation or other entity of which 50% or more of the voting
power of the outstanding voting equity securities or 50% or more of the
outstanding economic equity interest is held, directly or indirectly, by such
Person. Unless otherwise qualified, or the context otherwise requires, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Company.
"Unaudited Financials" has the meaning set forth in Section 3.7 of this
Agreement.
SECTION 2.
PURCHASE AND SALE OF THE SHARES
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2.1 First Closing. Subject to the terms and conditions of this Agreement,
the closing of the sale and purchase of the First Shares (the "First Closing")
shall take place at the offices of Xxxxxxxx, Xxxxx & Xxxxxxx, P.C., 0000
Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 on the date hereof or on such other
date and time as the Initial Purchasers and the Company may mutually agree (the
"First Closing Date").
2.2 Transactions at the First Closing. At the First Closing, subject to the
terms and conditions of this Agreement the Initial Purchasers severally (and not
jointly) shall purchase and acquire from the Company, and the Company shall
issue and sell to the Initial Purchasers an aggregate of 250,000 shares of
shares of Series B Preferred Stock for an aggregate purchase price of $5,000,000
(the "First Purchase Price"). At the First Closing, the Company shall deliver to
the Initial Purchasers duly executed certificates representing 250,000 shares of
Series B Preferred Stock, registered in the name of the Initial Purchasers or
their nominees, against payment by the Initial Purchasers of the First Purchase
Price payable in respect thereof by wire transfer of immediately available funds
to an account designated in a notice delivered by the Company.
2.3 Second Closing. Subject to the terms and conditions of this Agreement,
the closing of the sale and purchase of the Second Shares (the "Second Closing")
shall take place at the offices of Xxxxxxxx, Xxxxx & Xxxxxxx, P.C., 0000
Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 on January 25, 2000, or on such other
date and at such other time as the Second Closing Purchasers and the Company may
mutually agree (the "Second Closing Date").
2.4 Transactions at the Second Closing. On the Second Closing Date the
Second Closing Purchasers severally (and not jointly) shall purchase and acquire
from the Company, and the Company shall issue and sell to each such Second
Closing Purchaser, such number of shares of Series B Preferred Stock as are set
forth opposite such Second Closing Purchaser's name on the Schedule 2.2 hereto
for an aggregate purchase price of $11,000,000 (the "Second Purchase Pric ). At
the Second Closing, the Company shall deliver to each Second Closing Purchaser
duly executed certificates representing the number of shares of Series B
Preferred Stock set forth opposite such Second Closing Purchaser's name, each
registered in the name of such Second Closing Purchaser or its nominees, against
payment by each such Second Closing Purchaser of the portion of the Second
Purchase Price payable in respect thereof as set forth opposite such Second
Closing Purchaser's name on Schedule 2.2 hereto by wire transfer of immediately
available funds to an account designated in a notice delivered by the Company
not later than one Business Day prior to the Second Closing Date.
SECTION 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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The Company hereby represents and warrants to the Purchasers, as the case
may be (the "Applicable Purchaser"), as follows:
3.1 Corporate Existence and Power.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. The Company has the
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Company's annual report on Form 10-KSB
for the year ended December 31, 1998 (the "1998 Form 10-KSB"). The Company is
duly qualified to transact business as a foreign corporation and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership, leasing or operation of property requires such qualification, other
than any failure to be so qualified or in good standing as would not singly or
in the aggregate with all such other failures reasonably be expected to have a
Material Adverse Effect.
(b) True, correct and complete copies of the Certificate of Incorporation
(other than the Certificate of Designation to be filed pursuant to the terms
hereof) and the By-Laws as in effect on the date hereof have been provided by
the Company to the Purchasers.
3.2 Power and Authority. The Company has all requisite corporate power and
authority to execute and deliver this Agreement and to perform its obligations
under this Agreement. The execution, delivery and performance by the Company of
this Agreement and the consummation by the Company of the transactions
contemplated hereby have been duly authorized and approved by the Board of
Directors and no further corporate action on the part of the Company (other than
the filing of the Certificate of Designation) is necessary to authorize the
execution, delivery and performance by the Company of this Agreement or the
consummation by the Company of the transactions contemplated hereby. The Board
of Directors has duly adopted the Certificate of Designation and filed it with
the Delaware Secretary of State. This Agreement has been duly executed and
delivered by the Company and is a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability (regardless of whether considered in a
proceeding at law or in equity).
3.3 No Contravention, Conflict, Breach, Etc. The execution, delivery and
performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby will not conflict with, contravene or result in
a breach or violation of any of the terms and provisions of, or constitute a
default under, or result in the creation or imposition of any Encumbrance upon
any assets or properties of the Company or any of its Subsidiaries or cause the
Company or any of its Subsidiaries to be required to redeem, repurchase or offer
to repurchase any of their respective indebtedness under (i) the certificate of
incorporation, the by-laws or other organizational document of the Company or
any of its Subsidiaries, (ii) any Law of any Governmental Authority having
jurisdiction over the Company or any of its Subsidiaries or any of their
respective assets, properties or operations or (iii) any indenture, mortgage,
loan agreement, note or other material agreement or instrument for borrowed
money, any guarantee of any agreement or instrument for borrowed money or any
lease, permit, license or other agreement or instrument to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound or to which any of the assets, properties or operations of
the Company or any of its Subsidiaries is subject.
3.4 Consents. Except as set forth on Schedule 3.4, no consent, approval,
authorization, order, registration, filing or qualification of or with any (i)
Governmental Authority, (ii) stock exchange on which the securities of the
Company are traded or (iii) other Person (whether acting in an individual,
fiduciary or other capacity) is required to be made or obtained by the Company
or any of its Subsidiaries for the execution, delivery and performance by the
Company of this Agreement and the consummation of the transactions contemplated
hereby.
3.5 Subsidiaries. Schedule 3.5 sets forth a complete and accurate list of
all of the Subsidiaries of the Company together with their respective
jurisdictions of incorporation or organization. Except for its Subsidiaries, the
Company holds no equity, partnership, joint venture or other interest in any
Person. True and complete copies of the certificate of incorporation, by-laws
and other organizational documents of the Subsidiaries as in effect on the date
hereof have been provided by the Company to the Purchasers. Each Subsidiary of
the Company has been duly incorporated or organized and is validly existing as a
corporation or other legal entity in good standing under the laws of the
jurisdiction of its incorporation or organization, has the corporate or other
organizational power and authority to own, lease and operate its properties and
to conduct its business as currently conducted and is duly qualified to transact
business as a foreign corporation or other legal entity and is in good standing
in each jurisdiction in which the conduct of its business or its ownership,
leasing or operation of property requires such qualification, other than any
failure to be so qualified or in good standing as would not singly or in the
aggregate with all such other failures reasonably be expected to have a Material
Adverse Effect. All of the outstanding capital stock of each Subsidiary of the
Company has been duly authorized and validly issued, is fully paid and
nonassessable and is owned by the Company, directly or through other
Subsidiaries of the Company, free and clear of any Encumbrance, and there are no
rights granted to or in favor of any third party (whether acting in an
individual, fiduciary or other capacity), other than the Company or any
Subsidiary of the Company, to acquire any such capital stock, any additional
capital stock or any other securities of any such Subsidiary. There exists no
restriction, other than those pursuant to applicable law or regulation, on the
payment of cash dividends by any Subsidiary.
3.6 SEC Documents.
(a) The Company has made available to the Purchasers true and complete
copies of all SEC Documents.
(b) As of its filing date, each SEC Document filed pursuant to the Exchange
Act (i) complied in all material respects with the applicable requirements of
the Exchange Act and (ii) did not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
(c) All SEC Documents have been filed on a timely basis, and each SEC
Document has included all exhibits, schedules and contracts required to be filed
pursuant to the provisions of the Exchange Act.
3.7 Financial Statements . The audited financial statements and notes
included in the SEC Documents (the "Audited Financials") comply in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the SEC thereunder, were prepared in accordance with GAAP consistently
applied throughout the period involved except as noted therein, and fairly
present in all material respects the financial condition, results of operations,
cash flows and changes in shareholders' equity of the Company and its
Subsidiaries at the dates and for the periods presented. Since September 30,
1999, except as disclosed in the SEC Documents or as disclosed in Schedule 3.7,
the Company has not incurred any material liabilities and there has been no
change, and no development or event involving a prospective change, which has
had or could reasonably be expected to have, a Material Adverse Effect. The
unaudited quarterly consolidated financial statements and the related notes
included in the SEC Documents (the "Unaudited Financials" and together with the
Audited Financials, the "Financials"), fairly present in all material respects
the financial condition, results of operations and cash flows of the Company and
its Subsidiaries at the dates and for the periods to which they relate, subject
to normal year-end adjustments, and have been prepared in accordance with GAAP
applied on a consistent basis except as otherwise stated therein and have been
prepared on a basis consistent with that of the audited financial statements
referred to above subject to normal year-end adjustments except as otherwise
stated therein.
3.8 No Existing Violation, Default, Etc. The Company is not in violation
(i) of any provision of its Certificate of Incorporation, By-Laws or other
organizational documents or (ii) of any applicable Law or regulation, which
violation has or would reasonably be expected to have a Material Adverse Effect.
No breach, event of default or event that, but for the giving of notice or the
lapse of time or both, would constitute an event of default exists under any
Contract to which the Company is a party or by which the Company is bound or to
which any of the properties, assets or operations of the Company is subject,
which breach, event of default, or event that, but for the giving of notice or
the lapse of time or both, would constitute an event of default, has or would
reasonably be expected to have a Material Adverse Effect.
