STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made
and entered into as of August 31, 2001 (the "Agreement Date"),
by and between XXXXXXXXXX.XXX INC., a Delaware corporation
currently having its principal place of business located at 0
Xxxxxx Xxxx, Xxxxxx Xxxxxx, XX 00000 (the "Company"), PLANET
ZANETT CORPORATE INCUBATOR, INC., a Delaware corporation
currently having its principal place of business located at 000
Xxxx 00xx Xxxxxx, Xxx Xxxx, XX 00000 ("Planet Zanett"), XXXX I,
LLC, a Delaware limited liability company ("XXXX" and
collectively with Planet Zanett, the "Investors") Xx. Xxxxx
Xxxxxxxxxxx, and Xx. Xxxx Xxxxxx (each, unless otherwise
specifically identified, a "Founder" and, collectively, the
"Founders").
RECITALS
The Company desires to sell to the Investors, and the
Investors desire to purchase from the Company, shares of the
Company's Series A Convertible Preferred Stock on the terms and
conditions set forth in this Agreement.
The Company desires to sell to the Founders, and the
Founders desire to purchase from the Company, shares of the
Company's Common Stock on the terms and conditions set forth in
this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and for
other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
1. AGREEMENT TO PURCHASE AND SELL STOCK.
1.1 Authorization. As of the Agreement Date, the
Company will have authorized the issuance, pursuant to the terms
and conditions of this Agreement, of (i) three thousand six
hundred forty-two (3,642) shares of the Company's Series A
Convertible Preferred Stock, $0.0001 par value per share (the
"Series A Stock") having the rights, preferences, privileges and
restrictions set forth in the Certificate of Designation
designating the Series A Stock of the Company attached to this
Agreement as Exhibit A (the "Certificate") and (ii) two thousand
three hundred (2,300) shares of the Company's Common Stock,
without par value (the "Common Stock").
1.2 Agreement to Purchase and Sell Common Stock. The
Company agrees to sell to the Founders, and the Founders agree
to purchase from the Company an aggregate of two thousand three
hundred (2,300) shares of Common Stock (each Founder purchasing
1,150 shares), at a purchase price of U.S. $5.2174 per share for
an aggregate purchase price (the "Common Stock Purchase Price")
of U.S. Twelve Thousand Dollars ($12,000). The shares of Common
Stock purchased and sold pursuant to this Agreement will be
collectively referred to as the "Purchased Common Shares".
(a) Each Founder shall pay to the Company U.S.
Five Hundred ($500.00) of the Common Stock Purchase Price on or
about the first day of each month, each of which payments shall
be made against the delivery to each Founder of a duly executed
share certificate in the name of such Founder representing
ninety five and eight-tenths (95.8) shares of the Purchased
Common Shares. Payments made pursuant this Section 1.2(a) will
be made by check payable to the Company.
1.3 Agreement to Purchase and Sell Preferred Stock.
The Company agrees to sell to the Investors, and the Investors
agree to purchase from the Company, the Series A Stock at a
purchase price of U.S. $65.8979 per share for an aggregate
purchase price (the "Series A Purchase Price") of U.S. Two
Hundred Forty Thousand Dollars ($240,000). The shares of Series
A Stock purchased and sold pursuant to this Agreement will be
collectively referred to as the "Purchased Preferred Shares".
The Purchased Common Shares and the Purchased Preferred Shares
will be collectively referred to as the "Purchased Shares".
(a) The Investors shall pay to the Company the
Series A Purchase Price in twelve equal aggregate monthly
installments of U.S. Twenty Thousand Dollars ($20,000) on or
about the first day of each month, each of which payments shall
be made against the delivery of (i) a stock certificate issued
to and in the name of Planet Zanett, representing two hundred
seventy six and eighty three-one hundredths (276.83) shares of
the Company's Series A Stock and (ii) a stock certificate issued
to and in the name of XXXX representing twenty six and sixty
six-one hundredths (26.66) shares of the Company's Series A
Stock; and provided further, that the Investors will not be
obligated to make any such payments to the Company if as of the
date when such payment otherwise would be due there has occurred
any event, or exists any condition, circumstance or state of
affairs which has had or may have a material adverse effect on
the Company's business, assets, operations, financial condition
or prospects, taken as a whole, as reasonably determined by
Planet Zanett. Payments made pursuant this Section 1.3(a) will
be made by check payable to the Company.
(b) The shares of Common Stock issuable upon
conversion of the Purchased Preferred Shares will be
collectively referred to as the "Conversion Shares."
2. DELIVERIES.
(a) Upon the execution hereof, and against the
Company's receipt of a check in the amount of U.S. Five Hundred
Dollars ($500.00) from each of the Founders, which represents
the first payments to be made pursuant to Section 1.2 above, the
Company shall deliver to the Founders stock certificates issued
to and in the name of each Founder representing ninety five and
eight-tenths (95.8) shares of the Company's Common Stock.
(b) Upon the execution hereof, and against the
Company's receipt of a check in the amount of U.S. Twenty
Thousand Dollars ($20,000) which represents the first payment
pursuant to Section 1.3 above, the Company shall deliver to the
Investors (i) a stock certificate issued to and in the name of
Planet Zanett, representing two hundred seventy six and eighty
three-one hundredths (276.83) shares of the Company's Series A
Stock and (ii) a stock certificate issued to and in the name of
XXXX, representing twenty six and sixty six-one hundredths
(26.66) shares of the Company's Series A Stock.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents and warrants that, except as set forth
on Schedule 3 hereto, each of the representations and warranties
made in Sections 3.1, 3.3, 3.4, 3.6, 3.7, 3.9 (a), (b) and (d),
3.10, 3.11, 3.13, 3.14, 3.15, 3.17, 3.19, 3.20, 3.21, 3.22,
3.23, 3.25, 3.26, 3.27 of that certain Common Stock Purchase
Agreement between the Company and Planet Zanett dated January
26, 2001 (the "Original Agreement") are true and correct in all
material respects as of the date hereof, as if such
representations and warranties were made on the date hereof.
