EXHIBIT 10.8
LINEO, INC.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of this __
day of February, 2000, by and between Lineo, Inc., a Delaware corporation
(together with any predecessors or successors thereto; the "Company"), and
___________________, (together with its successors and assigns; the "Investor").
RECITALS
A. The Investor wishes to invest in the Company's Series A Class 2
Convertible Preferred Stock, $.001 par value per share (the "Series A Class 2
Preferred Stock").
B. The Company has authorized the issuance and sale to the Investor
of ___________ shares of Series A Class 2 Preferred Stock having the rights and
preferences set forth in the Certificate of Designation attached as EXHIBIT A
hereto (the "Certificate"), for an aggregate purchase price of $____________.
C. The parties hereto desire to set forth the terms of the purchase
and sale of the Series A Class 2 Preferred Stock.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
SECTION 1. PURCHASE AND SALE OF SHARES.
1.1 Description of Securities.
The Company's authorized capital stock consists of 100,000,000 shares of
Common Stock, par value $.001 per share, and 30,000,000 shares of Preferred
Stock, par value $.001 per share, of which 5,000,000 shares have been designated
as Series A Class 1 Convertible Preferred Stock and 2,500,000 shares have been
designated as Series A Class 2 Convertible Preferred Stock. The Company has
authorized and has reserved, and covenants to continue to reserve, free and
clear of preemptive and other similar rights, a sufficient number of shares of
its Common Stock to satisfy the rights of conversion of the holders of the
Series A Class 2 Preferred Stock. For purposes of this Agreement, (a) the shares
of Series A Class 2 Preferred Stock to be acquired by the Investor from the
Company hereunder are referred to as the "Series A Class 2 Preferred Shares,"
(b) the shares of Common Stock issuable upon conversion of the Series A Class 2
Preferred Shares are referred to as the "Conversion Shares" and (c) the Series A
Class 2 Preferred Shares and the Conversion Shares are sometimes referred to
collectively as the "Securities."
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1.2. SALE AND PURCHASE; CONVERSION.
Upon the terms and subject to the conditions herein, and in reliance on
the representations and warranties set forth in Section 2, the Investor hereby
purchases from the Company, and the Company hereby issues and sells to the
Investor, at the Closing (as defined below in Section 1.3), ___________ Series A
Class 2 Preferred Shares for the purchase price of $1.50 per share for an
aggregate of $____________, and the Company hereby grants the Investor the
rights set forth herein. The proceeds of this sale are intended to be used for
the expansion of the Company's business, working capital and other general
corporate purposes.
1.3 CLOSING.
The closing of the purchase and sale of the Series A Class 2 Preferred
Shares (the "Closing") shall take place at the offices of the Company at 10:00
a.m. on February __, 2000, or at such other time and place as the parties hereto
may agree (the "Closing Date"). At the Closing, the Company shall deliver to the
Investor a stock certificate, registered in the name of the Investor,
representing the number of Series A Class 2 Preferred Shares purchased by
Investor hereunder.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants the following, except as set forth in
the schedule of exceptions attached hereto as EXHIBIT B (the "Disclosure
Schedule"):
2.1 ORGANIZATION AND CORPORATE POWER.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is qualified to do
business as a foreign corporation in each jurisdiction in which the failure to
be so qualified would have a material adverse effect on its assets, liabilities,
condition (financial or other), business, results of operations or prospects (a
"Material Adverse Effect"). The Company has all required corporate power and
authority to carry on its business as presently conducted, to enter into and
perform this Agreement and the agreements contemplated hereby to which it is a
party and to carry out the transactions contemplated hereby and thereby,
including the issuance and conversion of the Securities and the issuance of the
Conversion Shares. The Company is not in violation of any term of the
Certificate of Incorporation and Bylaws of the Company, as amended to date (the
"Certificate of Incorporation" and the "Bylaws," respectively).