3.9 Licenses and Permits . Except as set forth in Schedule 3.9, the Company
and its Subsidiaries have such Licenses as are necessary to own, lease or
operate their properties and to conduct their businesses in the manner described
in the SEC Documents and as currently owned or leased and conducted and all such
Licenses are valid and in full force and effect except such Licenses that the
failure to have or to be in full force and effect individually or in the
aggregate have not had, and would not reasonably be expected to have, a Material
Adverse Effect. None of the Company or any of its Subsidiaries has received any
written notice that any violations are being or have been alleged in respect of
any such License and no proceeding is pending or, to the Knowledge of the
Company, threatened, to suspend, revoke or limit any such License the effect of
which would reasonably be expected to have a Material Adverse Effect. The
Company and its Subsidiaries are in compliance with their respective obligations
under such Licenses, with such exceptions as individually or in the aggregate
have not had, and would not reasonably be expected to have, a Material Adverse
Effect, and no event has occurred that allows, or after notice or lapse of time
would allow, revocation, suspension, limitation or termination of such Licenses,
except such events as have not had, or would not reasonably be expected to have,
a Material Adverse Effect.
3.10 Title to Properties . The Company and its Subsidiaries have sufficient
title to all properties (real and personal) owned by the Company and any such
Subsidiary that are necessary for the conduct of the business of the Company and
any such Subsidiary as described in the SEC Documents filed with the SEC prior
to the date of this Agreement and as currently conducted, free and clear of any
Encumbrance that may interfere with the conduct of its business, and all
properties held under lease by the Company and the Subsidiaries are held under
valid, subsisting and enforceable leases, with such exceptions as individually
or in the aggregate have not had, and would not reasonably be expected to have,
a Material Adverse Effect.
3.11 Intellectual Property. There are no material intellectual property
rights or other intangible property rights (other than standard license
agreements and other related rights acquired by the Company or under which the
Company is the licensee in connection with the Company's use of administrative,
ministerial, accounting and financial office automation software and related
products) including, without limitation, (i) trademarks, service marks,
fictitious or assumed names, trade dress, trade names, brand names, Internet
domain names, designs, logos, or corporate names, whether registered or
unregistered, and all registrations and applications for registration thereof;
(ii) copyrights, including all renewals and extensions thereof, copyright
registrations and applications for registration thereof, and non-registered
copyrights; (iii) trade secrets, concepts, ideas, designs, research, processes,
procedures, techniques, methods, know-how, data, mask works, discoveries,
inventions, modifications, extensions, improvements, formulae and other
proprietary rights (whether or not patentable or subject to copyright, mask
work, or trade secret protection); and (iv) computer software programs,
including, without limitation, all source code, object code, and documentation
related thereto, patents, patent applications, and other patent rights
(including any divisions, continuations, continuations-in-part, substitutions,
or reissues thereof, whether or not patents are issued on any such applications
and whether or not any such applications are modified or resubmitted) owned or
licensed by the Company or any of its Subsidiaries ("Intellectual Property")
other than as disclosed in Schedule 3.11. Except as disclosed in Schedule 3.11:
(i) the Company owns or possesses sufficient legal rights to all Intellectual
Property necessary for its business as presently conducted without any known
conflict or infringement of rights of others; (ii) other than those contracts,
agreements, and instruments required to be filed as an exhibit to the 1998 Form
10-KSB, there are no material outstanding options, licenses, or agreements of
any kind relating to the Intellectual Property nor is the Company bound by or a
party to any material options, licenses, or agreements of any kind with respect
to the intellectual property of any other person or entity; (iii) to the
Knowledge of the Company, the Company has not infringed upon or otherwise
violated the intellectual property rights of any third party; (iv) other than as
set forth on Schedule 3.11, the Company has not received any claim, charge,
demand, notice or other communication alleging that the Company has violated or,
by conducting its business as proposed, would violate any intellectual property
rights of any other person or entity; (v) other than as set forth on Schedule
3.11, the Company is unaware of any facts that would form a reasonable basis for
an action or claim by others alleging infringement by the Company of
Intellectual Property of others; and (vi) all of the Company's Intellectual
Property is owned by the Company, free and clear of all Encumbrances and held in
the Company's name. None of the execution or delivery of this Agreement or the
Certificate of Designation, or the carrying on of the Company's business by the
employees of the Company, 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 related to the Company's Intellectual Property or Related
Intellectual Property. The Company has taken all action reasonably necessary and
desirable to maintain and protect each item of Intellectual Property owned by
the Company. Except as set forth on Schedule 3.11, each employee, officer and
director of the Company has executed an agreement regarding inventions and
confidentiality substantially in the form or forms delivered to the Purchasers.
The Company is unaware of uncited prior art that is more pertinent than the art
already of record in the U.S. Patent and Trademark Office in connection with the
patents and patent applications of the Company's Intellectual Property.
3.12 Environmental Matters. The Company and its Subsidiaries and their
operations and properties are and have been in compliance in all respects with
all applicable Environmental Laws, and no expenditures are or, to the Company's
Knowledge, will be required in order to comply with any applicable Environmental
Laws. There is no civil, criminal or administrative judgment, action, suit,
demand, claim, hearing, notice of violation, investigation, proceeding, notice
or demand letter pending or to the Company's Knowledge, threatened against the
Company or any of its Subsidiaries pursuant to Environmental Laws which could
reasonably be expected to result in a material fine, penalty or other
obligation, cost or expense. There are no past or present events, conditions,
circumstances, activities, practices, incidents, agreements, actions or plans
which may prevent compliance by the Company or any of its Subsidiaries with, or
which have given rise to, or, to the Company's Knowledge, will give rise to,
material liability to the Company or any of its Subsidiaries under Environmental
Laws.
3.13 Capitalization. After giving effect to the transactions contemplated
hereby, the authorized capital stock of the Company will consist of 15,000,000
shares of Common Stock, $0.001 par value, and 1,962,335 shares of Preferred
Stock, $0.001 par value, of which 213,483 have been designated Series A
Convertible Preferred Stock and 816,000 shares have been designated Series B
Convertible Participating Preferred Stock. As of the First Closing Date, after
giving effect to the transactions contemplated hereby, the issued and
outstanding capital stock of the Company will consist of 7,189,203 shares of
Common Stock and 250,000 shares of Series B Preferred Stock. As of the Second
Closing Date, after giving effect to the transactions contemplated hereby, the
issued and outstanding capital stock of the Company will consist of 7,189,203
shares of Common Stock (increased by such number of shares as are issued upon
conversion or exercise of options, warrants and other convertible securities,
including Series B Preferred Stock, outstanding on the First Closing Date, and
upon exercise of options granted subsequent to the First Closing Date to
employees pursuant to an employee benefit plan approved by the Company's Board
of Directors and consistent with the Company's past practice regarding such
option issuances) and 800,000 shares of Series B Preferred Stock (reduced by
such number of shares as are converted into Common Stock). All such shares of
Capital Stock of the Company have been duly authorized and upon payment therefor
as contemplated by this Agreement, all such shares shall be fully paid and
non-assessable. Other than rights granted to the holders of Series B Preferred
Stock pursuant to this Agreement, no class of Capital Stock of the Company is
entitled to preemptive or similar rights. None of the shares of Capital Stock of
the Company issued prior to the date of this Agreement have been issued in
violation of federal or state securities laws. Except as set forth in Schedule
3.13 and pursuant to this Agreement, the Company has not agreed to register any
securities under the Securities Act or under any state securities law or granted
registration rights to any person or entity. The Series B Preferred Stock shall
have the rights and preferences set forth in the Certificate of Designation. The
First Shares to be issued at the First Closing are convertible into 950,570
shares of Common Stock and the Second Shares to be issued at the Second Closing
are convertible into 2,091,254 shares of Common Stock, subject to antidilution
provisions set forth in the Certificate of Designation. Except as set forth in
Schedule 3.13 and except as contemplated by this Agreement, there are no shares
of capital stock of the Company reserved for issuance. Except for the Shares and
as set forth in Schedule 3.13, there are no options, warrants or other rights to
purchase shares of Capital Stock or other securities of the Company or any of
its Subsidiaries, or securities convertible into or exchangeable for shares of
Capital Stock or other securities of the Company or any of its Subsidiaries,
nor, except as required by this Agreement or the Certificate of Designation or
as set forth in Schedule 3.13, is the Company or any Subsidiary obligated in any
manner to issue shares of its Capital Stock or other securities. Except as
contemplated hereby and for relevant state and federal securities laws, there
are no restrictions on the Purchaser's ability to transfer shares of Capital
Stock of the Company.
3.14 Employee Benefits.
(a) Except for the plans described in the SEC Documents filed with the SEC
prior to the date of this Agreement and those listed in Schedule 3.14 (the
"Benefit Plans"), there are no employee benefit plans or arrangements of any
type (including, without limitation, plans described in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended and the regulations
thereunder ("ERISA") under which the Company has or in the future could have
directly, or indirectly through a Commonly Controlled Entity (within the meaning
of Sections 414(b), (c), (m) and (o) of the Code), any material liability with
respect to any current or former employee of the Company or any Commonly
Controlled Entity. No such Benefit Plan is a "multiemployer plan" (within the
meaning of ERISA Section 4001(a)(3)) or subject to Title IV of ERISA and, the
Company has never contributed to, or had any obligation to contribute to, any
such multiemployer plan or any plan subject to Title IV of ERISA.