All of such representations and warranties shall be deemed to be
representations and warranties of Seller contained in this
Agreement.
In addition to the above, the Company hereby
represents and warrants to the Investors as follows:
3.1 Capitalization. On the Agreement Date, and
subsequent to the filing of the Company's restated certificate
of incorporation and the Certificate, the capitalization of the
Company will consist of the following (which following
information shall not include the Purchased Shares):
(a) Common Stock. A total of ten thousand
(10,000) authorized shares of Common Stock, without par value,
of which one thousand four hundred twenty five (1,425) shares
are currently issued and outstanding, excluding any Conversion
Shares into which the Purchased Shares issuable to the Investors
hereunder may be converted.
(b) Preferred Stock. A total of five thousand
(5,000) authorized shares of preferred stock, par value of
$.0001 per share, none of which are issued and outstanding. The
rights, preferences and privileges of the Series A Stock will be
as stated in the Certificate and as provided by law.
(c) Other Securities. The Company has reserved
seventy five (75) shares of its Common Stock for future issuance
to employees, directors and officers of, and consultants to, the
Company under the 2000 Incentive Stock Plan (the "2000 Plan") as
may be determined by the Company's Board of Directors from time
to time. As of the date hereof, options for an aggregate of
forty-five (45) shares of Common Stock have been awarded to
Messrs. Xxxx Xxxxxxxx and Xxxxxx Xxxxxxx.
(d) Options, Warrants, Reserved Shares. Except
as otherwise provided in Section 3.2(c) above, there are not
outstanding any options, warrants, rights (including conversion
or preemptive rights) or agreements for the purchase or
acquisition from the Company of any shares of its capital stock
or any securities convertible into or ultimately exchangeable or
exercisable for any shares of the Company's capital stock. No
shares of the Company's outstanding capital stock, or stock
issuable upon exercise or exchange of any outstanding options,
warrants or rights, or other stock issuable by the Company, are
subject to any rights of first refusal or other rights to
purchase such stock (whether in favor of the Company or any
other person), pursuant to any agreement or commitment of the
Company, other than as follows: (i) an aggregate of forty five
(45) shares of the Company's common stock issuable to Messrs.
Xxxx Xxxxxxxx and Xxxxxx Xxxxxxx pursuant to exercise of stock
options awarded to them under the 2000 Plan which are
represented by stock option agreements referenced on Schedule
3.1(e); (ii) shares of the Company's capital stock issued to and
in the name of each of Messrs. Xxxx Xxxxxxxxxx and Xxxx
Xxxxxxxxxx are subject to call options in favor of the Company
pursuant to the terms of their respective original subscription
agreements dated as of June 28, 2000, and (iii) all shares of
the Company's capital stock previously and hereafter issued to
the Investors, the Founders, Xx. Xxx Xxxxxxx, Xx. Xxxx
Xxxxxxxxxx and Xx. Xxxx Xxxxxxxxxx, all of which are subject to
certain rights of first refusal and a Company option of
repurchase pursuant to that certain stockholders agreement dated
as of January 26, 2001 by and among each of Planet Zanett, the
Founders, Xx. Xxx Xxxxxxx, Xx. Xxxx Xxxxxxxxxx and Xx. Xxxx
Xxxxxxxxxx.
(e) Outstanding Security Holders. Attached to
this Agreement as Schedule 3.1(e) is a complete list of all
outstanding stockholders, option holders, warrant holders,
convertible note holders and other security holders of the
Company as of immediately prior to the Agreement Date, which
schedule lists the type of instruments, certificate numbers in
sequential order (if applicable), the dates of issuance, the
names of holders and the number of Shares held or to be held
upon exercise of such instrument.
3.2 Valid Issuance of Stock.
The Purchased Shares, when issued, sold and
delivered in accordance with the terms of this Agreement for the
consideration provided for herein, will be duly and validly
issued, fully paid and nonassessable. The Conversion Shares have
been duly and validly reserved for issuance and, upon issuance
in accordance with the terms of the Certificate, will be duly
and validly issued, fully paid and nonassessable.
(a) Based in part on the representations made by
the Investors in Section 4 hereof and the Founders in Section 5
hereof, the Purchased Shares and (assuming no change in
applicable law and no unlawful distribution of Purchased Shares
by the Investors or other parties) the Conversion Shares will be
issued pursuant to an exemption from the registration and
prospectus delivery requirements of the U.S. Securities Act of
1933, as amended (the "1933 Act") and in compliance with the
registration and qualification requirements, or applicable
exemptions therefrom, of all applicable state securities laws;
provided that, with respect to the Conversion Shares, no
commission or other remuneration is paid or given, directly or
indirectly, for soliciting the issuance of Conversion Shares
upon the conversion of the Purchased Preferred Shares and no
additional consideration is paid for the Conversion Shares other
than surrender of the applicable Purchased Preferred Shares upon
conversion thereof in accordance with the Certificate.