2.2 AUTHORIZATION AND NON-CONTRAVENTION.
The execution, delivery and performance by the Company of this Agreement
and all other agreements, documents and instruments to be executed and delivered
by the Company as contemplated hereby (including, without limitation, the
Certificate) and the issuance and delivery of (i) the Series A Class 2 Preferred
Shares and (ii) upon the conversion of the Series A Class 2 Preferred Shares,
the Conversion Shares, have been duly authorized by all necessary corporate and
other action of the Company. This Agreement and each such other agreement,
document and instrument (including, without limitation, the Certificate)
constitute valid and binding obligations of the Company, enforceable in
accordance with their respective terms. The execution and delivery by the
Company of this Agreement and each other agreement, document
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and instrument to be executed and delivered by the Company pursuant hereto or as
contemplated hereby (including, without limitation, the Certificate) and the
performance by the Company of the transactions contemplated hereby and thereby,
including, without limitation, the issuance and delivery of (i) the Series A
Class 2 Preferred Shares and (ii) upon the conversion of the Series A Class 2
Preferred Shares, the Conversion Shares, do not and will not: (A) violate,
conflict with or result in a default (whether after the giving of notice, lapse
of time or both) under any material contract or obligation to which the Company
is a party or by which it or its assets are bound, or any provision of the
Certificate of Incorporation or Bylaws of the Company, or cause the creation of
any material encumbrance upon any of the assets of the Company; (B) violate or
result in a violation of, or constitute a default under, any provision of any
material law, regulation or rule, or any order of, or any restriction imposed
by, any court or governmental agency applicable to the Company; (C) require from
the Company any notice to, declaration or filing with, or consent or approval of
any governmental authority or third party other than as may be required to
secure an exemption from qualification of the offer and sale of the Series A
Class 2 Preferred Shares under the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state securities and blue sky laws; or (D)
accelerate any obligation under, or give rise to a right of termination of, any
material agreement, permit, license or authorization to which the Company or any
of its assets is a party or by which the Company or any of its assets is bound.
2.3 CAPITALIZATION.
As of the Closing and after giving effect to the transactions
contemplated hereby, the authorized capital stock of the Company will consist of
100,000,000 shares of Common Stock, par value $.001 per share, of which
22,738,437 shares will be issued and outstanding, and 30,000,000 shares of
Preferred Stock, par value $.001 per share, of which (a) 5,000,000 shares shall
be designated as Series A Class 1 Preferred Stock, none of which will be issued
and outstanding and (b) 2,500,000 shares shall be designated as Series A Class 2
Preferred Stock and of which not more than 2,500,000 shares will be issued and
outstanding. The shares of Common Stock are held by the stockholders listed in
Section 2.3 of the Disclosure Schedule in the amounts listed therein. In
addition, the Company has authorized and reserved for issuance upon conversion
of the Series A Preferred Shares up to 7,500,000 Conversion Shares (subject to
adjustment for stock splits, stock dividends and the like) and has reserved for
issuance upon exercise of options under the Company's stock option plan (the
"Plan") 2,000,000 shares of Common Stock (subject to adjustment for stock
splits, stock dividends and the like). The Company has also authorized the
Canopy Group, Inc. to convert up to 5,000,000 shares of Common Stock into Series
A Class 1 Preferred Stock. Other than as described above, the Company has not
issued or agreed to issue and is not obligated to issue any warrants, options or
other rights (contingent or otherwise) to purchase or acquire any shares of its
capital stock, or any securities convertible into or exercisable or exchangeable
for such shares or any warrants, options or other rights to acquire any such
convertible securities. The Company has no obligation (contingent or otherwise)
to purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other distribution in
respect thereof. There are no agreements, written or oral, between the Company
and any holder of its capital stock or, among any holders of its capital tock,
relating to the acquisition, disposition or voting of the capital stock of the
Company. As of the Closing, and after giving effect to the transactions
contemplated hereby, all of the outstanding shares of capital stock of the
Company (including, without limitation, the Series A Class 2 Preferred Shares)
will have been duly and validly authorized and issued, fully paid and
nonassessable and, except as set forth herein, not subject to
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any preemptive or similar rights to purchase or otherwise acquire shares of
capital stock of the Company and will have been offered, issued, sold and
delivered in compliance with applicable federal and state securities and blue
sky laws. No person or entity is entitled to (a) any preemptive right, right of
first refusal or similar right with respect to the issuance of any capital stock
of the Company, or (b) any rights with respect to the registration of any
capital stock of the Company under the Securities Act of 1933, as amended. The
Conversion Shares will, upon issuance, be duly and validly authorized and
issued, fully paid and nonassessable, and not subject to any preemptive rights,
and will be offered, issued, sold and delivered in compliance with applicable
federal and state securities and blue sky laws. The relative rights, preferences
and other provisions relating to the Series A Class 2 Preferred Shares are as
set forth in EXHIBIT A hereto.