(b) With respect to each Benefit Plan: (i) such Benefit Plan has been
maintained and administered at all times in material compliance with its terms
and applicable law and regulation; (ii) no event has occurred and to the
Knowledge of the Company, there exists no circumstance under which the Company
could directly, or indirectly through a Commonly Controlled Entity, incur any
material liability under ERISA, the Code or otherwise; (iii) there are no
actions, suits or claims pending or, to the Knowledge of the Company,
threatened, with respect to any Benefit Plan or against the assets of any
Benefit Plan with respect to which suits management of the Company reasonably
believes the Company could incur any material liability; (iv) all contributions
and premiums due and owing to any Benefit Plan have been made or paid on a
timely basis and no "accumulated funding deficiency," as defined in Code Section
412, has been incurred, whether or not waived; and (v) if such Benefit Plan is
intended to be qualified under Section 401(a) of the Code, such Benefit Plan has
been determined to be so qualified and each trust created under such Benefit
Plan has been determined to be exempt from tax under Section 501(a) of the Code
and to the Knowledge of the Company, no event has occurred since the date of
such determinations, including effective changes in laws or regulations or
modifications to the Benefit Plans, that would adversely affect such
qualification or tax exempt status.
(c) The Company has no Postretirement Benefit Obligation (as defined in
Statement of Financial Accounting Standards No. 106) in respect of
post-retirement health and medical benefits for current and former employees of
the Company. No condition exists that would prevent the Company from amending or
terminating any plan providing health or medical benefits in respect of current
or former employees of the Company.
(d) No employee or former employee of the Company will become entitled to
any bonus, retirement, severance, job security or similar benefit or enhanced
such benefit (including acceleration of vesting or exercise of an incentive
award, stock option or restricted security) as a result of the transactions
contemplated hereby.
(e) All persons classified by the Company as independent contractors
satisfy the requirements of applicable law to be so classified and the Company
has no obligation to provide benefits to any such person under any Benefit Plan.
3.15 Taxes.
(a) The Company and its Subsidiaries have filed or caused to be filed, or
have properly filed extensions for, all material Tax returns that are required
to be filed and have paid or caused to be paid all Taxes as shown on said
returns and on all assessments received by it to the extent that such Taxes have
become due, except Taxes the validity or amount of which is being contested in
good faith by appropriate proceedings and with respect to which adequate
reserves, in accordance with GAAP, have been set aside. The Company and its
Subsidiaries have paid or caused to be paid, or have established reserves for
all Tax liabilities applicable to the Company and its Subsidiaries for all
fiscal years that have not been examined and reported on by the taxing
authorities (or closed by applicable statutes). Schedule 3.15 sets forth the tax
year through which United States Federal income tax returns of the Company and
its Subsidiaries have been examined and closed. For purposes of this Section
3.15, "Tax" or "Taxes" means any federal, state, county, local, foreign and
other taxes (including, without limitation, income, profits, premium, estimated,
excise, sales, use, occupancy, gross receipts, franchise, ad valorem, severance,
capital levy, production, transfer, withholding, employment, unemployment
compensation, payroll and property taxes, import duties and other governmental
charges and assessments), whether or not measured in whole or in part by net
income, and including deficiencies, interest, additions to tax or interest, and
penalties with respect thereto, and including expenses associated with
contesting any proposed adjustments related to any of the foregoing.
(b) Except as set forth on Schedule 3.15, with respect to all Tax Returns
of the Company and any of its Subsidiaries, (i) no audit is in progress and no
extension of time is in force with respect to any date on which any Tax Return
was or is to be filed and no waiver or agreement is in force for the extension
of time for the assessment or payment of any Tax; and (ii) there is no
unassessed deficiency proposed or, to the Company's Knowledge, threatened
against the Company or any of its Subsidiaries.
(c) Except as set forth on Schedule 3.15, neither the Company nor any of
its Subsidiaries has agreed to or is required to make any adjustments under
section 481 of the Code by reason of a change of accounting method or otherwise.
(d) None of the respective assets of the Company or any of its Subsidiaries
is required to be treated as being owned by any Person, other than the Company
or any of its Subsidiaries, pursuant to the "safe harbor" leasing provisions of
Section 168(f)(8) of the Code.
(e) The Company is not a "United States real property holding corporation"
("USRPHC") as that term is defined in Section 897(c)(2) of the Code and the
regulations promulgated thereunder.
3.16 Litigation. Except as set forth in Schedule 3.16 or as previously
disclosed in SEC Documents filed with the SEC prior to the date of this
Agreement, there are no pending actions, suits, proceedings, arbitrations or
investigations, royalty or other audits, complaints, against or affecting the
Company or any of its Subsidiaries or any of their respective properties, assets
or operations, or with respect to which the Company or any such Subsidiary is
responsible by way of indemnity or otherwise (together "Litigation Claims"),
that are required under the Exchange Act to be described in such SEC Documents
or that could singly, or in the aggregate, with all such other Litigation
Claims, reasonably be expected to have a Material Adverse Effect and, to the
Knowledge of the Company, no such Litigation Claims are threatened.
3.17 Labor Relations. Neither the Company nor any of its Subsidiaries is
engaged in any unfair labor practice. Except as disclosed in the SEC Documents
filed with the SEC prior to the date of this Agreement or as set forth on
Schedule 3.17, (a) no grievance or arbitration proceeding arising out of or
under collective bargaining agreements is pending or, to the Knowledge of the
Company, threatened against the Company or any of its Subsidiaries; (b) no
strike, material labor dispute, slowdown or stoppage has occurred within the
past 36 months or is pending or, to the Knowledge of the Company, threatened
against the Company, any of its Subsidiaries or any material supplier of the
Company; (c) neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or contract; and (d) no union organizing
activities are taking place that affect the employees of the Company or any
Subsidiary.
3.18 Receivables. All accounts and notes receivable reflected on the
September 30, 1999 Unaudited Financials, and all accounts and notes receivable
arising subsequent to the September 30, 1999 Unaudited Financials, (i) have
arisen in the ordinary course of business of the Company or its Subsidiaries and
(ii) subject only to a reserve for bad debts and normal returns, credits,
adjustments and warranty coverage, in each case reflected in the September 30,
1999 Unaudited Financials in accordance with GAAP and consistent with past
practice, have been collected or, subject to the occurrence of unforeseen events
occurring after the date hereof, are collectible in the ordinary course of
business of the Company and its Subsidiaries in the aggregate recorded amounts
thereof in accordance with their terms.
3.19 Investment Company. Neither the Company nor any Person controlling the
Company is, and no such Person after giving effect to the transactions
contemplated hereby will be, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
3.20 Insurance. The Company has in full force and effect (i) general
liability and (ii) directors and officers insurance policies, in each case, with
financially sound and responsible insurance companies, with extended coverage,
sufficient in amount (subject to reasonable deductions) in respect of its
properties that might be damaged or destroyed.
3.21 Exemption from Registration; Restrictions on Offer and Sale of Same or
Similar Securities. The offer and sale of the Shares made pursuant to this
Agreement will be exempt from the registration requirements of the Securities
Act. Neither the Company nor any Person acting on its behalf has, in connection
with the off ering of the Shares engaged in (i) any form of general solicitation
or general advertising (as those terms are used within the meaning of Rule
502(c) under the Securities Act), (ii) any action involving a public offering
within the meaning of Section 4(2) of the Securities Act or (iii) any action
that would require the registration under the Securities Act of the offering and
sale of the Shares pursuant to this Agreement or that would violate applicable
state securities or "blue sky" laws. The Company has not made and will not prior
to the Second Closing make, directly or indirectly, any offer or sale of shares
of its Capital Stock, if as a result the offer and sale of the securities
contemplated hereby, or any of them, could fail to be entitled to exemption from
the registration requirements of the Securities Act. As used herein, the terms
"offer" and "sale" have the meanings specified in Section 2(3) of the Securities
Act.
3.22 Contracts. Schedule 3.22 lists all Contracts to which the Company is a
party and which involve payments to or from the Company in excess of $100,000
per year. Neither the Company nor any of its Subsidiaries nor, to the Knowledge
of the Company, any other party is in breach of or in default under any such
contract except for such breaches and defaults as in the aggregate have not had,
and would not reasonably be expected to, have a Material Adverse Effect.
3.23 No Material Adverse Change. Since October 1, 1999: (a) the Company and
its Subsidiaries have not incurred any material liability or obligation
(indirect, direct or contingent), or entered into any material oral or written
agreement or other transaction, that is not in the ordinary course of business
or that would reasonably be expected to result in a Material Adverse Effect; (b)
the Company and its Subsidiaries have not sustained any loss or interference
with its business or properties from fire, flood, windstorm, accident or other
calamity (whether or not covered by insurance) that has had or that would
reasonably be expected to have a Material Adverse Effect; (c) there has been no
material change in the indebtedness of the Company and its Subsidiaries; (d)
there has been no dividend or distribution of any kind declared, paid or made by
the Company or any of its Subsidiaries on any class of its capital stock; (e)
neither the Company nor any of its Subsidiaries has made (nor does it propose to
make) (i) any change in its accounting methods or practices or (ii) any change
in the depreciation or amortization policies or rates adopted by it, in either
case, except as may be required by law or applicable accounting standards; and
(f) there has been no event causing a Material Adverse Effect, nor any
development that would, singly or in the aggregate, reasonably be expected to
result in a Material Adverse Effect.
3.24 Trade Relations. Except as set forth in Schedule 3.24, there exists no
actual or, to the Company's Knowledge, threatened termination, cancellation or
limitation of, or any adverse modification or change in, the business
relationship of the Company or any of its Subsidiaries with, any customer or any
group of customers whose purchases are individually or in the aggregate material
to the business of the Company or any of its Subsidiaries, or with any material
supplier, and, to the Company's Knowledge, there exists no present condition or
state of fact or circumstances that would materially adversely affect the
Condition of the Company or, to the Company's Knowledge, prevent the Company
from conducting its business after the consummation of the transactions
contemplated by this Agreement, in substantially the same manner in which such
business has heretofore been conducted and described in the SEC Documents.