(b) The outstanding shares of the capital stock
of the Company are duly and validly issued, fully paid and
nonassessable, and such shares of capital stock, and all
outstanding options, warrants, convertible notes and other
securities of the Company, have been issued in full compliance
with the registration and prospectus delivery requirements of
the 1933 Act or in compliance with applicable exemptions
therefrom, the registration and qualification requirements of
all applicable securities laws of states of the United States
and all other provisions of applicable securities laws of States
of the United States, including, without limitation, anti-fraud
provisions.
3.3 Due Authorization. All corporate action on the
part of the Company, its officers, directors and stockholders
necessary for the authorization, execution, delivery of, and the
performance of all obligations of the Company under this
Agreement and the Certificate and the authorization, issuance,
reservation for issuance and delivery of all of the Purchased
Shares being sold under this Agreement and of the Conversion
Shares has been taken or will be taken prior to the Agreement
Date, and this Agreement constitutes the valid and legally
binding obligations of the Company, enforceable in accordance
with their respective terms, except as may be limited by (i)
applicable bankruptcy, insolvency, reorganization or others laws
of general application relating to or affecting the enforcement
of creditors' rights generally and (ii) the effect of rules of
law governing the availability of equitable remedies.
3.4 Status of Proprietary Assets. Within thirty (30)
days of the date hereof, the Company will be in full compliance
with the service provider safe harbor provisions set forth at
Section 512(c) of the Digital Millennium Copyright Act ("DMCA")
and, to the best of the Company's Knowledge, the Company has not
violated or infringed, and is not currently violating or
infringing, and the Company has not received any communications
alleging that the Company (or any of its employees or
consultants) has violated or infringed or, by conducting its
business as proposed, would violate or infringe, any Proprietary
Asset of any other person or entity; provided, however, and
notwithstanding the foregoing, the Investors expressly
acknowledge that, although the Company's business as proposed to
be conducted will implement safeguards against infringement of
third party intellectual property rights (e.g., in its terms of
use and through the availability of its digital rights
management feature - the copyright protected network ("CPN")),
no assurance can be provided to the Investors that all of such
third parties' respective intellectual property rights will not
be infringed by participants, users and/or subscribers of the
Company's services, which infringement may possibly implicate
the Company under various laws including, but not limited to,
the DMCA.
3.5 Registration Rights. Except as provided in the
Investor Rights Agreement between the Company and Planet Zanett
dated January 26, 2001, the Company has not granted or agreed to
grant to any person or entity any rights (including piggyback
registration rights) to have any securities of the Company
registered with the United States Securities and Exchange
Commission ("SEC") or any other governmental authority.
3.6 Activities Since July 1, 2001. Except as set
forth on Schedule 3.7, the Company has not since July 1, 2001:
(a) formed or acquired or disposed of any
interest in any corporation, partnership, joint venture, or
other entity;
(b) written up, written down, or written off the
book value of any amount of assets;
(c) declared, paid, or set aside for payment any
dividend or distribution with respect to its capital stock;
(d) redeemed, purchased, or otherwise acquired,
or sold, granted, or otherwise disposed of, directly or
indirectly, any of its capital stock or securities or any rights
to acquire such capital stock or securities, or agreed to
changes in the terms and conditions of any such rights;
(e) increased the compensation of or paid or
accrued any bonus to any employee or contributed or accrued or
contributed to any employee benefit plan, other than in
accordance with policies, practices, or requirements established
and in effect on July 1, 2001;
(f) entered into any employment, compensation,
consulting or collective bargaining agreement with any person or
group;
(g) entered into, adopted, or materially amended
any employee benefit plan; or
(h) entered into any other material commitment
or transaction not disclosed elsewhere herein.
In addition to the foregoing, since July 1,
2001, there has not been:
(i) any damage, destruction or loss, whether or
not covered by insurance, materially and adversely affecting the
assets, properties, financial condition, operating results,
prospects or business of the Company (as presently conducted and
as presently proposed to be conducted);
(j) any waiver by the Company of a valuable
right or of a material debt owed to it;
(k) any satisfaction or discharge of any lien,
claim or encumbrance or payment of any obligation by the
Company, except such a satisfaction, discharge or payment made
in the ordinary course of business that is not material to the
assets, properties, financial condition, operating results or
business of the Company;
(l) any material change or amendment to a
material agreement or arrangement by which the Company or any of
its assets or properties is bound or subject, except for changes
or amendments which are expressly provided for or disclosed in
this Agreement; or
(m) to the Company's Knowledge, any other event
or condition of any character which would materially and
adversely affect the assets, properties, financial condition,
operating results or business of the Company.
3.7 Insurance. At such time as it is financially
practicable for the Company to do so, as determined by the Board
of Directors, the Company will obtain such insurance policies as
are customary for the type of business engaged in by the
Company, with extended coverage, sufficient in amount (subject
to reasonable deductibles) to allow it to replace any of its
properties that might be damaged or destroyed. Once obtained,
true and complete copies of all such insurance policies will be
furnished to the Investors and notice of any termination or
threatened termination of such policies will be made known to
the Investors.
3.8 Use of Proceeds. The Company shall, upon its
receipt of the Series A Purchase Price from the Investors and
the Common Stock Purchase Price from the Founders, use such
funds for the purposes identified on Schedule 3.9.
4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF
THE INVESTOR. The Investors hereby represent and warrant to,
and agree with, the Company that:
4.1 Authorization. This Agreement constitutes each
Investor's valid and legally binding obligation, enforceable in
accordance with its terms except as may be limited by (i)
applicable bankruptcy, insolvency, reorganization or other laws
of general application relating to or affecting the enforcement
of creditors' rights generally and (ii) the effect of rules of
law governing the availability of equitable remedies. Each
Investor represents that it has full power and authority to
enter into this Agreement and that its entering into this
Agreement and consummating the transactions contemplated hereby
will not conflict with, violate, or result in a breach of any
terms or conditions of any order, judgment or decree, or any
agreement or instrument to which it is a party or by which it or
any of its properties or assets are bound, or constitutes a
default thereunder.