2.4 SUBSIDIARIES; INVESTMENTS.
Other than 1,250,000 shares of Common Stock of Caldera Systems, Inc., a
representative office located in Taiwan and a wholly owned subsidiary located in
the United Kingdom, the Company has no subsidiaries and no capital stock or
other interest in any corporation, joint venture, partnership, trust, limited
liability company or other entity.
2.5 FINANCIAL STATEMENTS.
The Company has previously furnished to the Investor copies of its draft
audited financial statements (balance sheet, statement of operations; statement
of cash flows and statement of stockholders equity) for the fiscal year at and
ended October 31, 1999. Such financial statements were prepared in conformity
with generally accepted accounting principles applied on a consistent basis; are
complete, correct and consistent in all material respects with the books and
records of the Company; and fairly and accurately present the financial position
of the Company as of the dates thereof and the results of operations and cash
flows of the Company for the periods shown therein.
2.6 ABSENCE OF UNDISCLOSED LIABILITIES.
Except as and to the extent reflected or reserved against in the
financial statements referred to in Section 2.5 above, the Company does not have
and is not subject to any material liability or obligation of any nature,
whether accrued, absolute, contingent or otherwise.
2.7 ABSENCE OF CHANGES.
Except as set forth in Section 2.7 of the Disclosure Schedule, since
October 31, 1999 there has not been (a) any material adverse change in the
financial condition, results of operations, assets, liabilities, or business of
the Company, (b) any material asset or property of the Company made subject to a
lien of any kind, (c) any waiver of any material right of the Company, or the
cancellation of any material debt or claim held by the Company, (d) any payment
of dividends on, or other distribution with respect to, or any direct or
indirect redemption or acquisition of, any shares of the capital stock of the
Company, or any agreement or commitment therefore, (e) any mortgage, pledge or
hypothecation of any tangible or intangible asset of the Company, except in the
ordinary course of business, (f) any sale or assignment of any tangible asset of
the Company having a book value in excess of $5,000, except in the ordinary
course of business, or of any Intellectual Property Rights (as hereafter
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defined) or other intangible assets, (g) any loan by the Company to, or any loan
to the Company from, any officer, director, employee or stockholder of the
Company, or any agreement or commitment therefore (other than travel and other
advances in the ordinary course of business), (h) any damage, destruction or
loss (whether or not covered by insurance) materially and adversely affecting
the assets, property or business of the Company, (i) any repayment of any loan
owed by the Company (including, without limitation, any loan owed to any
stockholder of the Company), (j) any single capital expenditure in excess of
$50,000 or any capital expenditures aggregating more than $250,000, or (k) any
material change in the accounting methods or practices followed by the Company.
2.8 TITLE; CONDITION OF PROPERTY.
(a) Except as set forth in Section 2.8 of the Disclosure Schedule, the
Company has good title to all of its property and assets, real, personal or
mixed, tangible or intangible, free and clear of all liens, security interests,
charges and other encumbrances of any kind.
(b) Without material exception, all assets used in the Company
business are in good operating condition and repair and suitable for use in the
operation of such business, and none of such assets that (singly or when
aggregated with other assets) is material to the business of the Company is
obsolete.
2.9 CERTAIN CONTRACTS AND ARRANGEMENTS.
Except as set forth in Section 2.9 of the Disclosure Schedule (with true
and correct copies delivered to the Investor), the Company is not a party or
subject to or bound by:
(a) any plan or contract providing for collective bargaining or
the like, or any contract or agreement with any labor union;
(b) any contract, lease or agreement creating any obligation of
the Company to pay to any third party $100,000 or more with respect to any
single such contract or agreement;
(c) any contract or agreement for the sale, license, lease or
disposition of products or services in excess of $100,000;
(d) any contract containing covenants directly or explicitly
limiting the freedom of the Company to compete in any line of business or with
any person or entity;
(e) any license agreement (as licensor or licensee);
(f) any contract or agreement for the purchase of any leasehold
improvements, equipment or fixed assets for a price in excess of $100,000;
(g) any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for borrowing in excess of $100,000 or
any pledge or security arrangement;
(h) any material joint venture, partnership, or manufacturing
agreement;
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(i) any endorsement or any other advertising, promotional or
marketing agreement;
(j) any employment contracts, or agreements with officers,
directors, employees or stockholders of the Company or persons or organizations
related to or affiliated with any such persons;
(k) any pension, profit sharing, retirement (other than the
Company's 401(k) plan), stock option, phantom stock or other equity incentive
plans;
(l) any arrangement relating to any royalty payments to
employees, customers or independent contractors based on the sales volume of the
Company;
(m) any acquisition, merger or similar agreement; or
(n) any contract with a governmental body under which the
Company may have an obligation for renegotiation.