3.25 Broker's, Finder's or Similar Fees. Other than fees payable to Xxxxxxx
& Company, Inc. and Boulder Venture Partners, in each case as described in
Schedule 3.25, there are no brokerage commissions, finder's fees or similar fees
or commissions payable by the Company in connection with the transactions
contemplated hereby based on any agreement, arrangement or understanding with
the Company or any of its Subsidiaries or any action taken by any such entity.
3.26 Disclosure; Agreement and Other Documents . This Agreement and each of
the certificates furnished to the Purchasers by the Company in connection with
the purchase and sale of the Shares, taken as a whole, do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained herein or therein, in the light of the
circumstances under which they were made, not misleading.
SECTION 4.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
------------------------------------------------
Each Purchaser hereby represents and warrants to the Company as follows:
4.1 Existence and Power. Such Purchaser (a) is duly organized and validly
existing under the laws of the jurisdiction of its formation and (b) has the
requisite power and authority to execute, deliver and perform its obligations
under this Agreement.
4.2 Authorization; No Contravention. The execution, delivery and
performance by such Purchaser of this Agreement and the transactions
contemplated hereby, including, without limitation, the purchase of the Shares,
(a) have been duly authorized by all necessary action and (b) do not contravene
the terms of such Purchaser's organizational documents, or any amendment
thereof.
4.3 Binding Effect. This Agreement has been duly executed and delivered by
such Purchaser and constitutes the legal, valid and binding obligation of such
Purchaser, enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability (regardless of whether considered in a
proceeding at law or in equity).
4.4 Purchase for Own Account. The Shares to be acquired by such Purchaser
pursuant to this Agreement are being or will be acquired for its own account and
with no intention of distributing or reselling such Shares or any part thereof
in any transaction that would be in violation of the securities laws of the
United States of America, or any state, without prejudice, however, to the
rights of such Purchaser at all times to sell or otherwise dispose of all or any
part of such Shares under an effective registration statement under the
Securities Act, or under an exemption from such registration available under the
Securities Act, and subject, nevertheless, to the disposition of such
Purchaser's property being at all times within its control. If such Purchaser
should in the future decide to dispose of any of the Shares, such Purchaser
understands and agrees that it may do so only in compliance with the Securities
Act and applicable state securities laws, as then in effect. Such Purchaser
agrees to the imprinting, so long as required by law, of a legend on
certificates representing the Shares substantially to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE ACT."
4.5 Accreditation; Sophistication; Other Securities Laws Matters . Such
Purchaser (a) is an "accredited investor" within the meaning of Rule 501 under
the Securities Act; (b) has sufficient knowledge and experience in investing in
companies similar to the Company so as to be able to evaluate the risks and
merits of its investment in the Company and is able financially to bear the
risks thereof; (c) has had an opportunity to discuss the Company's business,
management and financial affairs with the Company's management; and (d) is a
resident of the jurisdiction listed below its name on the signature page hereto
for purposes of state "blue sky" securities law purposes.
4.6 Broker's, Finder's or Similar Fees. There are no brokerage commissions,
finder's fees or similar fees or commissions payable by such Purchaser in
connection with the transactions contemplated hereby based on any agreement,
arrangement or understanding with such Purchaser or any action taken by such
Purchaser.
SECTION 5.
CONDITIONS TO THE OBLIGATION OF THE PURCHASERS TO CLOSE
-------------------------------------------------------
The obligation of each Purchaser to pay the First Purchase Price or the
Second Purchase Price, as the case may be, and to perform any obligations
hereunder shall be subject to the satisfaction as determined by, or waiver by,
such Purchaser of the following conditions on or before the First Closing Date
or the Second Closing Date, as the case may be (the "Applicable Closing Date").
5.1 Representations and Warranties. The representations and warranties of
the Company contained in Section 3 hereof shall be true and correct in all
material respects (it being understood that, for purposes of determining the
accuracy of such representations and warranties, all "Material Adverse Effect"
and other materiality qualifications contained in such representations and
warranties shall be disregarded) at and on the Applicable Closing Date as if
made at and on such date, except to the extent that any representation and
warranty expressly speaks as of an earlier date, in which case such
representation and warranty is true and correct as of such date and except for
any activities or transactions which may have taken place after the date hereof
which are contemplated by this Agreement.
5.2 Compliance with this Agreement. The Company shall have performed and
complied in all material respects with all of its agreements and conditions set
forth herein that are required to be performed or complied with by the Company
on or before the Applicable Closing Date.
5.3 Secretary's Certificate. Such Purchaser shall have received a
certificate from the Company, in form and substance reasonably acceptable to
such Purchaser, dated the Applicable Closing Date and signed by a secretary or
an assistant secretary of the Company, certifying (a) that the attached copies
of the Certificate of Incorporation, the By-Laws and resolutions of the Board of
Directors of the Company approving this Agreement and the transactions
contemplated hereby, are all true, complete and correct and remain unamended and
in full force and effect, and (b) as to the incumbency and specimen signature of
each officer of the Company executing this Agreement and any other document
delivered in connection herewith on behalf of the Company.
5.4 Officers' Certificate. Such Purchaser shall have received a certificate
from the Company, in form and substance satisfactory to such Purchaser, dated
the Applicable Closing Date and signed by the Company's chief executive officer
and its treasurer, certifying that (a) the representations and warranties of the
Company contained in Section 3 hereof are true and correct in all material
respects on the Applicable Closing Date and (b) the Company has performed and
complied with in all material respects all of the agreements and conditions set
forth or contemplated herein that are required to be performed or complied with
by the Company on or before the Applicable Closing Date.
5.5 Documents. Such Purchaser shall have received true, complete and
correct copies of such documents as they may reasonably request in connection
with or relating to the issue and sale of the Shares and the transactions
contemplated hereby, all in form and substance reasonably satisfactory to such
Purchaser.
5.6 Filing of Certificate of Designation. The Certificate of Designation
shall have been duly filed by the Company with the Secretary of State of the
State of Delaware in accordance with the General Corporation Law of the State of
Delaware.
5.7 Opinion of Counsel. Such Purchaser shall have received an opinion of
Xxxxxxxx, Xxxxx & Xxxxxxx, P.C., counsel to the Company, dated the Applicable
Closing Date, relating to the transactions contemplated hereby or referred to
herein, substantially in the form attached hereto as Exhibit B.
5.8 Approval of Purchasers. All actions and proceedings hereunder and all
documents required to be delivered by the Company hereunder or in connection
with the consummation of the transactions contemplated hereby, shall have been
acceptable to the Purchasers, in their reasonable judgment as to their form and
substance.
5.9 Shares. At the Applicable Closing, the Company shall have delivered to
each of the Purchasers stock certificates in definitive form representing the
number of Shares set forth opposite such Purchaser's name on Schedule 2.2.
5.10 Consents and Approvals. All consents, exemptions, authorizations, or
other actions by, or notices to, or filings with Governmental Authorities and
other Persons in respect of all Requirements of Law and with respect to those
Contractual Obligations of the Company which are necessary or required in
connection with the execution, delivery or performance (including, without
limitation, the issuance of the Shares and shares of Common Stock issuable upon
conversion of the Shares) by, or enforcement against, the Company of this
Agreement shall have been obtained and be in full force and effect.
5.11 No Litigation. As of the Applicable Closing Date, no action, suit,
proceeding, claim or dispute shall have been brought or otherwise arisen on or
before the Applicable Closing Date, at law, in equity, in arbitration or before
any Governmental Authority against the Company or any of its Subsidiaries which
is reasonably likely to (a) have a Material Adverse Effect on the Condition of
the Company or (b) have an adverse effect on the ability of the Company to
perform its obligations under this Agreement.
5.12 No Judgment or Order. There shall not be on the Applicable Closing
Date any Order of a court of competent jurisdiction or any ruling of any
Governmental Authority or any condition imposed under any Requirement of Law
which would, in the reasonable judgment of the Purchasers, (a) prohibit or
restrict (i) the purchase of the Shares or (ii) the consummation of the
transactions contemplated by this Agreement, (b) subject the Purchasers to any
penalty or other onerous condition under or pursuant to any Requirement of Law
if the Shares were to be purchased hereunder or (c) restrict the operation of
the business of the Company or any of the Subsidiaries as conducted on the date
hereof. 5.13 No Material Adverse Change . From the date hereof until the
Applicable Closing Date, there shall have been no material adverse change in the
Condition of the Company.
5.14 Lock-up Agreements. The Purchasers shall have received, prior to the
First Closing Date, lock-up agreements in substantially the form attached hereto
as Exhibit C, executed by all executive officers of the Company and by all
members of the Board of Directors of the Company who will continue to serve in
such capacity following the Second Closing.
5.15 Election of Directors. (a) With respect to the closing obligations of
Quantum Industrial Partners LDC and SFM Domestic Investors LLC, the Company
shall have taken all steps necessary to elect a designee of such entities to its
Board of Directors and (b) with respect to the closing obligations of Xxxxxxxx,
Xxxxxx & Xxxxx II, L.P., the Company shall have taken all steps necessary to
elect a designee of such entity to its Board of Directors, in each case at or
prior to the Second Closing Date and in accordance with Section 10.1 hereof.
5.16 Completion of Diligence. Such Purchaser shall have completed its
financial, legal and business due diligence to its sole satisfaction.
5.17 Confidentiality Agreement. Prior to the Second Closing, each of
Xxxxxxx X. Xxxxxxx, W. Xxxx Xxxxxxxx and Xxxxx Xxxxxx shall have entered into a
confidentiality agreement with the Company similar to that executed by other
employees of the Company.