4.2 Purchase for Own Account. The Purchased
Preferred Shares to be purchased by each Investor hereunder, and
any Conversion Shares to be acquired by each Investor upon the
conversion of all or any portion thereof, will be acquired for
investment for each Investor's own account, not as a nominee or
agent, and not with a view to the public resale or distribution
thereof within the meaning of the Act, and the Investors have no
present intention of selling, granting any participation in, or
otherwise distributing the same. Notwithstanding the preceding
sentence, the Company acknowledges that Planet Zanett may
transfer all or any portion of its investment in the Company to
one or more affiliates of Planet Zanett. Each Investor also
represents that it has not been formed for the specific purpose
of acquiring the Purchased Preferred Shares, or any Conversion
Shares to be acquired by the Investors upon the conversion of
all or any portion thereof.
4.3 Disclosure of Information. The Investors have
received or have had full access to all the information they
consider necessary or appropriate to make an informed investment
decision with respect to the Purchased Preferred Shares to be
purchased by the Investors under this Agreement, and any
Conversion Shares to be acquired by the Investors upon the
conversion of all or any portion thereof. The Investors further
have had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the
offering of the Purchased Preferred Shares and to obtain
additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or
expense) necessary to verify any information furnished to the
Investors or to which the Investors had access. The foregoing,
however, does not in any way limit or modify the representations
and warranties made by the Company in Section 3.
4.4 Investment Experience. The Investors understand
that the acquisition of the Purchased Preferred Shares, and any
Conversion Shares to be acquired by the Investors upon the
conversion of all or any portion thereof, involves substantial
risk. Each Investor: (i) has experience as an investor in
securities of companies in the development stage and
acknowledges that it is able to fend for itself, can bear the
economic risk of its acquisition of the Purchased Preferred
Shares, and any Conversion Shares to be acquired by the Investor
upon the conversion of all or any portion thereof, and the
potential loss of its entire investment therein, and has such
knowledge and experience in financial or business matters that
it is capable of evaluating the merits and risks of this
acquisition of the Purchased Preferred Shares, and any
Conversion Shares to be acquired by the Investor upon the
conversion of all or any portion thereof, and protecting its own
interests in connection with this acquisition and/or (ii) has a
preexisting personal or business relationship with the Company
and certain of its officers, directors or controlling persons of
a nature and duration that enables the Investor to be aware of
the character, business acumen and financial circumstances of
such persons.
4.5 Restricted Securities. Each Investor understands
that the Purchased Preferred Shares, and any Conversion Shares
to be acquired by the Investors upon the conversion of all or
any portion thereof, are characterized as "restricted
securities" under the Act inasmuch as the Purchased Preferred
Shares, and any Conversion Shares to be acquired by the
Investors upon the conversion of all or any portion thereof, are
being acquired from the Company in transactions not involving a
public offering and that under the Act and applicable rules and
regulations thereunder such securities may be resold without
registration under the Act only in certain limited
circumstances. In this connection, each Investor represents
that it is familiar with Rule 144 of the rules and regulations
promulgated under the Act ("Rule 144"), as presently in effect,
and understands the resale limitations imposed thereby and by
the Act. Each Investor understands that the Company is under no
obligation to register any of the securities sold hereunder
except as provided in the Amended and Restated Investor Rights
Agreement. Each Investor understands that no public market now
exists for any of the Purchased Preferred Shares, or any
Conversion Shares to be acquired by the Investors upon the
conversion of all or any portion thereof, and that it is
uncertain whether a public market will ever exist for the
Purchased Preferred Shares or the Conversion Shares.
4.6 Further Limitations on Disposition. Without in
any way limiting the representations set forth above, each
Investor further agrees not to make any disposition of all or
any portion of the Purchased Preferred Shares or the Conversion
Shares unless and until:
(a) there is then in effect a registration
statement under the 1933 Act covering such proposed disposition
and such disposition is made in accordance with such
registration statement; or
(b) (i) the Investor shall have notified the
Company of the proposed disposition and shall have furnished the
Company with a statement of the circumstances surrounding the
proposed disposition, and (ii) the Investor shall have furnished
the Company, at the expense of the Investor or its transferees,
with an opinion of counsel, reasonably satisfactory to the
Company, that such disposition will not require registration of
such securities under the Act.
Notwithstanding the provisions of paragraphs (a)
and (b) above, no such registration statement or opinion of
counsel shall be required: (i) for any transfer of any
Purchased Preferred Shares or Conversion Shares in compliance
with Rule 144 or Rule 144A; or (ii) for any transfer of any
Purchased Preferred Shares by an Investor to (A) a partner or
member of such Investor, (B) a retired partner of such Investor
who retires after the date hereof, or (C) the estate of any such
partner or member; provided that in each of the foregoing cases
the transferee agrees in writing to be subject to the terms of
this Section 4 to the same extent as if the transferee were an
original Investor hereunder. For the avoidance of doubt, all
transfers by the Investors as contemplated in this Section 4.6
are subject to compliance with applicable law.