All of the Company's contracts and commitments are in full force and
effect and neither the Company nor, to the knowledge of the Company, any other
party is in default thereunder (nor, to the knowledge of the Company, has any
event occurred which with notice, lapse of time or both would constitute a
default thereunder), except to the extent that any such default would not have a
Material Adverse Effect, and the Company has not received notice of any alleged
default under any such contract, agreement, understanding or commitment.
2.10 INTELLECTUAL PROPERTY RIGHTS; EMPLOYEE RESTRICTIONS.
Except as set forth in Section 2.10 of the Disclosure Schedule:
(a) The Company has the right to use, sell, and license the
Intellectual Property Rights (as defined below) material to the conduct of its
business as presently conducted, including without limitation all rights to the
Company name "Lineo" and to the trademarks and the product name "Embedix," free
and clear of the rights of all others (the "Company Rights").
(b) The business of the Company as presently conducted, the
products marketed or sold, and the provision of services by the Company do not
violate and will not violate any agreements that the Company has with any third
party or infringe any patent, trademark, service xxxx, copyright or trade secret
or any other Intellectual Property Rights of any third party.
(c) No claim is pending or threatened against the Company nor
has the Company received any notice or claim from any person asserting that any
of the Company's present or contemplated activities infringe or may infringe any
Intellectual Property Rights of such person, and the Company is not aware of any
infringement by any other person of any of the Company Rights.
(d) Each current and former employee of the Company, and each
of the Company's consultants and independent contractors involved in development
of any of the Company Rights, has executed an agreement regarding
confidentiality, proprietary information and assignment of inventions and
copyrights to the Company, and none of such employees,
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consultants or independent contractors is in violation of any agreement or in
breach of any agreement or arrangement with former or present employers relating
to proprietary information or assignment of inventions. The Company has taken
all reasonable steps to protect all data, information, ideas, concepts, know-how
and materials that the Company treats as trade secrets, and all other
confidential information and Intellectual Property Rights of the Company, which
are not part of the public domain or knowledge, nor, to the best knowledge of
the Company, have they been used, divulged or appropriated for the benefit of
any person other than the Company or otherwise to the detriment of the Company.
(e) No royalties or other amounts are payable by the Company to
persons by reason of the ownership or use of the Intellectual Property Rights of
the Company.
(f) No third party has claimed or, to the best of the Company's
knowledge, has reason to claim that any person employed by or affiliated with
the Company has (a) violated or may be violating any of the terms or conditions
of his or her employment, non-competition, non-disclosure, non-solicitation or
inventions agreement with such third party, (b) disclosed or may be disclosing
or utilized or may be utilizing any Intellectual Property Rights, trade secret
or proprietary information or documentation of such third party, or (c)
interfered or may be interfering in the employment relationship between such
third party and any of its present or former employees.
As used herein, the term "Intellectual Property Rights" shall mean the
intellectual property rights, including, without limitation, all patents, patent
applications, patent rights, trademarks, trademark applications, trade names,
service marks, service xxxx applications, copyrights, copyright applications,
computer programs and other computer software, inventions, designs, samples,
specifications, schematics, know-how, trade secrets, proprietary processes and
formulae, including production technology and processes, all source and object
code, algorithms, promotional materials, customer lists, supplier and dealer
lists and marketing research, and all documentation and media constituting,
describing or relating to the foregoing, including without limitation, manuals,
memoranda and records.
2.11 LITIGATION.
There is no litigation or governmental proceeding or investigation
pending or threatened against the Company or affecting any of its properties or
assets or against any officer, director or key employee of the Company in his or
her capacity as an officer, director or employee of the Company, which
litigation, proceeding or investigation is reasonably likely to have a Material
Adverse Effect, or which may call into question the validity or hinder the
enforceability of this Agreement or any other agreements or transactions
contemplated hereby; nor has there occurred any event nor does there exist any
condition on the basis of which any such litigation, proceeding or investigation
might be properly instituted or commenced.