SECTION 6.
CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE
----------------------------------------------------
The obligations of the Company to issue and sell the Shares and to perform
its other obligations hereunder, shall be subject to the satisfaction as
determined by, or waiver by, the Company of the following conditions on or
before the Applicable Closing Date:
6.1 Representations and Warranties. The representations and warranties of
such Purchaser contained in Section 4 hereof shall be true and correct at and on
the Applicable Closing Date as if made at and on such date, except to the extent
that any representation and warranty expressly speaks as of an earlier date, in
which case such representation and warranty is true and correct as of such date
and except for any activities or transactions which may have taken place after
the date hereof which are contemplated by this Agreement.
6.2 Compliance with this Agreement. Such Purchaser shall have performed and
complied in all material respects with all of its agreements and conditions set
forth herein that are required to be performed or complied with by the
Purchasers on or before the Applicable Closing Date.
6.3 Payment of Purchase Price. At the First Closing and the Second Closing,
as the case may be, the Company shall have received the First Purchase Price and
the Second Purchase Price, as the case may be.
6.4 No Judgment or Order. There shall not be on the Applicable Closing Date
or on the Second Closing Date any Order of a court of competent jurisdiction or
any ruling of any Governmental Authority or any condition imposed under any
Requirement of Law which would, in the reasonable judgment of the Company, (a)
prohibit or restrict (i) the sale of the Shares or (ii) the consummation of the
transactions contemplated by this Agreement or (b) subject the Company to any
penalty or other onerous condition under or pursuant to any Requirement of Law
if the Shares were to be sold hereunder.
SECTION 7.
AFFIRMATIVE COVENANTS
---------------------
The Company hereby covenants and agrees with the Purchasers with respect to
this Section 7 that, so long as any of the Shares or the Common Stock issuable
upon the conversion thereof are outstanding, except to the extent that a
particular section of this Section 7 provides for an earlier termination, as
follows:
7.1 SEC Filings. From and after the date of this Agreement, the Company
agrees that it will use commercially reasonable efforts to file with the SEC,
within the time periods specified in the SEC's rules and regulations for as long
as they are applicable to the Company, (i) all quarterly and annual financial
information required to be filed with the SEC on Forms 10-QSB and 10-KSB, (ii)
all current reports required to be filed with the SEC on Form 8-K and (iii) any
other information required to be filed with the SEC.
7.2 Reservation of Shares . The Company shall at all times reserve and keep
available out of its authorized shares of Common Stock, solely for the purpose
of issue or delivery upon conversion of the Shares, as provided in the
Certificate of Designation and the Certificate of Incorporation, the number of
shares of Common Stock that may be issuable or deliverable upon such conversion
or exercise. The Company shall issue such shares of Common Stock in accordance
with the terms of this Agreement, the Certificate of Incorporation, the
Certificate of Designation (in the case of the shares of Common Stock issuable
upon conversion of the Shares), and otherwise comply with the terms hereof and
thereof.
7.3 Registration and Listing 7.4. If and for so long as the shares of
Common Stock are quoted on the Nasdaq or listed on any national securities
exchange, the Company will, if permitted by the rules of such system or
exchange, quote or list and keep quoted or listed on such system or exchange,
upon official notice of issuance, all shares of Common Stock issuable or
deliverable upon conversion of the Shares.
7.4 Director and Officer Liability Insurance . The Company will maintain
director and officer liability insurance which is commercially standard for a
company similarly situated to the Company.
7.5 Tax Matters.
(a) The parties hereto agree and acknowledge that unless otherwise required
in the opinion of outside counsel to the relevant party, as a result of a change
in applicable law, to comply with its obligations under the Code, (i) no party
hereto will take the position that any amount will be includible in income with
respect to the Shares issued pursuant to this Agreement under Section 305 of the
Code and that all parties shall file all Tax Returns accordingly (the "Reporting
Agreement") and (ii) no party shall take any position inconsistent with the
Reporting Agreement upon examination of any Tax Return, in any refund claim, in
any litigation or otherwise.
(b) The Company covenants that it will not become a USRPHC at any time
while Purchasers or any Affiliate of the Purchasers (a "Purchaser Entity") owns
the Shares or any Common Stock of the Company.
(c) In the event that a Purchaser Entity desires to sell or dispose of any
of the Shares or any Common Stock, and upon demand by Purchaser Entity, the
Company agrees to deliver to Purchaser Entity a letter (the "Letter") which
complies with Sections 1.1445-2(c)(3) and 1.897-2(h) of the treasury regulations
promulgated under the Code (the "Treasury Regulations"), addressed to Purchaser
Entity, stating that the Company is not, and has not been, a USRPHC during the
period equal to the lesser of (i) the period beginning five years prior to the
date of the Letter through the date of the Letter and (ii) the period from the
date of this Agreement through the date of the Letter. The Letter shall be
delivered to the Purchaser Entity one business day prior to the close of any
sale of the Shares or any Common Stock by the Purchaser Entity (the "Delivery
Date"). The Letter shall be dated as of the Delivery Date and signed by a
corporate officer who must verify under penalties of perjury that the statement
is correct to his knowledge and belief pursuant to Section 1.897-2(h) of the
Treasury Regulations.
SECTION 8.
RIGHT OF FIRST REFUSAL
----------------------
8.1 Future Issuance of Shares; Right of First Refusal.
(a) Except for (i) capital stock or options to purchase capital stock of
the Company which may be issued to employees or directors of the Company
pursuant to a stock incentive plan or other employee benefit arrangement
approved by the Board of Directors, (ii) a subdivision of the outstanding shares
of Common Stock into a larger number of shares of Common Stock, (iii) capital
stock issued as full or partial consideration for a merger, acquisition, joint
venture, strategic alliance, license agreement or other similar non-financing
transaction, provided that such issuance is approved by the Company's Board of
Directors (including at least one director designated by the Second Purchasers),
(iv) capital stock issued as full or partial consideration for services,
provided that such issuance is approved by the Company's Board of Directors
(including at least one director designated by the Second Purchasers), (v)
capital stock issued in connection with a firm commitment underwritten publicly
registered offering, (vi) capital stock purchased by any Purchaser in the public
market or from the Company and (vii) capital stock issued upon exercise,
conversion or exchange of the Shares, or of any convertible securities, options
or warrants outstanding as of the date hereof, if the Company wishes to issue
any shares of capital stock or any other securities convertible into or
exchangeable or exercisable for capital stock of the Company (collectively, "New
Securities") to any Person (the "Subject Purchaser"), then the Company shall
send written notice (the "New Issuance Notice") to the holders of the Shares,
which New Issuance Notice shall state (x) the number of New Securities proposed
to be issued and (y) the proposed purchase price per share of the New Securities
that the Company is willing to accept (the "Proposed Price").
(b) Rights of First Refusal; Exercise. For a period of twenty (20) days
after receipt of the New Issuance Notice as provided in Section 8.1(a), each
initial holder of the Series B Preferred Stock and any assignee thereof (each, a
"Rightholder") shall have the right to purchase up to its Proportionate
Percentage (as hereinafter defined) of the New Securities at a purchase price
equal to the Proposed Price and upon the terms and conditions set forth in the
New Issuance Notice. Each Rightholder shall have the right to purchase up to
that percentage of the New Securities determined by dividing (i) a number equal
to the number of shares of Common Stock into which the shares of Series B
Preferred Stock then owned by such Rightholder are convertible (including for
this purpose the number of shares of Series B Preferred Stock already converted
into Common Stock and shares acquired pursuant to the exercise of the rights
granted under this Section 8) by (ii) the sum of (x) the number of shares of
Common Stock then outstanding and (y) the number of shares of Common Stock into
which all outstanding shares of Preferred Stock are convertible (the
"Proportionate Percentage").
(c) The right of each Rightholder to purchase the New Securities under
subsection (a) above shall be exercisable by delivering written notice of its
exercise, prior to the expiration of the 20-day period referred to in subsection
(b) of this Section 8, to the Company, which notice shall state the amount of
New Securities that the Rightholder elects to purchase as provided in Section
8.1(b). The failure of a Rightholder to respond within the 20-day period shall
be deemed to be a waiver of the Rightholder's rights under Section 8.1(b);
provided that each Rightholder may waive its, his or her rights under Section
8.1(b) prior to the expiration of the 20-day period by giving written notice to
the Company. Each Rightholder shall have a right of over-allotment such that if
any Rightholder fails to exercise its right of first refusal to purchase its
Proportionate Percentage of the Shares, the other Rightholders may purchase the
non-exercising Rightholder's portion on the same proportionate percentage basis
described in the previous sentence.
(d) If, following the expiration of the 20-day period referred to above,
not all of the New Securities have been subscribed for by the Subject
Purchasers, each Rightholder shall have the option to reduce that number of New
Securities it has elected to purchase pursuant to Section 8.1(b) by a
proportionate amount.
(e) Closing. The closing of the purchase of New Securities subscribed for
by the Rightholders under Section 8.1(b) shall be held at the same time and
place as the closing of the New Securities subscribed for by the Subject
Purchasers (the "New Securities Closing"), or if there be no Subject Purchasers,
three (3) Business Days after the 20-day waiting period. At the New Securities
Closing, the Company shall deliver certificates representing the New Securities,
and the New Securities shall be issued free and clear of all liens and the
Company shall so represent and warrant, and further represent and warrant that
the New Securities shall be, upon issuance of the New Securities to the
Rightholders and after payment for the New Securities, duly authorized, validly
issued, fully paid and nonassessable by the Company. At the New Securities
Closing, the Rightholders purchasing the New Securities shall deliver payment in
full in immediately available funds for the New Securities purchased by it, him
or her. At the New Securities Closing, all of the parties to the transaction
shall execute any additional documents that are otherwise necessary or
appropriate.
