Preferred Stock Purchase Agreement (the "Agreement") effective as of
September 16, 1998 by and between VCS Technologies, Inc. (the "Company"), and
Xxxxxxx X. Xxxxxxx III ("Xxxxxxx"). The Company and Wheaton may be referred to
herein collectively as the "Parties" or individually as a "Party."
In consideration of the promises and the mutual covenants contained
herein, the Parties hereby agree as follows:
1 Company Obligation. The Parties acknowledge that the Company is obligated to
pay to Wheaton for accrued salary, commissions and reimbursable expenses the
aggregate amount of $371,582 (the "Company Obligation").
2 Purchase of Preferred Stock. Effective as of the date hereof, Wheaton hereby
agrees to purchase from the Company, and the Company agrees to sell to
Wheaton, 3,716 shares of the Company's Series A Preferred Stock (the "Series A
Shares") for an aggregate purchase price of $371,582. As payment for the
Series A Shares purchased hereby, Wheaton has waived payment of the Company
Obligation. The Company shall deliver to Wheaton a certificate representing
the Series A Shares as soon as practicable following the date of this
Agreement.
3 Representations and Warranties of the Company. The Company represents and
warrants to Wheaton as follows:
3.1 The Company is duly organized, validly existing and in good standing
under the laws of the state of Delaware with full power and authority to
operate its business as currently conducted.
3.2 The authorized capital stock of the Company consists of 9,990,000
shares of Common Stock and 10,000 shares of Preferred Stock. Each outstanding
share of Common Stock is duly authorized, validly issued, fully paid and
non-assessable, and has not been issued and is not owned or held in violation
of any preemptive rights of stockholders. No shares of Preferred Stock are
currently outstanding. As soon as practicable following the date of this
Agreement, the Company shall take such corporate actions and shall make such
filings with the Secretary of State of the State of Delaware as may be
necessary to authorize, designate and issue the Series A Shares in accordance
with this Agreement.
3.3 The Company has all requisite power and authority to execute, deliver
and perform its obligations under this Agreement. This Agreement has been duly
authorized by the Company and, when executed and delivered by the Company will
constitute the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
3.4 Except as set forth in Section 3.2 above, no consent, authorization,
approval, order, license, certificate or permit of or from, or declaration or
filing with, any federal, state, local or other governmental authority, or any
court or any other tribunal, is required by the Company for the execution,
delivery or performance by the Company under this Agreement (except for such
filings as may be required under federal and state securities laws).
4 Representations and Warranties of Wheaton. Wheaton hereby represents and
warrants to the Company as follows:
4.1 Wheaton is a bona fide resident of the state set forth in Section 7.3
of this Agreement and is legally competent to execute this Agreement.
4.2 Wheaton has received, read carefully and is familiar with this
Agreement. Respecting the Company, Wheaton is familiar with the Company's
business and financial condition and any other matters relating to the
transactions contemplated hereby; Wheaton has received all materials which
have been requested by him, has had a reasonable opportunity to ask questions
of the Company and its representatives, and the Company has answered all
inquiries that Wheaton has put to it. Wheaton has taken all the steps
necessary to evaluate the merits and risks of the transactions effected
hereby.
4.3 Wheaton has been advised by the Company to consider retaining legal
counsel in connection with the preparation and the execution of this
Agreement.
4.4 Wheaton represents that he is an "accredited investor" as such term
is defined in Rule 501 of the Rules and Regulations promulgated under the
Securities Act of 1933, as amended (the "Securities Act").
4.5 Wheaton has such knowledge and experience in finance, securities,
investments and other business matters so as to be able to evaluate the merits
and risks of his investment in the Company.
4.6 Wheaton has adequate means of providing for his current and
foreseeable future needs and has no need for liquidity of his investment in
the Company. Wheaton recognizes and is fully cognizant of the fact that his
investment in the Company involves a high degree of risk, and Wheaton
represents that he can afford to bear such risk, including, without
limitation, the risk of losing the entire investment.
4.7 Wheaton has been advised by the Company that (i) the Series A Shares
purchased hereby and the shares of Common Stock into which the Series A Shares
may be converted (collectively, the "Securities") have not been registered
under the Securities Act, and that the Securities will be issued on the basis
of the statutory exemption provided by Section 4(2) of the Securities Act or
Regulation D promulgated thereunder, or both, relating to transactions by an
issuer not involving any public offering, and under similar exemptions under
applicable state securities laws; (ii) none of the Securities have been
registered or qualified with any federal or state agency or self-regulatory
organization, and (iii) the Company's reliance on exemptions from federal and
state registration or qualification requirements is based in part upon the
representations made by Wheaton contained in this Agreement.