2.12 TAX MATTERS.
The Company has filed all federal, state, local and foreign income,
excise and franchise tax returns, real estate and personal property tax returns,
sales and use tax returns and other tax returns required to be filed by it where
the failure to file such returns would have a Material Adverse Effect, and has
paid all taxes owing by it, except taxes which have not yet accrued or
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otherwise become due, for which adequate provision has been made in the
pertinent financial statements referred to in Section 2.5 above or which will
not have a Material Adverse Effect. All taxes and other assessments and levies
which the Company is required to withhold or collect have been withheld and
collected and have been paid over to the proper governmental authorities except
where the failure to withhold or collect and pay over would not have a Material
Adverse Effect. With regard to the federal income tax returns of the Company,
the Company has never received notice of any audit or of any proposed
deficiencies from the Internal Revenue Service. There are in effect no waivers
of applicable statutes of limitations with respect to any taxing owed by the
Company for any year. Neither the Internal Revenue Service nor any other taxing
authority is now asserting or, to the knowledge of the Company, threatening to
assert against the Company any deficiency or claim for additional taxes or
interest thereon or penalties in connection therewith.
2.13 EMPLOYEE BENEFIT PLANS.
The Company does not maintain or contribute to any employee benefit plan,
stock option, bonus or incentive plan, severance pay policy or agreement,
deferred compensation agreement or any similar plan or agreement (an "Employee
Benefit Plan") other than the Plan and the Employee Benefit Plans identified and
described in Section 2.13 of the Disclosure Schedule. The terms and operation of
each Employee Benefit Plan comply in all material respects with all applicable
laws and regulations relating to such Employee Benefit Plan. There are no
unfunded obligations of the Company under any retirement, pension,
profit-sharing, deferred compensation plan or similar program. The Company is
not required to make any payments or contributions to any Employee Benefit Plan
pursuant to any collective bargaining agreement, and all Employee Benefit Plans
are terminable at the discretion of the Company without material liability to
the Company upon or following such termination. The Company has never maintained
or contributed to any Employee Benefit Plan providing or promising any health or
other welfare benefits (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) to terminated
employees, except for benefits mandated by applicable law, including, but not
limited to, Section 4980B of the Internal Revenue Code of 1986, as amended, and
Part 6 of Subtitle B of Title I of ERISA.
2.14 LABOR LAWS.
The Company employs approximately 50 employees and generally enjoys good
employer-employee relationships. The Company is not delinquent in payments to
any of its employees for any wages, salaries, commissions, bonuses or other
direct compensation for any services performed for it as of the date hereof or
amounts required to be reimbursed to such employees. The Company is in
compliance in all material respects with all applicable laws and regulations
respecting labor, employment, fair employment practices, terms and conditions of
employment, and wages and hours. There are no charges of employment
discrimination or unfair labor practices or strikes, slowdowns, stoppages of
work or any other concerted interference with normal operations existing,
pending or, to the knowledge of the Company, threatened against or involving the
Company.
2.15 EMPLOYEES.
Section 2.15 of the Disclosure Schedule contains a list of all managers,
employees and consultants of the Company who, individually, have received
compensation from the Company
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for the fiscal year of the Company ended October 31, 1999, in excess of
$100,000. In each case, Section 2.15 of the Disclosure Schedule includes the
current job title, years of service with the Company and aggregate annual
compensation and benefits of each such individual. To the knowledge of the
Company and the Stockholders, no key employee of the Company has any plan or
intention to terminate his or her employment with the Company. The Company has
complied in all material respects with the immigration laws of the United States
with respect to the hiring, employment and engagement of all of its employees
and consultants who are not United States citizens, and, to the knowledge of the
Company, the immigration or residency status of each of such employees and
consultants is sufficient to allow such employees and consultants to remain
lawfully employed or engaged by the Company.
2.16 HAZARDOUS WASTE, ETC.
No hazardous wastes, substances or materials or oil or petroleum products
have been generated, transported, used, disposed, stored or treated by the
Company, and no hazardous wastes, substances or materials or oil or petroleum
products have been released, discharged, disposed, transported, placed or
otherwise caused to enter the soil or water in, under or upon any real property
owned, leased or operated by the Company.
2.17 BUSINESS; COMPLIANCE WITH LAWS.
The Company has all necessary franchises, permits, licenses and other
rights and privileges necessary to permit it to own its property and to conduct
its business as it is presently or contemplated to be conducted. The Company is
currently and has heretofore been in compliance in all material respects with
all federal, state, local and foreign laws and regulations.
2.18 INVESTMENT BANKING; BROKERAGE.
There are no claims for investment banking fees, brokerage commissions,
finder's fees or similar compensation (exclusive of professional fees to lawyers
and accountants) in connection with the transaction contemplated by this
Agreement payable by the Company or based on any arrangement or agreement made
by or on behalf of the Company or any of the Stockholders.