(f) Sale to Subject Purchaser. The Company may sell to the Subject
Purchaser all of the New Securities not purchased by the Rightholders as
provided in Section 8.1(b) on terms and conditions that are no more favorable to
the Subject Purchaser than those set forth in the New Issuance Notice; provided,
however, that the sale is bona fide and made pursuant to a contract entered into
within three (3) months of the earlier to occur of (i) the waiver by the
Rightholders of their option to purchase the New Securities as provided in
Section 8.1(b) and (ii) the expiration of the 20-day period referred to in
Section 8.1(b). If such sale is not consummated within such four (4) month
period for any reason, then the restrictions provided for in this Section 8.1
shall again become effective, and no issuance and sale of New Securities may be
made thereafter by the Company without again offering the New Securities in
accordance with this Section 8.1. The New Securities Closing of any issue and
purchase contemplated by this Section 8.1(f) shall be held at the time and place
as the parties to the transaction may agree.
(g) Termination of Rights of First Refusal. The Company's obligations and
the Rightholders' rights pursuant to this Section 8 shall terminate on the
fourth anniversary of this Agreement.
SECTION 9.
REGISTRATION RIGHTS
-------------------
9.1 Definitions. For purposes of this Section 9:
(a) The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document;
(b) The term "Registrable Securities" means (i) the Common Stock issuable
or issued upon conversion of the Series B Preferred Stock, (ii) any Common Stock
of the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
Series B Preferred Stock or Common Stock and (iii) ) any Common Stock of the
Company issuable upon the exercise of warrants issuable to Xxxxxxx & Company,
Inc. and Boulder Venture Partners described in Schedule 3.25, excluding in all
cases, however, any Registrable Securities sold by a person in a transaction in
which his registration rights under this Section 9 are not assigned or for which
the rights under this Section 9 have terminated pursuant to Section 9.16 hereof;
(c) The number of shares of "Registrable Securities then outstanding" shall
be determined by the number of shares of Common Stock outstanding which are, and
the number of shares of Common Stock issuable pursuant to then exercisable or
convertible securities which are exercisable or convertible into, Registrable
Securities;
(d) The term "Holder" means any person owning or having the right to
acquire Registrable Securities;
(e) The term "Form S-3" means such form under the Securities Act as in
effect on the date hereof or any registration form under the Securities Act
subsequently adopted by the SEC in lieu of Form S-3 which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
9.2 Request for Registration.
(a) If the Company shall receive at any time after six months following the
date of the Second Closing a written request from the Holders of at least
33-1/3% of the Registrable Securities then outstanding that the Company file a
registration statement under the Securities Act covering the registration of at
least 33-1/3% of the Registrable Securities then outstanding, with anticipated
aggregate proceeds, net of underwriting discounts and commissions, of not less
than $5,000,000), then the Company shall, within ten (10) days of the receipt
thereof, give written notice of such request to all Holders and shall, subject
to the limitations of subsection 9.2(b), file as soon as practicable, and in any
event within sixty (60) days of the receipt of such request, a registration
statement under the Securities Act covering all Registrable Securities which the
Holders request to be registered within twenty (20) days of the mailing of such
notice by the Company in accordance with Section 9.5.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to this Section 9.2 and the Company
shall include such information in the written notice referred to in subsection
9.2(a). In such event, the right of any Holder to include his Registrable
Securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in subsection
9.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders. Notwithstanding any other provision of this
Section 9.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
(c) The Company is obligated to effect only three such registrations
pursuant to this Section 9.2.
(d) Notwithstanding the foregoing, if the Company shall furnish to Holders
requesting a registration statement pursuant to this Section 9.2 a certificate
signed by the President of the Company stating that, in the good faith judgment
of the Board of Directors, by a vote of at least 2/3 of its members, of the
Company it would be seriously detrimental to the Company and its stockholders
for such registration statement to be filed and it is therefore essential to
defer the filing of such registration statement, the Company shall have the
right to defer such filing for a period of not more than sixty (60) days after
receipt of the request of the Initiating Holders; provided, however, that the
Company may not utilize this right more than once in any twelve (12) month
period.
9.3 Company Registration. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration effected
by the Company for stockholders other than the Holders) any of its stock or
other securities under the Securities Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after mailing of
such notice by the Company in accordance with Section 9.5, the Company shall,
subject to the provisions of Section 9.8, cause to be registered under the
Securities Act all of the Registrable Securities that each such Holder has
requested to be registered.
9.4 Obligations of the Company. Whenever required under this Section 9 to
effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect to
such Registrable Securities and use its best efforts to cause such registration
statement to become effective, and, upon the request of the Holders of a
majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to one hundred twenty (120) days.
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders; provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Section 9, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 9, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.
(h) Cause all such Registrable Securities registered pursuant hereunder to
be listed on each securities exchange on which similar securities issued by the
Company are then listed.
(i) Provide a transfer agent and registrar for all Registrable Securities
registered pursuant hereunder and a CUSIP number for all such Registrable
Securities, in each case not later than the effective date of such registration.
9.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 9 with
respect to Registrable Securities that the selling Holders shall furnish to the
Company such customary information regarding themselves, the Registrable
Securities held by them, and the intended method of disposition of such
securities as shall be required to effect the registration of such Holders'
Registrable Securities.
9.6 Expenses of Demand Registration. All expenses other than underwriting
discounts and commissions incurred in connection with registrations, filings or
qualifications pursuant to Section 9.2, including (without limitation) all
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders (not to exceed $25,000 per
registration) shall be borne by the Company; provided, however, that the Company
shall not be required to pay for any expenses of any registration proceeding
begun pursuant to Section 9.2 if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities to be registered (in which case all participating Holders shall bear
such expenses), unless the Holders of a majority of the Registrable Securities
agree to forfeit their right to one demand registration pursuant to Section 9.2;
provided further, however, that if at the time of such withdrawal, the Holders
have learned of a material adverse change in the condition, business or
prospects of the Company that was unknown to the Holders at the time of their
request, then the Holders shall not be required to pay any of such expenses and
shall retain their rights pursuant to Section 9.2.
9.7 Expenses of Company Registration. The Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Securities with respect to the registrations pursuant to Section
9.3 for each Holder, including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees relating or apportionable
thereto and the fees and disbursements of one counsel for the selling Holders
(not to exceed $25,000 per registration) selected by them, but excluding
underwriting discounts and commissions relating to Registrable Securities.
9.8 Underwriting Requirements. In connection with any offering involving an
underwriting of shares being issued by the Company, the Company shall not be
required under Section 9.3 to include any of the Holders' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it, and then only in such
quantity as will not, in the opinion of the underwriters, jeopardize the success
of the offering by the Company. If the total amount of securities, including
Registrable Securities, requested by stockholders to be included in such
offering exceeds the amount of securities sold other than by the Company that
the underwriters reasonably believe compatible with the success of the offering,
then the Company shall be required to include in the offering only that number
of such securities, including Registrable Securities, which the underwriters
believe will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata, first among the Holders and then among
other selling stockholders according to the total amount of securities entitled
to be included therein owned by each selling stockholder or in such other
proportions as shall mutually be agreed to by such selling stockholders) but in
no event shall (a) the amount of securities of the selling Holders included in
the offering be reduced below thirty percent (30%) of the total amount of
securities included in such offering or (b) notwithstanding (a) above, any
shares being sold by a stockholder exercising a demand registration right
similar to that granted in Section 9.2 be excluded from such offering. For
purposes of the preceding parenthetical concerning apportionment, for any
selling stockholder that is a Holder of Registrable Securities and that is a
partnership or corporation, the partners, retired partners and stockholders of
such Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling stockholder," and any pro rata reduction with
respect to such "selling stockholder" shall be based upon the aggregate amount
of Registrable Securities owned by all entities and individuals included in such
"selling stockholder," as defined in this sentence.
9.9 Delay of Registration. No Holder shall have any right to obtain or seek
an injunction restraining or otherwise delaying any such registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Section 9.
9.10 Indemnification. In the event any Registrable Securities are included
in a registration statement under this Section 9:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, the officers, directors and legal counsel of each Holder,
any underwriter (as defined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Exchange Act, against any losses, claims, damages or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state securities law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively, a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law; and the Company will
reimburse, as incurred, each such Holder, officer, director, legal counsel,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this subsection 9.10(a) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, officer, director, underwriter or
controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify and
hold harmless the Company, each of its directors, each of its officers who has
signed the registration statement, each person, if any, who controls the Company
within the meaning of the Securities Act, any underwriter, any other Holder
selling securities in such registration statement, any of such Holder's
directors or officers and any person who controls such Holder, against any
losses, claims, damages or liabilities (joint or several) to which the Company
or any of the foregoing persons may become subject, under the Securities Act,
the Exchange Act or other federal or state securities law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will reimburse, as incurred, any
legal or other expenses reasonably incurred by the Company or any person
intended to be indemnified pursuant to this subsection 9.10(b) in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
subsection 9.10(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld;
provided, that, in no event shall any indemnity under this subsection 9.10(b)
exceed the proceeds (net of underwriting discounts and commissions) from the
offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section 9.10
of notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 9.10, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an indemnified party (together with all other
indemnified parties that may be represented without conflict by one counsel)
shall have the right to retain one separate counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential differing interests between such indemnified party
and any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 9.10, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
9.10.
(d) If the indemnification provided for in this Section 9.10 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with the underwritten public offering are in conflict with
the foregoing provisions, the provisions in the underwriting agreement shall
control.