4.7 Legends. It is understood that the certificates
evidencing the Purchased Preferred Shares and the Conversion
Shares will, in addition to any other legends required by any
other agreements among the parties, bear the following legend:
(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED
UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT
TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE
AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF
THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF
THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
(b) The Purchased Preferred Shares and the
Conversion Shares shall also bear any legend required by state
securities laws, and the Purchased Preferred Shares shall
include an additional legend substantially in the form of the
following:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE: (1) ARE
CONVERTIBLE INTO SHARES OF COMMON STOCK OF THE COMPANY AT
THE OPTION OF THE HOLDER AT ANY TIME PRIOR TO AUTOMATIC
CONVERSION THEREOF; AND (2) AUTOMATICALLY CONVERT INTO
COMMON STOCK OF THE COMPANY IN THE EVENT OF A PUBLIC
OFFERING MEETING CERTAIN REQUIREMENTS OR UPON CERTAIN
CONSENTS OF THE HOLDERS OF THE COMPANY'S PREFERRED STOCK
ALL PURSUANT TO AND UPON THE TERMS AND CONDITIONS SPECIFIED
IN THE COMPANY'S CERTIFICATE OF DESIGNATION. A COPY OF
SUCH CERTIFICATE OF DESIGNATION MAY BE OBTAINED, WITHOUT
CHARGE, AT THE COMPANY'S PRINCIPAL OFFICE.
The legend set forth in (a) above shall be
removed by the Company from any certificate evidencing Purchased
Preferred Shares or Conversion Shares upon delivery to the
Company of an opinion by counsel, reasonably satisfactory to the
Company, that a registration statement under the Act is at that
time in effect with respect to the legended security or that
such security can be freely transferred in a public sale without
such a registration statement being in effect and that such
transfer will not jeopardize the exemption or exemptions from
registration pursuant to which the Company issued the Purchased
Preferred Shares or Conversion Shares. The Company acknowledges
and agrees that it will permit the transfer of the Purchased
Preferred Shares to an affiliate of Planet Zanett without
requiring an opinion of counsel so long as the legend set forth
in (a) above appears on the transferred certificates and so long
as such transfer is not in violation of applicable federal and
state securities laws.
5. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF
THE FOUNDERS. Each Founder hereby represents and warrants to,
and agrees with, the Company that:
5.1 Authorization. This Agreement constitutes each
Founder's valid and legally binding obligation, enforceable in
accordance with its terms except as may be limited by (i)
applicable bankruptcy, insolvency, reorganization or other laws
of general application relating to or affecting the enforcement
of creditors' rights generally and (ii) the effect of rules of
law governing the availability of equitable remedies. Each
Founder represents that it has full power and authority to enter
into this Agreement and that its entering into this Agreement
and consummating the transactions contemplated hereby will not
conflict with, violate, or result in a breach of any terms or
conditions of any order, judgment or decree, or any agreement or
instrument to which it is a party or by which it or any of its
properties or assets are bound, or constitutes a default
thereunder.
5.2 Purchase for Own Account. The Purchased Common
Shares to be purchased by each Founder hereunder will be
acquired for investment for each Founder's own account, not as a
nominee or agent, and not with a view to the public resale or
distribution thereof within the meaning of the Act, and each
Founder has no present intention of selling, granting any
participation in, or otherwise distributing the same.
Notwithstanding the preceding sentence, the Company acknowledges
that each Founder may transfer all or any portion of its
investment in the Company to one or more affiliates of each
Founder.
5.3 Disclosure of Information. Each Founder has
received or has had full access to all the information it
considers necessary or appropriate to make an informed
investment decision with respect to the Purchased Common Shares
to be purchased by each Founder under this Agreement. Each
Founder further has had an opportunity to ask questions and
receive answers from the Company regarding the terms and
conditions of the offering of the Purchased Common Shares and to
obtain additional information (to the extent the Company
possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify any
information furnished to each Founder or to which each Founder
had access. The foregoing, however, does not in any way limit
or modify the representations and warranties made by the Company
in Section 3.
5.4 Investment Experience. Each Founder understands
that the acquisition of the Purchased Common Shares involves
substantial risk. Each Founder: (i) has experience as an
investor in securities of companies in the development stage and
acknowledges that it is able to fend for itself, can bear the
economic risk of its acquisition of the Purchased Common Shares
and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of
this acquisition of the Purchased Common Shares and protecting
its own interests in connection with this acquisition and/or
(ii) has a preexisting personal or business relationship with
the Company and certain of its officers, directors or
controlling persons of a nature and duration that enables each
Founder to be aware of the character, business acumen and
financial circumstances of such persons.
5.5 Restricted Securities. Each Founder understands
that the Purchased Common Shares are characterized as
"restricted securities" under the Act inasmuch as they are being
acquired from the Company in a transaction not involving a
public offering and that under the Act and applicable rules and
regulations thereunder such securities may be resold without
registration under the Act only in certain limited
circumstances. In this connection, each Founder represents that
it is familiar with Rule 144 of the rules and regulations
promulgated under the Act ("Rule 144"), as presently in effect,
and understands the resale limitations imposed thereby and by
the Act. Each Founder understands that the Company is under no
obligation to register any of the securities sold hereunder.
Each Founder understands that no public market now exists for
any of the Purchased Common Shares and that it is uncertain
whether a public market will ever exist for the Purchased Common
Shares.
5.6 Further Limitations on Disposition. Without in
any way limiting the representations set forth above, each
Founder further agrees not to make any disposition of all or any
portion of the Purchased Common Shares unless and until:
(a) there is then in effect a registration
statement under the 1933 Act covering such proposed disposition
and such disposition is made in accordance with such
registration statement; or
(b) (i) each Founder shall have notified the
Company of the proposed disposition and shall have furnished the
Company with a statement of the circumstances surrounding the
proposed disposition, and (ii) each Founder shall have furnished
the Company, at the expense of each Founder or its transferees,
with an opinion of counsel, reasonably satisfactory to the
Company, that such disposition will not require registration of
such securities under the Act.