2.19 INSURANCE.
The Company has fire, casualty, product liability, workers' compensation
and business interruption and other insurance policies, with extended coverage,
sufficient in amount to allow it to replace any of its material properties which
might be damaged or destroyed or sufficient to cover liabilities to which the
Company may reasonably become subject, and such types and amounts of other
insurance with respect to its business and properties, on both a per occurrence
and an aggregate basis, as are customarily carried by persons engaged in the
same or similar business as the Company. There is no default or event which
could give rise to a default under any such policy.
2.20 TRANSACTIONS WITH AFFILIATES.
There are no loans, leases, contracts or other transactions between the
Company and any officer, director or five percent (5%) stockholder of the
Company or any family member or
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affiliate of the foregoing persons, and there have been no such transactions
within the past twelve (12) months except as set forth in Section 2.20 of the
Disclosure Schedule.
2.21 SUPPLIERS.
Section 2.21 of the Disclosure Schedule sets forth each supplier of the
Company who supplied more than five percent (5%) of the Company's supplies or
materials for the fiscal year ended October 31, 1999 and each supplier who the
Company believes may supply for more than five percent (5%) of the Company's
supplies or materials for the fiscal year ended October 31, 2000 (each a
"Supplier" and collectively the "Suppliers"). The relationships of the Company
with its Suppliers are good commercial working relationships. No Supplier of the
Company has canceled or otherwise terminated its relationship with the Company,
or has during the last 12 months decreased materially its services, supplies or
materials to the Company. No Supplier has, to the knowledge of the Company, any
plan or intention to terminate, cancel or otherwise materially and adversely
modify its relationship with the Company or to decrease materially or limit its
services, supplies or materials to the Company.
2.22 CERTAIN EVENTS.
(a) During the past ten (10) years, neither the Company nor any
of the officers or directors of the Company has had a petition under the
Bankruptcy Reform Act of 1978, as amended, or any state insolvency law, filed by
or against any of them which has not as of the date of this Agreement been
dismissed.
(b) During the past ten (10) years, neither the Company nor the
officers or directors of the Company has been convicted in a criminal proceeding
or is a named subject of a criminal proceeding which is presently pending
(excluding traffic violations and other minor offenses).
(c) During the past ten (10) years, neither the Company nor the
officers or directors of the Company has been, or is, the subject of any order,
judgment or decree, whether or not subsequently reversed, suspended or vacated,
of any court or any administrative agency, requiring the payment of money
damages in excess of $100,000 or permanently or temporarily enjoining any of
them from, or otherwise limiting any of their abilities to engage in, any type
of business practice.
2.23 REGISTRATION RIGHTS.
Except as disclosed is Section 2.23 of the Disclosure Schedule, the
Company has not granted or agreed to grant any registration rights, including
piggyback rights, to any person or entity.
2.24 DISCLOSURE.
The representations and warranties made or contained in this Agreement,
the exhibits hereto and the certificates and statements executed or delivered in
connection herewith, and the information concerning the business of the Company
delivered to the Investor in connection with or pursuant to this Agreement, when
taken together, do not and shall not contain any untrue statement of a material
fact and do not and shall not omit to state a material fact required to be
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stated therein or necessary in order to make such representations, warranties or
other material not misleading in light of the circumstances in which they were
made or delivered. There have been no events or transactions or information
which has come to the attention of the management of the Company having a direct
impact on the Company or its assets, liabilities, financial condition, business,
results of operations or prospects which, in the reasonable judgment of such
management, could be expected to have a Material Adverse Effect.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
The Investor represents and warrants to the Company the following:
3.1 INVESTMENT EXPERIENCE AND INTENT.
The Investor represents to the Company that it has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the investment contemplated by this Agreement and making
an informed investment decision with respect thereto. The investor represents
that it is an "accredited investor" as such term is defined in Rule 501 under
the Securities Act. The Investor represents and understands that it is
responsible for its own due diligence investigation and satisfying its own due
diligence requirements and shall not be entitled to rely on the due diligence
investigation of any other person or entity. The Investor represents to the
Company that it is purchasing the Series A Class 2 Preferred Shares for its own
account, for investment only and not with a view to, or any present intention
of, effecting a distribution of such securities or any part thereof except
pursuant to a registration or an available exemption under applicable law. The
Investor acknowledges that its respective Series A Class 2 Preferred Shares have
not been registered under the Securities Act or the securities laws of any state
or other jurisdiction and cannot be disposed of unless they are subsequently
registered under the Securities Act and any applicable state laws or exemption
from such registration is available.