(f) The obligations of the Company and Holders under this Section 9.10
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 9, and otherwise.
9.11 Reports Under Securities Exchange Act of 1934. With a view to making
available to the Holders the benefits of Rule 144 and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration or pursuant to a registration on
Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144, at all times;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act; and
(c) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3,
(ii) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company and (iii) such other
information as may be reasonably requested in availing any Holder of any rule or
regulation of the SEC which permits the selling of any such securities without
registration or pursuant to such form.
9.14 Limitations on Subsequent Registration Rights. From and after the date
of this Agreement, the Company shall not, without the prior written consent of
the Holders of a majority of the outstanding Registrable Securities, enter into
any agreement with any holder or prospective holder of any securities of the
Company which would allow such holder or prospective holder (a) to include such
securities in any registration filed under Section 9.2 or Section 9.3 hereof,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of his securities will not in any manner reduce the amount of the
Registrable Securities of the Holders which is included or (b) to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in subsection
9.2(a) or within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 9.2 or Section 9.3.
9.15 Amendment of Registration Rights. Any provision of this Section 9 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of at least 70% of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
Registrable Securities at the time outstanding (including securities into which
such Registrable Securities are convertible), each future holder of all such
Registrable Securities, and the Company.
9.16 Termination of Registration Rights. The Company's obligations pursuant
to this Section 9 shall terminate with respect to each Holder severally upon the
earlier to occur of (a) five (5) years from the date of this Agreement or (b)
the date on which a Holder is able to sell all of such Holder's Registrable
Securities under Rule 144 within a single three (3) month period, provided that
no such termination shall occur pursuant to this Section 9.16(b) prior to the
second anniversary of the date of this Agreement.
SECTION 10.
VOTING RIGHTS
-------------
10.1 Board Membership. The Board of Directors of this Company shall consist
of five (5) members. For so long as the Purchasers maintain beneficial ownership
of at least 25% of the shares of Series B Preferred Stock, (i) each of (A)
Quantum Industrial Partners LDC and SFM Domestic Investors LLC, acting jointly
("Xxxxx Investors"), and (B) Xxxxxxxx, Xxxxxx & Xxxxx II, L.P. ("Xxxxxxxx")
shall be entitled to nominate one (1) director of the Company at each annual
election of directors or any special meeting called to elect directors and (ii)
a representative of the Initial Purchasers shall be entitled to attend each
meeting of the Company's Board of Directors. The Purchasers agree to vote their
Shares for the nominees of the Xxxxx Investors and Xxxxxxxx at any annual
meeting or any special meeting called to elect directors. The holders of Series
B Preferred Stock and Common Stock (voting together as a single class and not as
separate series, and on an as-converted basis) shall be entitled to elect the
three (3) remaining directors of the Company.
In the case of any vacancy in the office of a director nominated by the
Xxxxx Investors or Xxxxxxxx, then the Purchasers agree to vote their Shares to
elect a replacement nominated by the Xxxxx Investors or Xxxxxxxx, as the case
may be, for the unexpired term. The Purchasers also agree to vote their Shares
for the removal, with or without cause, of a director nominated by the Xxxxx
Investors or Xxxxxxxx, as the case may be, upon the request of the nominating
Purchaser. Any future holder of Shares shall be required to become a party to
the voting agreements set forth in this Section 10.1.
10.2 Protective Provisions. In addition to any approvals required by law,
so long as the Purchasers retain through beneficial ownership shares of capital
stock representing, on an as-converted basis, at least 7.5% of the outstanding
shares of Common Stock on an as-converted basis (after giving effect to and
assuming exercise or conversion of all outstanding options, warrants and other
convertible securities, whether or not vested), the Company shall not without
first obtaining the approval (by vote or written consent, as provided by law) of
the holders of at least 70% of the shares of Series B Preferred Stock purchased
under this Agreement or the Common Stock into which such shares are converted:
(a) consummate a merger, consolidation or sale of all or substantially all
of the assets of the Company in which the per share consideration received by
the holders of Series B Preferred Stock is less than three (3) times the
Conversion Price in effect immediately prior to the vote of the stockholders of
the Company to approve such transaction or, if there shall be no such vote, the
date of such transaction;
(b) repurchase or redeem equity securities or debt (other than redemptions
pursuant to Section 6 of the Certificate of Designation and except to the extent
that such debt is due in accordance with its terms);
(c) authorize or issue any equity securities senior to or pari passu with
the Series B Preferred Stock;
(d) authorize or issue any additional shares of Series B Preferred Stock;
(e) increase or decrease the authorized size of the Company's Board of
Directors;
(f) incur, refinance, guarantee or assume any indebtedness other than in
the ordinary course of business, provided that all indebtedness of the Company
(including drawdowns under existing credit facilities) does not exceed an amount
equal to 10% of the market capitalization of the Company in the aggregate at the
time of incurrence;
(g) create, incur or assume any lien or encumbrance of any kind upon the
assets of the Company, whether now owned or hereafter acquired, other than
existing liens or encumbrances in excess of an amount equal to 10% of the market
capitalization of the Company at the time of the creation, incurrence or
assumption;
(h) engage in transactions with Affiliates other than those approved by the
Compensation Committee of the Company; and
(i) establish any non-wholly owned Subsidiary or sell or transfer any
Subsidiary's stock or cause any Subsidiary to issue any stock to any Person
other than the Company.
For purposes of this subsections (f) and (g) of this Section 10.2, the term
"market capitalization" shall mean the closing price of the Common Stock of the
Company on the principal market or exchange on which the Common Stock is then
traded (or, if there shall be no such market or exchange, the fair market value
of the Common Stock as determined in good faith by the Company's Board of
Directors) on the trading day immediately prior to the time of creation,
incurrence or assumption, multiplied by the number of shares of Common Stock
outstanding as of the close of business on such date (with the shares of Common
Stock issuable upon conversion of the Series B Preferred Stock as of such date
deemed to be outstanding).
SECTION 11.
INDEMNIFICATION
---------------
Except as otherwise provided in this Section 11, the Company agrees to
indemnify, defend and hold harmless each Purchaser and its Affiliates and their
respective officers, directors, agents, employees, subsidiaries, partners,
members and controlling persons to the fullest extent permitted by law from and
against any and all claims, losses, liabilities, damages, deficiencies,
judgements, assessments, fines, settlements, costs or expenses (including
interest, penalties and reasonable fees, disbursements and other charges of
counsel) (collectively, "Losses") based upon, arising out of or otherwise in
respect of any inaccuracy in or any breach of any surviving representation,
warranty, covenant or agreement of the Company contained in this Agreement.
Notwithstanding the foregoing (i) the Company shall not be liable pursuant to
this Section 11 unless such Losses exceed $350,000 in the aggregate, in which
case the Purchasers may recover from the Company Losses in excess of the first
$200,000, and (ii) the Company's liability pursuant to this Section 11 shall in
no event exceed in the aggregate $10,000,000.
SECTION 12.
TERMINATION OF AGREEMENT
------------------------
12.1 Termination. This Agreement may be terminated as follows:
(a) at any time on or prior to the Applicable Closing Date, by mutual
written consent of the Company and the Initial Purchasers or the Second Closing
Purchasers, as the case may be; or
(b) at the election of the Company or the Purchasers by written notice to
the other parties hereto after 5:00 p.m., New York City time on January 25, 2000
if neither the First Closing nor the Second Closing shall have been consummated
pursuant hereto, unless such date is extended by the mutual written consent of
the Company, the Initial Purchasers and the Second Purchasers; or
(c) at the election of the Company, if any one or more of the conditions to
its obligation to close set forth in Section 6 has not been satisfied or waived
and the First Closing or the Second Closing, as the case may be, shall not have
occurred on the scheduled Applicable Closing Date; or
(d) at the election of the Initial Purchasers, if any one or more of the
conditions to its obligation to close set forth in Section 5 has not been
satisfied or waived and the First Closing, shall not have occurred on the
scheduled First Closing Date, and at the election of the Second Purchasers, if
any one or more of the conditions to its obligation to close set forth in
Section 5 has not been satisfied or waived and the Second Closing shall not have
occurred on the scheduled Second Closing Date; or
(e) at the election of the Company if there has been a material breach of
any representation, warranty, covenant or agreement of the Initial Purchasers or
the Second Purchasers, as the case may be, contained in this Agreement, which
breach is incurable or has not been cured by such Purchaser within 10 days after
written notice from the Company; or
(f) at the election of the Initial Purchasers or the Second Purchasers, as
the case may be, if there has been prior to (i) the First Closing Date, in the
case of the Initial Purchasers, or (ii) the Second Closing Date, in the case of
the Second Purchasers, a material breach by the Company of any representation,
warranty, covenant or agreement of the Company contained in this Agreement,
which breach is incurable or has not been cured by the Company within 10 days
after written notice from the Initial Purchasers or the Second Purchasers, as
applicable.
Notwithstanding anything to the contrary in this Section, the Initial
Purchasers shall have a right at the time set forth below to rescind this
Agreement and to receive, in exchange for the shares of Series B Preferred Stock
purchased at the Initial Closing, an amount equal to (i) the First Purchase
Price minus (ii) any amounts paid by the Company as reimbursement for fees
incurred by counsel to the Initial Purchasers pursuant to Section 13.11 if the
Company is unwilling or unable, solely as a consequence of its own actions or as
a result of an event having a Material Adverse Effect on its business, to effect
the Second Closing. The Initial Purchasers may exercise this right: (x) at any
time prior to January 31, 2000 if the Second Closing is scheduled to occur on
January 25, 2000; (y) if the Second Closing is postponed, within five days of
the rescheduled closing; or (z) on February 15, 2000 if the Second Closing has
not occurred by then.