Notwithstanding the provisions of paragraphs (a)
and (b) above, no such registration statement or opinion of
counsel shall be required: (i) for any transfer of any
Purchased Common Shares in compliance with Rule 144 or Rule
144A; or (ii) for any transfer of any Purchased Common Shares by
each Founder to (A) a partner of such Founder, (B) a retired
partner of such Founder who retires after the date hereof, or
(C) the estate of any such partner; provided that in each of the
foregoing cases the transferee agrees in writing to be subject
to the terms of this Section 5 to the same extent as if the
transferee were an original investor hereunder.
5.7 Legends. It is understood that the certificates
evidencing the Purchased Common Shares will, in addition to any
other legends required by any other agreements among the
parties, bear the legends set forth below:
(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED
UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT
TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE
AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF
THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF
THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
(b) Any legend required by state securities
laws.
The legend set forth in (a) above shall be
removed by the Company from any certificate evidencing Purchased
Common Shares upon delivery to the Company of an opinion by
counsel, reasonably satisfactory to the Company, that a
registration statement under the Act is at that time in effect
with respect to the legended security or that such security can
be freely transferred in a public sale without such a
registration statement being in effect and that such transfer
will not jeopardize the exemption or exemptions from
registration pursuant to which the Company issued the Purchased
Common Shares. The Company acknowledges and agrees that it will
permit the transfer of the Purchased Common Shares to an
affiliate of each Founder without requiring an opinion of
counsel so long as the legend set forth in (a) above appears on
the transferred certificates and so long as such transfer is not
in violation of applicable federal and state securities laws.
6. CONDITIONS TO INVESTORS' OBLIGATIONS. The obligations
of the Investors to the Company under this Agreement are subject
to the fulfillment or waiver, on or before the Agreement Date,
of each of the following conditions, the waiver of which shall
not be effective against the Investors if the Investors do not
consent to such waiver, which consent may be given by written
communication to the Company or its counsel:
6.1 Representations and Warranties True. Each of the
representations and warranties of the Company contained in
Section 3 shall be true and correct on and as of the Agreement
Date with the same effect as though such representations and
warranties had been made on and as of the Agreement Date.
6.2 Due Diligence. Planet Zanett shall have
completed, to its sole satisfaction, its due diligence of the
Company.
6.3 Performance. The Company shall have performed
and complied with all agreements, obligations and conditions
contained in this Agreement that are required to be performed or
complied with by it on or before the Agreement Date and shall
have obtained all approvals, consents and qualifications
necessary to complete the purchase and sale described herein.
6.4 Certificate of Designation. The Certificate
shall have been duly adopted by the Company by all necessary
corporate action of its Board of Directors and stockholders, and
shall have been duly filed with and accepted by the Delaware
Secretary of State.
6.5 Compliance Certificate. The Company shall have
delivered to the Investors by the Agreement Date a certificate
signed on its behalf by its President, Chief Executive Officer,
or Chief Financial Officer certifying that the conditions
specified in Sections 6.1, 6.3 and 6.4 have been fulfilled and
stating that there shall have been no material adverse change in
the business, affairs, prospects, operations, properties, assets
or condition of the Company.
6.6 Securities Exemptions. The offer and sale of the
Purchased Shares to the Investors pursuant to this Agreement
shall be exempt from the registration requirements of the Act
and the registration and/or qualification requirements of all
other applicable state securities laws.
6.7 Proceedings and Documents. All corporate and
other proceedings in connection with the transactions
contemplated and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Investors
and to the counsel for Planet Zanett, and they shall each have
received all such counterpart originals and certified or other
copies of such documents as they may reasonably request. Such
documents shall include (but not be limited to) the following:
(a) Certified Charter Documents. A copy of the
Company's restated certificate of incorporation, the Certificate
and Bylaws of the Company (as amended through the Agreement
Date), certified by the Secretary of the Company as true and
correct copies thereof as of the Agreement Date.
(b) Secretary's Incumbency Certificate. A
certificate of the Secretary or an Assistant Secretary or other
officer of the Company certifying the names of the officers of
the Company authorized to sign this Agreement, the certificates
for the Purchased Shares and the other documents, instruments or
certificates to be delivered pursuant to this Agreement by the
Company or any of its officers, together with the true
signatures of such officers.
(c) Corporate Actions. A copy of the
resolutions of the Board of Directors and the stockholders of
the Company evidencing the approval of the Certificate, this
Agreement, the issuance of the Purchased Shares and the other
matters contemplated hereby, certified by the Secretary of the
Company to be true, complete and correct.
(d) Good Standing Certificates. A certificate of
good standing of the Company issued by the Delaware Secretary of
State, dated no earlier than ten (10) days prior to the
Agreement Date.
6.8 Ownership of Technology. The Investors shall
have received from the Company all documents and other materials
requested by the Investors in writing for the purpose of
examining and determining the Company's rights in and to any
technology, product and Proprietary Assets now used, proposed to
be used in, or necessary to, the Company's business as now
conducted and proposed to be conducted, and the status of the
Company's ownership rights in and to all such technology,
products and Proprietary Assets shall be reasonably satisfactory
to the Investors.
6.9 Designees on the Board of Directors. The Company
shall ensure that (i) the number of directors of the Corporation
remains at five (5) members and (ii) the three (3) persons
designated by Planet Zanett to the Company's Board of Directors
(the "Investor Directors") shall be appointed to the Board of
Directors as of the date hereof.