4.8 Wheaton has been advised by the Company of, and/or he is otherwise
familiar with, the nature of the limitations on the transfer of the Securities
imposed by the Securities Act and the Rules and Regulations promulgated
thereunder. In particular, Wheaton agrees that no sale, assignment or transfer
of any of the Securities shall be valid or effective (and agrees to not so
sell, assign or transfer any of the Securities), and the Company shall not be
required to give any effect to such a sale, assignment or transfer, unless the
sale, assignment or transfer is (i) registered under the Securities Act, it
being understood that none of the Securities are currently registered for
sale; or (ii) made in accordance with all the requirements and limitations of
Rule 144 under the Securities Act. Wheaton acknowledges that the Securities
shall be subject to a stop transfer order and that the certificate or
certificates evidencing the Securities shall bear the following legend (and
such other legends as may be required by state blue sky laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (1) A REGISTRATION
STATEMENT UNDER THE ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT
WITH RESPECT TO THESE SECURITIES, OR (2) PURSUANT TO A SPECIFIC
EXEMPTION FROM REGISTRATION UNDER THE ACT BUT ONLY UPON A HOLDER
HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE
COMPANY, OR OTHER COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY, THAT
THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL APPLICABLE PROVISIONS
OF THE ACT AS WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR STATE
SECURITIES LAW.
4.9 Wheaton is acquiring the Securities for his own account for
investment and not with a view to the sale or distribution thereof or the
granting of any participation therein. Wheaton has no present intention of
distributing or selling to others any of such interest or granting any
participation therein.
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4.10 It never has been represented, guaranteed or warranted by any of the
Company, the Company's officers, directors, stockholders, employees or agents,
or any other person, whether expressly or by implication, that (i) the Company
or Wheaton will realize any given percentage of profits and/or amount or type
of consideration, profit or loss as a result of the Company's activities or
Wheaton's investment; or (ii) the past performance or experience of the
management of the Company, or of any other person, will in any way indicate
the predictable results of the Company's activities or the ownership of the
Securities.
4.11 Wheaton is not acquiring the Securities as a result of or subsequent
to any advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or
presented at any seminar or meeting, or any solicitation of a share exchange
by a person other than a representative of the Company with whom Wheaton had a
pre-existing relationship.
4.12 Wheaton is not relying on the Company with respect to the tax and
other economic considerations of an investment.
5 Indemnification.
5.1 Survival of Representations and Warranties. The representations and
warranties contained herein shall survive the execution and delivery of this
Agreement and shall continue forever thereafter.
5.2 Indemnification for the Benefit of the Company. Wheaton acknowledges
that he understands the meaning and legal consequences of the representations
and warranties contained in Section 4 hereof, and agrees to indemnify and hold
harmless the Company and each of the Company's officers, directors, employees
and agents from and against any and all loss, damage or liability due to or
arising out of a breach of any such representation or warranty.
5.3 Indemnification for the Benefit of Wheaton. The Company acknowledges
that it understands the meaning and legal consequences of the representations
and warranties contained in Section 3 hereof, and agrees to indemnify and hold
harmless Wheaton and each of Wheaton's officers, directors, employees and
agents from and against any and all loss, damage or liability due to or
arising out of a breach of any such representation or warranty.
6 Company's Right of First Purchase. For such time until the date prior to the
effective date of the registration statement filed in connection with the
Company's initial public offering, any shares of Common Stock held by Wheaton
(including, but not limited to, any of the Securities) will be subject to the
Company's right of first purchase. By virtue of that right, (a) such shares of
Common Stock may not be transferred during Wheaton's lifetime to any person
other than members of Wheaton's Immediate Family (as defined below), a
partnership whose members are Wheaton's and/or members of Wheaton's Immediate
Family, or a trust for the benefit of Wheaton and/or members of Wheaton's
Immediate Family, unless such transfer occurs within the 30 days immediately
following either (i) the expiration of 30 days following written notice by
Wheaton to the Company identifying the prospective transferee and offering the
Company the first opportunity to purchase such stock at its Fair Market Value
(as defined below) in cash; or (ii) the Company's election to not purchase
such shares of Common Stock after receipt of such notice; and (b) upon
Wheaton's death, the Company will have the right to purchase all or some of
such stock at its Fair Market Value within nine months after the date of
death. This right of first purchase will continue to apply to any such shares
of Common Stock after the transfer during Wheaton's lifetime of such shares of
Common Stock to a member of Wheaton's Immediate Family or to a family
partnership or trust as aforesaid, and after any transfer of such shares of
Common Stock with respect to which the the Company expressly waived its right
of first purchase without also waiving it as to any subsequent transfers
thereof, but it will not apply after a transfer of such shares of Common Stock
with respect to which the Company was offered but did not exercise or waive
its right of first purchase or more than nine months after Wheaton's death.