3.2 AUTHORIZATION AND NON-CONTRAVENTION.
The Investor represents that it has full right, authority and power to
enter into this Agreement and each agreement, document and instrument to be
executed and delivered by or on behalf of such Investor pursuant to or as
contemplated by this Agreement and to carry out the transactions contemplated
hereby and thereby, and the execution, delivery and performance by such Investor
of this Agreement and each such other agreement, document and instrument have
been duly authorized by all necessary action. The Investor represents and
warrants that this Agreement and each agreement, document and instrument
executed and delivered by such Investor pursuant to or as contemplated by this
Agreement constitute, or when executed and delivered will constitute, valid and
binding obligations of such Investor enforceable in accordance with their
respective terms and that the execution, delivery and performance by such
Investor of this Agreement and each such other agreement, document and
instrument, and the performance of the transactions contemplated hereby and
thereby do not and will not: (a) violate, conflict with or result in a default
(whether after the giving of notice, lapse of time or both) under any contract
or obligation to which such Investor is a party or by which it or its assets are
bound, or cause the creation of any encumbrance upon any of the assets of the
Investor; (b) violate or result in a violation of, or constitute a default
under, any provision of any law, regulation or rule, or any order of, or any
restriction imposed by, any court or other governmental agency applicable to the
Investor; (c) require from the Investor any notice to, declaration or filing
with,
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or consent or approval of any governmental authority or other third party;
or (d) accelerate any obligation under, or give rise to a right of termination
of, any agreement, permit, license or authorization to which the Investor is a
party or by which the Investor is bound.
3.3 COMMISSIONS AND FEES.
The Investor represents that there are no claims for investment banking
fees, brokerage commissions, finder's fees or similar compensation (exclusive of
professional fees to lawyers and accountants) in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of such Investor.
SECTION 4. CONDITIONS OF PURCHASE.
The Investor's obligation to purchase and pay for the Series A Class 2
Preferred Shares to be purchased by it shall be subject to compliance by the
Company with its agreements herein contained and to the fulfillment to the
Investor's satisfaction, or the waiver by the Investor, on or before and at the
Closing Date, of the following conditions:
4.1 SATISFACTION OF CONDITIONS.
The representations and warranties of the Company contained in this
Agreement shall be true and correct on and as of the Closing Date; each of the
conditions specified in this Section 4 shall have been satisfied or waived in
writing by the Investor; and, on the Closing Date, certificates to such effect
executed by the President and Chief Financial Officer of the Company shall have
been delivered to the Investor.
4.2 AUTHORIZATION.
The Board of Directors of the Company shall have duly adopted resolutions
in form and substance reasonably satisfactory to the Investor and shall have
taken all action necessary for the purpose of authorizing the Company to
consummate the transactions contemplated hereby in accordance with the terms
hereof and to cause the Certificate to become effective; and the Investor shall
have received a certificate of the Secretary of the Company setting forth a copy
of the relevant Board of Directors and/or stockholder resolutions and the
Certificate of Incorporation, the Certificate and Bylaws of the Company and such
other matters as may be reasonably requested by the Investor.
4.3 OPINION OF COUNSEL.
The Investor shall have received from Summit Law Group an opinion dated
as of the Closing Date substantially in the form attached hereto as EXHIBIT C.
4.4 ALL PROCEEDINGS SATISFACTORY.
All corporate and other proceedings taken prior to or at the Closing in
connection with the transactions contemplated by this Agreement, and all
documents and evidences incident thereto, shall be reasonably satisfactory in
form and substance to the Investor.
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4.5 NO VIOLATION OR INJUNCTION.
The consummation of the transactions contemplated by this Agreement shall
not be in violation of any law or regulation and shall not be subject to any
injunction, stay or restraining order.
4.6 CONSENTS AND WAIVERS.
The Company shall have obtained all consents or waivers necessary to
execute this Agreement and the other agreements and documents contemplated
herein, to issue and sell the Securities to be sold to the Investor hereunder
and to carry out the transactions contemplated hereby and thereby and shall have
delivered evidence thereof to the Investor. All corporate and other action and
governmental filings necessary to effectuate the terms of this Agreement and
other agreements and instruments executed and delivered by the Company in
connection herewith shall have been made or taken.
4.7 ATTORNEYS' FEES.
The Company shall have reimbursed Investor for its reasonable fees and
expenses of a single legal counsel, up to $10,000.