6.10 Officers' Certificates. The Company shall
deliver to the Investors certificates executed by each of its
officers and directors in which each of them represents that he
(i) has not made a personal filing or been an officer or
director, partner or member of an entity that has filed an
action seeking protection under the Bankruptcy Code of the
United States of America or analogous law of any jurisdiction
not subject to the laws of the United States of America during
the past seven (7) years and (ii) has never been convicted of
any action that is defined as a crime that would adversely
affect the company or its public image or would be required to
be disclosed under Paragraph 401(f) of Regulation S-K under the
Act.
6.11 Consent Letter. The Investors shall have
received a letter in the form attached hereto as Exhibit B,
executed by the Company, the Investors, the Founders and Xx.
Xxx Xxxxxxx stating, among other things, that such parties
acknowledge and agree that the rights of the Investors under the
Stockholder's Agreement and the Investor Rights Agreement
between the Company and Planet Zanett dated January 26, 2001
apply to the Purchased Preferred Shares and the Conversion
Shares.
6.12 No Material Change. There shall have been no
material adverse change in the business, affairs, prospects,
operations, properties, assets or condition of the Company.
7. CONDITIONS TO THE COMPANY'S OBLIGATIONS . The
obligations of the Company to the Investors under this Agreement
are subject to the fulfillment or waiver, on or before the
Agreement Date, of each of the following conditions, the waiver
of which shall not be effective against the Company if the
Company does not consent to such waiver, which consent may be
given by written communication to the Investors or Planet
Zanett's counsel:
7.1 Representations and Warranties. The
representations and warranties of the Investors contained in
Section 4 and the Founders in Section 5 shall be true and
correct on the Agreement Date with the same effect as though
such representations and warranties had been made on and as of
the Agreement Date.
7.2 Payment. The Investors shall have delivered to
the Company the first payment set forth in, and in accordance
with the provisions of, Section 1.2.
7.3 Certificate of Designation. The Certificate
shall each have been duly adopted by the Company by all
necessary corporate action of its Board of Directors and
stockholders, and shall have been duly filed with and accepted
by the Delaware Secretary of State.
7.4 Securities Exemptions. The offer and sale of the
Purchased Preferred Shares to the Investors pursuant to this
Agreement shall be exempt from the registration requirements of
the Act and the registration and/or qualification requirements
of all other applicable state securities laws.
7.5 Proceedings and Documents. All corporate and
other proceedings in connection with the transactions
contemplated by this Agreement and all documents incident
thereto shall be reasonably satisfactory in form and substance
to the Company and to the Company's legal counsel, and the
Company shall have received all such counterpart originals and
certified or other copies of such documents as it may reasonably
request.
8. CONDITIONS TO THE FOUNDERS' OBLIGATIONS. The
obligations of the Founders to the Company under this Agreement
are subject to the fulfillment or waiver, on or before the
Agreement Date, of the following condition, the waiver of which
shall not be effective against the Founders if each of the
Founders do not consent to such waiver, which consent may be
given by written communication to the Company or its counsel:
On or before the Agreement Date and prior to each purchase by
the Founders of Common Shares hereunder, the Company shall have
loaned to the Founders, in equal amount (e.g., $500 to each
Founder) the portion of the Common Stock Purchase Price in order
to provide them with the requisite capital to purchase that
installment of the Purchased Common Shares.
9. MISCELLANEOUS.
9.1 Survival of Warranties. The representations,
warranties and covenants of the Company and the Investors
contained in or made pursuant to this Agreement shall survive
the execution and delivery of this Agreement and shall in no way
be affected by any investigation of the subject matter thereof
made by or on behalf of the Investors, such Investor's counsel
or the Company, as the case may be.
9.2 Assignment. This Agreement may not be assigned
by any of the parties hereto without the prior written consent
of all of the other parties, except that Planet Zanett may,
subject to compliance with applicable law, assign this Agreement
or transfer all or a portion of its investment in the Company to
any of its affiliates on five (5) days prior written notice to
the Company. The Company expressly agrees to cooperate in
effecting any such assignment or transfer.
9.3 Successors and Assigns. The terms and conditions
of this Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties.
9.4 Governing Law; Venue; Waiver of Jury Trial. This
Agreement shall be governed by and construed under the internal
laws of the State of Delaware, without reference to principles
of conflict of laws or choice of laws. The venue for any claim,
controversy or dispute which arises between the parties hereto
(with respect to this Agreement) shall be the United States
District Court for the District of Delaware (or state court if
federal jurisdiction does not apply) and the parties hereby
consent to the jurisdiction of such courts and waive any
objection to such venue. THE PARTIES TO THIS AGREEMENT HEREBY
WAIVE THEIR RIGHT TO A TRIAL BY JURY WITH RESPECT TO DISPUTES
ARISING UNDER THIS AGREEMENT AND THE RELATED AGREEMENTS AND
CONSENT TO A BENCH TRIAL WITH THE APPROPRIATE JUDGE ACTING AS
THE FINDER OF FACT.
9.5 Counterparts; Facsimile Signatures. This
Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together
shall constitute one and the same instrument. This Agreement
may be executed by facsimile signature which, for purposes
hereof, shall be deemed to be the original signatures of such
party.
9.6 Headings. The headings and captions used in this
Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement. All
references in this Agreement to sections, paragraphs, exhibits
and schedules shall, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules
attached hereto, all of which exhibits and schedules are
incorporated herein by this reference.