The Company may assign all or any portion of its right of first purchase to
any one or more of its stockholders, or to a
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pension or retirement plan or trust for employees of the Company, who may then
exercise the right so assigned. The Company's right of first purchase shall
terminate on the date prior to the effective date of the registration
statement filed in connection with the Company's initial public offering.
6.1 Certain Definitions. In addition to the terms defined elsewhere in
this Agreement, the following terms will have the following definitions:
6.1.1 Fair Market Value. The "Fair Market Value" of Common Stock will
mean the price at which one could reasonably expect such stock to be sold in
an arm's length transaction, for cash, other than on an installment basis, to
a person not employed by, controlled by, in control of or under common control
with the issuer of such stock. Such Fair Market Value will be that which has
currently or most recently been determined for this purpose by the Board of
Directors of the Company, or at the sole discretion of the Board by an
independent appraiser or appraisers selected by the Board, in either case
giving due consideration to recent transactions involving shares of such
stock, if any, the issuer's net worth, prospective earning power and
dividend-paying capacity, the goodwill of the issuer's business, the issuer's
industry position and its management, that industry's economic outlook, the
values of securities of issuers whose stock is publicly traded and which are
engaged in similar businesses, the effect of transfer restrictions to which
such stock may be subject under law and under the applicable terms of any
contract governing such stock, the absence of a public market for such stock
and such other matters as the Board or its appraiser or appraisers deem
pertinent. The determination by the Board or its appraiser or appraisers of
the Fair Market Value will be conclusive and binding notwithstanding the
possibility that other persons might make a different determination. If the
Fair Market Value to be used was thus fixed more than sixteen months prior to
the day as of which Fair Market Value is being determined, it will in any
event be no less than the book value of the stock being valued at the end of
the most recent period for which financial statements of the Company are
available.
6.1.2 Immediate Family. An individual's "Immediate Family" includes
only his or her spouse, parents or other ancestors, and children and other
direct descendants of that individual or of his or her spouse (including such
ancestors and descendants by adoption).
7 Miscellaneous.
7.1 Confidentiality. Wheaton hereby acknowledges and agrees that this
Agreement is confidential, and that its terms and contents shall not be
disclosed to any person other than through a press release of the Company.
7.2 Payment of Expenses. Except as expressly otherwise provided, each of
the Parties hereto shall pay all expenses and disbursements incurred by its
officers, employees, attorneys, accountants, financial advisers and other
agents and representatives in connection with this Agreement and the
performance of its obligations hereunder.
7.3 Notices. Any notices required or permitted to be given to, or served
upon, either Party hereto pursuant to this Agreement shall be sufficiently
given or served if sent to such Party by registered or certified mail,
addressed to it at its address, as set forth below, or to such other address
as it shall designate by written notice to the other parties addressed as
follows:
VCS Technologies, Inc.
000 Xxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Att: Xxxxxxx X. Xxxxxxx III, President and CEO
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Xxxxxxx X. Xxxxxxx III
C/o VCS Technologies, Inc.
000 Xxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
7.4 Counterparts. This Agreement may be executed in any number of
counterparts and each counterpart shall constitute an original instrument, but
all such separate counterparts shall constitute only one and the same
instrument.
7.5 Entire Agreement. This agreement constitutes the entire agreement
between the Parties hereto and supersedes all prior agreements, understandings
and arrangements, oral or written, between the Parties hereto with respect to
the subject matter hereof.
7.6 Amendments and Waivers. This Agreement may not be modified or amended
except by an instrument or instruments in writing signed by the Party against
whom enforcement of any such modification or agreement is sought. Either Party
hereto may, by an instrument in writing, waive compliance by the other Party
with any term or provision of this Agreement to be performed or complied with
by such other Party hereto. The waiver by any Party of a breach of any term or
provision of this Agreement shall not be construed as a waiver of any
subsequent breach.
7.7 Assignment. This Agreement is personal in nature and neither of the
Parties shall, without the written consent of the other, assign or transfer
its rights or obligations hereunder to another person or entity, except as
herein expressly provided or permitted and except that the Company may
transfer all or any portion of its rights or obligations hereunder to any of
its affiliates without such prior written consent. Subject to the foregoing
provisions of this Section 8.7, this Agreement shall be binding upon and inure
to the benefit of the Parties hereto and their respective successors and
assigns.
7.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of New York and all disputes arising hereunder shall
be adjudicated solely before the courts of New York to whose jurisdiction the
Parties hereto consent.
IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement and
caused the same to be delivered on their behalf as of the date first above
written.
VCS Technologies, Inc.
/s/ Xxxxxxx Xxxxxxx III By: /s/ Xxxxxxx Xxxxxxx III
------------------------ ------------------------
Xxxxxxx X. Xxxxxxx III Xxxxxxx X. Xxxxxxx III
President and CEO
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