4.8 OTHER AGREEMENTS.
The Company, Investor and all other relevant parties shall have entered
into the Voting Agreement and the Investor Rights Agreement.
SECTION 5. GENERAL.
5.1 AMENDMENTS, WAIVERS AND CONSENTS.
For the purpose of this Agreement and all agreements executed pursuant
hereto, no course of dealing between or among any of the parties hereto and no
delay on the part of any party hereto in exercising any rights hereunder or
thereunder shall operate as a waiver of the rights hereof and thereof. No
covenant or other provision hereof may be waived otherwise than by a written
instrument signed by the party or parties so waiving such covenant or other
provision. No amendment to this Agreement may be made without the written
consent of the Company and the Investor.
5.2 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS;
ASSIGNABILITY OF RIGHTS.
All covenants, agreements, representations and warranties of the Company
and the Investor made herein, in the Disclosure Schedule and the Certificate and
in the certificates, lists, exhibits, schedules or other written information
delivered or furnished to any Investor in connection herewith (a) are material,
shall be deemed to have been relied upon by the party or parties to whom they
are made and shall survive the Closing regardless of any investigation or
knowledge on the part of such party or its representatives and (b) shall bind
the parties' successors and assigns (including without limitation any successor
to the Company by way of acquisition, merger or otherwise), whether so expressed
or not, and, except as otherwise provided in this Agreement, all such covenants,
agreements, representations and warranties shall inure to the benefit of the
Investor's successors and assigns and to their transferees of Securities,
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whether so expressed or not, and any such transferee shall be deemed the
"Investor" for purposes hereof.
5.3 LEGEND ON SECURITIES.
The Company and the Investor acknowledge and agree that the following
legend shall be typed on each certificate evidencing any of the securities
issued hereunder held at any time by an Investor:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES OR BLUE SKY LAWS AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT (1)
PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR (2) PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO
THE DISPOSITION OF SECURITIES AND (3) IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES AND BLUE SKY LAWS.
5.4 GOVERNING LAW.
This Agreement shall be deemed to be a contract made under, and shall be
construed in accordance with, the laws of Delaware, without giving effect to
conflict of laws principles thereof.
5.5 SECTION HEADINGS AND GENDER.
The descriptive headings in this Agreement have been inserted for
convenience only and shall not be deemed to limit or otherwise affect the
construction of any provision thereof or hereof. The use in this Agreement of
the masculine pronoun in reference to a party hereto shall be deemed to include
the feminine or neuter, and vice versa, as the context may require.
5.6 COUNTERPARTS.
This Agreement may be executed simultaneously in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute but one and the
same document.
5.7 NOTICES AND DEMANDS.
Any notice or demand which is required or provided to be given under this
Agreement or the Certificate shall be deemed to have been sufficiently given and
received for all purposes when delivered by hand, telecopy, telex or other
method of facsimile, or five days after being sent by certified or registered
mail, postage and charges prepaid, return receipt requested, or two
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days after being sent by overnight delivery providing receipt of delivery, to
the following addresses:
if to the Company: Lineo, Inc.
000 X. 000 X.
Xxxxxx, Xxxx 00000
Attn: President
Fax: (000) 000-0000
copy to: Summit Law Group
0000 Xxxxxxxx Xxxxxx X., Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxxxxxx, Esq.
Fax: (000) 000-0000
if to the Investor: __________________
__________________
__________________
5.8 REMEDIES; SEVERABILITY.
It is specifically understood and agreed that any breach of the
provisions of this Agreement by any person subject hereto will result in
irreparable injury to the other parties hereto, that the remedy at law alone
will be an inadequate remedy for such breach, and that, in addition to any other
remedies which they may have, such other parties may enforce their respective
rights by actions for specific performance (to the extent permitted by law). The
Company may refuse to recognize any unauthorized transferee as one of its
stockholders for any purpose, including, without limitation, for purposes of
dividend and voting rights, until the relevant party or parties have complied
with all applicable of this Agreement. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be deemed
prohibited or invalid under such applicable law, such provision shall be
ineffective to the extent
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of such prohibition or invalidity, and such prohibition or invalidity shall not
invalidate the remainder of such provision or the other provisions of this
Agreement.
5.9 INTEGRATION.
This Agreement, including the exhibits, documents and instruments
referred to herein or therein, constitutes the entire agreement, and supersedes
all other prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
Lineo, Inc. Investor
By: ____________________________________ By:__________________________________
Xxxxx Xxxxxx, President and Chairman
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