9.7 Notices. Any notice, request or other
communication required or permitted hereunder shall be in
writing and shall be deemed to have been duly given if
personally delivered or if deposited in the U.S. mail by
registered or certified mail, return receipt requested, postage
prepaid, as follows:
If to Planet Zanett:
Planet Zanett Corporate Incubator, Inc.
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxxxx
with a copy (which shall not constitute notice
hereunder) to:
Klehr, Harrison, Xxxxxx, Branzburg & Xxxxxx, LLP
000 X. Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
If to XXXX:
XXXX I, LLC
00 Xxxx Xxxxxx, #00X
XX, XX 00000
Attention:: Xxxxx Xxxxxxxxx
If to the Company or the Founders:
XxxxxXxxxx.Xxx Inc.
0 Xxxxxx Xxxx
Xxxxxx Xxxxxx, XX 00000
Attention: Xx. Xxxxx Xxxxxxxxxxx
President & CEO
with a copy (which shall not constitute notice
hereunder) to:
Xxxxxx, Xxxxxxxx & Xxxxx, a Professional
Corporation
000 Xxxxxxxx
0xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxx, Esquire
Any party hereto (and such party's permitted assigns) may by
notice so given change its address for future notices hereunder.
Notice shall conclusively be deemed to have been given when
personally delivered or when deposited in the mail in the mail
in the manner set forth above.
9.8 No Finder's Fees. Neither the Investors, the
Company, or any officer, director, or employee of the Investors
or the Company (i) employed any broker or finder, or (ii)
incurred any liability whatsoever, for any brokerage fees,
commissions, or finders' fees in connection with the
transactions contemplated hereby. Each Investor agrees to
indemnify and to hold harmless the Company from any liability
for any commission or compensation in the nature of a finders'
or broker's fee (and any asserted liability) for which such
Investor or any of its officers, partners, employees, or
representatives is responsible. The Company agrees to indemnify
and hold harmless the Investors from any liability for any
commission or compensation in the nature of a finder's or
broker's fee (and any asserted liability) for which the Company
or any of its officers, employees or representatives is
responsible.
9.9 Attorneys' Fees. If any action at law or in
equity is necessary to enforce or interpret the terms of this
Agreement or the Certificate, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such
party may be entitled.
9.10 Amendments and Waivers. Any term of this
Agreement may be amended and the observance of any term of this
Agreement 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 Investors. Any
amendment or waiver effected in accordance with this Section
9.10 shall be binding upon each holder of any Purchased Shares
and/or Conversion Shares at the time outstanding, each future
holder of such securities, and the Company. In view of the
foregoing, the Investors hereby acknowledges that the Company
has not effected the amendments of its certificate of
incorporation required by Section 7.17 of the Original Agreement
to increase its authorized capitalization to 50,000,000 shares
and to effect the 1500-for-1 forward stock split and
reclassification of its shares of common stock (the
"Reclassification and Forward Split") nor previously
affirmatively undertaken to examine and comply with the safe-
harbor provisions of the DMCA, as contemplated thereby, and
accordingly, the Investors hereby agree that they will not take
any action against the Company, its officers, directors or
agents as a result of its failure to do so. Furthermore, the
Company is hereby relieved of its obligations to cause the
Reclassification and Forward Split amendments to its certificate
of incorporation to be effected.
9.11 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law,
such provision(s) shall be excluded from this Agreement and the
balance of the Agreement shall be interpreted as if such
provision(s) were so excluded and shall be enforceable in
accordance with its terms.
9.12 Entire Agreement. This Agreement, together with
all exhibits and schedules hereto, constitutes the entire
agreement and understanding of the parties with respect to the
subject matter hereof and supersedes any and all prior
negotiations, correspondence, agreements, understandings duties
or obligations between the parties with respect to the subject
matter hereof.
9.13 Further Assurances. From and after the date of
this Agreement, upon the request of the Investors or the
Company, the Company and each Investor shall execute and deliver
such instruments, documents or other writings as may be
reasonably necessary or desirable to confirm and carry out and
to effectuate fully the intent and purposes of this Agreement.
9.14 Mutual Drafting. This Agreement is the result of
the joint efforts of the Company and the Investors, and each
provision hereof has been subject to the mutual consultation,
negotiation and agreement of the parties and there shall be no
construction against any party based on any presumption of the
party's involvement in the drafting thereof.
9.15 Publicity. Neither the Company nor the Investors
shall make any public disclosure concerning the transaction
contemplated by this Agreement unless required by law or unless
upon the mutual consent of the parties hereto; provided,
further, that all such disclosure shall have the prior
reasonable approval of both parties.
IN WITNESS WHEREOF, the parties hereto have executed this
Stock Purchase Agreement as of the date first above written.
THE COMPANY:
XXXXXXXXXX.XXX INC.,
a Delaware corporation
By:
Xx. Xxxxx Xxxxxxxxxxx
President & CEO
THE INVESTORS:
PLANET ZANETT CORPORATE INCUBATOR,
INC., a Delaware corporation
By:
Xxxxx XxXxxxxx
Chief Executive Officer
XXXX I, LLC,
a Delaware limited liability
company
By
Xxxxx Xxxxxxxxx
Member
FOUNDERS:
Xxxxx Xxxxxxxxxxx
Xxxx Xxxxxx
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
Schedule 3
Exceptions to Representations and
Warranties
Schedule 3.2(e)
Outstanding Security Holders
Schedule 3.6
Activities Since July 1, 2001
Schedule 3.9
Use of Proceeds
EXHIBITS
Exhibit A
Certificate of Designation
Exhibit B
Form of Consent Letter