12.2 Survival. If this Agreement is terminated and the transactions
contemplated hereby are not consummated as described above, this Agreement shall
become void and of no further force and effect; provided, however, that (i) a
breaching party shall be liable to the non-breaching party for damages caused by
such breach; (ii) none of the parties hereto shall have any liability in respect
of a termination of this Agreement pursuant to Section 12.1(a) or Section 12.1(b
and provided further, that none of the parties hereto shall have any liability
for speculative, special, consequential, incidental or unforeseeable damages
resulting from a termination of this Agreement.
SECTION 13.
MISCELLANEOUS
-------------
13.1 Survival of Representations, Warranties and Covenants. The
representations and warranties, covenants and agreements contained herein shall
survive until April 30, 2001.
13.2 Notices. All notices, demands and other communications provided for or
permitted hereunder shall be made in writing and shall be by registered or
certified first-class mail, return receipt requested, telecopier, courier
service, overnight mail or personal delivery:
(i) if to a Purchaser, to the address set forth below such Purchaser's
signature on the signature page hereof.
(ii) if to the Company:
InfoNow Corporation
0000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Chief Executive Officer
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxxx, Xxxxx & Xxxxxxx, P.C.
0000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxx, Esq.
Telecopy: (000) 000-0000
All such notices and communications shall be deemed to have been duly given
when delivered by hand, if personally delivered; when delivered by courier or
overnight mail, if delivered by commercial courier service or overnight mail;
five (5) Business Days after being deposited in the mail, postage prepaid, if
mailed; and when receipt is mechanically acknowledged, if telecopied.
13.3 Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of the parties hereto.
Subject to applicable securities laws, each of the Initial Purchasers and Second
Closing Purchasers may assign any of its rights under this Agreement to any of
its Affiliates but any such assignment shall not relieve any Initial Purchaser
or Second Closing Purchaser from its obligations hereunder. The Company may not
assign any of its rights under this Agreement, except to a successor-in-interest
to the Company, without the written consent of all of the Purchasers.
13.4 Amendment and Waiver.
(a) No failure or delay on the part of the Company or the Purchasers in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.
(b) Any amendment, supplement or modification of or to any provision of
this Agreement, any waiver of any provision of this Agreement, and any consent
to any departure by the Company or the Purchasers from the terms of any
provision of this Agreement, shall be effective only (i) if it is made or given
in writing, (ii) in the specific instance and for the specific purpose for which
made or given and (iii) prior to the second anniversary of the Second Closing,
by agreement of each Purchaser which retains beneficial ownership of at least
80% of the shares of Series B Preferred Stock purchased under this Agreement or
the Common Stock into which such shares are converted and between the second and
fifth anniversary of the Second Closing, by agreement of each Purchaser which
retains beneficial ownership of at least 50% of the shares of Series B Preferred
Stock purchased under this Agreement or the Common Stock into which such shares
are converted; provided that for purposes of calculating the ownership
percentage, the equity interests of the Xxxxx Investors are aggregated and the
equity interests of the Xxxxxx OTC and Emerging Growth Fund and Xxxxxx Emerging
Information Sciences Trust are aggregated. Except where notice is specifically
required by this Agreement, no notice to or demand on the Company in any case
shall entitle the Company to any other or further notice or demand in similar or
other circumstances.
13.5 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
13.6 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
13.7 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
13.8 Severability. If any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
13.9 Rules of Construction. Unless the context otherwise requires, "or" is
not exclusive, and references to sections or subsections refer to sections or
subsections of this Agreement.
13.10 Entire Agreement. This Agreement, together with the exhibits and
schedules hereto, is intended by the parties as a final expression of their
agreement and intended to be a complete and exclusive statement of the agreement
and understanding of the parties hereto in respect of, and supercedes all prior
agreements relating to, the subject matter contained herein and therein. There
are no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein or therein.
13.11 Fees. Upon the First Closing, the Company shall pay directly or
reimburse the Initial Purchasers for reasonable attorney's fee incurred in
connection with the transactions contemplated by this Agreement. Upon the Second
Closing, the Company shall pay directly or reimburse the Purchasers for their
reasonable out-of-pocket expenses (including attorney's fees (other than those
paid pursuant to the immediately preceding sentence), disbursements and other
charges) incurred in connection with the transactions contemplated by this
Agreement; provided, however, that the Company shall not be obligated to
reimburse the Purchasers for any reasonable out-of-pocket expenses in excess of
$75,000 in the aggregate.
13.12 Publicity; Confidentiality.
(a) Except as may be required by applicable law or the rules of any
securities exchange or market on which shares of Common Stock are traded, none
of the parties hereto shall issue a publicity release or public announcement or
otherwise make any disclosure concerning this Agreement, the transactions
contemplated hereby or the business and financial affairs of the Company,
without prior approval by the other parties hereto; provided, however, that
nothing in this Agreement shall restrict any Purchaser or the Company from
disclosing information (i) that is already publicly available, (ii) that was
known to such Purchaser or the Company on a non-confidential basis prior to its
disclosure by the Company or such Purchaser, as the case may be, (iii) that may
be required or appropriate in response to any summons or subpoena or in
connection with any litigation, provided that such Purchaser or the Company, as
the case may be, will use reasonable efforts to notify the Company or the
Purchaser, as the case may be, in advance of such disclosure so as to permit the
Company or the Purchaser, as the case may be, to seek a protective order or
otherwise contest such disclosure, and such Purchaser or the Company, as the
case may be, will use reasonable efforts to cooperate, at the expense of the
Company, with the Company or the Purchaser, as the case may be, in pursuing any
such protective order, (iv) to the extent that such Purchaser or the Company, as
the case may be, reasonably believes it appropriate in order to protect its
investment in the Shares in order to comply with any Requirement of Law, (v) to
such Purchaser's or the Company's, as the case may be, officers, directors,
agents, employees, members, partners, controlling persons, auditors or counsel,
(vi) to Persons who are parties to similar confidentiality agreements or (vii)
to a prospective transferee who executes a confidentiality agreement in
connection with any contemplated transfer of any of the Shares. If any
announcement is required by law or the rules of any securities exchange or
market on which shares of Common Stock are traded to be made by any party
hereto, prior to making such announcement such party will, to the extent
practicable, deliver a draft of such announcement to the other parties and shall
give the other parties reasonable opportunity to comment thereon.
(b) Unless substantially in the form previously disclosed, the Purchasers
shall have the opportunity to review and reasonably modify any provision of any
public announcement or document which is to be released to the public or filed
with the SEC, which provision mentions the Purchasers or any of their
Affiliates, prior to the release of such document to the public or the filing of
such document with the SEC.
13.13 Further Assurances. Each of the parties shall execute such documents
and perform such further acts (including, without limitation, obtaining any
consents, exemptions, authorizations or other actions by, or giving any notices
to, or making any filings with, any Governmental Authority or any other Person)
as may be reasonably required or desirable to carry out or to perform the
provisions of this Agreement.
13.14 Schedules. Anything disclosed on any schedule attached hereto or
otherwise disclosed in writing to the Purchasers shall be deemed disclosed on
all schedules attached hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective officers hereunto duly authorized on
the date first above written.
INFONOW CORPORATION
By:
Name: Xxxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
INFONOW CORPORATION
STOCK PURCHASE AGREEMENT
PURCHASERS' COUNTERPART SIGNATURE PAGE
QUANTUM INDUSTRIAL PARTNERS LDC
By:
Name:
Its:
Address:
SFM DOMESTIC INVESTORS LLC
By:
Name:
Its:
Address:
INFONOW CORPORATION
STOCK PURCHASE AGREEMENT
PURCHASERS' COUNTERPART SIGNATURE PAGE
XXXXXX OTC AND EMERGING GROWTH FUND
By:
Name:
Its:
Address:
XXXXXX EMERGING INFORMATION SCIENCES TRUST
By:
Name:
Its:
Address:
INFONOW CORPORATION
STOCK PURCHASE AGREEMENT
PURCHASERS' COUNTERPART SIGNATURE PAGE
XXXXXXXX, XXXXXX & XXXXX II, L.P.
By:
Name:
Its:
Address:
INFONOW CORPORATION
STOCK PURCHASE AGREEMENT
COUNTERPART SIGNATURE PAGE
(FOR PURPOSES OF SECTION 9 ONLY)
XXXXXXX & COMPANY, INC.
By:
Name:
Its:
Address:
INFONOW CORPORATION
STOCK PURCHASE AGREEMENT
COUNTERPART SIGNATURE PAGE
(FOR PURPOSES OF SECTION 9 ONLY)
BOULDER VENTURE PARTNERS
By:
Name:
Its:
Address:
Schedule 2.2
SHARES AND PURCHASE PRICE
Shares of Series B Shares of Series B
Preferred Stock Purchased Preferred Stock Purchased Aggregate
Purchaser at the First Closing at the Second Closing Purchase Price
--------- -------------------- --------------------- --------------
Quantum Industrial Partners LDC -- ** **
SFM Domestic Investors LLC -- ** **
Xxxxxx OTC and Emerging Growth Fund 200,000 -- $4,000,000
Xxxxxx Emerging Information Sciences Trust 50,000 -- $1,000,000
Xxxxxxxx, Xxxxxx & Xxxxx II, L.P. -- 200,000 $4,000,000
Total 250,000 550,000 $16,000,000
** The allocation of shares purchased and the aggregate purchase price shall
be determined prior to the Second Closing Date, provided that Quantum
Industrial Partners LDC and SFM Domestic Investors LLC shall in the
aggregate purchase 350,000 shares of Series B Preferred Stock for
$7,000,000.
