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EXHIBIT 10.22
XXXXXXXX.XXX, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of the 12th day of November
1999, by and among XxxXxxxx.xxx, Inc., a Delaware corporation (the "Company"),
and the investors severally and not jointly listed on Schedule A hereto, each of
which is herein referred to as an "Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Sale and Issuance of Series A Preferred Stock.
(a) The Company shall adopt and file with the Secretary of State
of Delaware on or before the Initial Closing (as defined below) the Restated
Certificate of Incorporation in the form attached hereto as Exhibit A (the
"Restated Certificate").
(b) On or prior to the Initial Closing (as defined below), the
Company shall have authorized (i) the sale and issuance to the Investors of the
Series A Preferred Stock and (ii) the issuance of the shares of Common Stock to
be issued upon conversion of the Series A Preferred Stock (the "Conversion
Shares"). The Series A Preferred Stock and the Conversion Shares shall have the
rights, preferences, privileges and restrictions set forth in the Restated
Certificate.
(c) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally and not jointly, to purchase at the Initial Closing
or pursuant to Section 1.3 and the Company agrees to sell and issue to each
Investor at the Initial Closing or pursuant to Section 1.3, that number of
shares of the Company's Series A Preferred Stock set forth opposite such
Investor's name on Schedule A hereto for the purchase price set forth thereon.
1.2 Initial Closing. The purchase and sale of the Series A Preferred
Stock shall take place at the offices of Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx
Xxxxxxxx & Xxxxxxxxx, LLP, 000 Xxxxxxxxxxxx Xxxxx, Xxxxx Xxxx, Xxxxxxxxxx, at
10:00 A.M., on November 12, 1999, or at such other time and place as the Company
and Investors acquiring in the aggregate more than half the shares of Series A
Preferred Stock sold pursuant hereto mutually agree upon orally or in writing
(which time and place are designated as the "Initial Closing"). At the Initial
Closing the Company shall deliver to each Investor a certificate representing
the Series A Preferred Stock that such Investor is purchasing against payment of
the purchase price therefor by check, wire transfer, cancellation of
indebtedness, or any combination thereof.
1.3 Subsequent Sale of Series A Preferred Stock to Xxxx.xxx, Inc.
Concurrent with the launch of the Company's web site, which shall occur no later
than February 1, 2000, Xxxx.xxx, Inc. shall purchase, at a purchase price of
$0.93 per share an additional 1,612,903
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shares of Series A Preferred Stock, provided that the web site is reasonably
satisfactory to Xxxx.xxx, Inc. (the "Xxxx.xxx Subsequent Closing").
1.4 Subsequent Sale of Series A Preferred Stock. The Company may sell up
to the balance of the authorized number of shares of Series A Preferred Stock
not sold at the Initial Closing or reserved for the Xxxx.xxx Subsequent Closing
to such purchasers as it shall select, at a price not less than $0.93 per share,
provided the agreement for sale is executed not later than January 1, 2000. Any
such purchaser shall become a party to this Agreement and that certain
Investors' Rights Agreement dated November 12, 1999, by and among the Company
and the Investors, the form of which is attached hereto as Exhibit B (the
"Investors' Rights Agreement"), that certain Voting Agreement dated November 12,
1999, by and among the Company and the Investors, the form of which is attached
hereto as Exhibit C (the "Voting Agreement") and that certain Right of First
Refusal and Co-Sale Agreement dated November 12, 1999 by and among the Company
and the Investors, the form of which is attached hereto as Exhibit D (the "Right
of First Refusal and Co-Sale Agreement") and shall have the rights and
obligations hereunder and thereunder, unless such purchaser enters into an
agreement that provides otherwise. The Voting Agreement and the Right of First
Refusal and Co-Sale Agreement are herein called collectively the "Ancillary
Agreements."
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Investor that, except as set forth on a Schedule
of Exceptions (the "Schedule of Exceptions") furnished each Investor and special
counsel for the Investors, specifically identifying the relevant subparagraph
hereof, which exceptions shall be deemed to be representations and warranties as
if made hereunder:
2.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure to so qualify would have a material adverse
effect on its business or properties.
2.2 Capitalization and Voting Rights. The authorized capital of the
Company consists of:
(a) Preferred Stock. 10,000,000 shares of Preferred Stock, par
value $0.0001 (the "Preferred Stock"), of which 5,500,000 shares have been
designated Series A Preferred Stock (the "Series A Preferred Stock") and up to
all of which will be sold pursuant to this Agreement. The rights, privileges and
preferences of the Series A Preferred Stock will be as stated in the Company's
Restated Certificate.
(b) Common Stock. 40,000,000 shares of common stock, par value
$0.0001 ("Common Stock"), of which 19,460,000 shares are issued and outstanding.
The outstanding shares of Common Stock are all duly and validly authorized and
issued, fully paid and nonassessable, and were issued in accordance with the
registration and qualification provisions of the Securities Act of 1933, as
amended (the "Securities Act") and any relevant state securities laws, or
pursuant to any exemptions therefrom.
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(c) Except for (A) the conversion privileges of the Series A
Preferred Stock to be issued under this Agreement, (B) the rights provided in
Section 2.3 of the Investors' Rights Agreement, (C) commitments or proposals to
issue up to 300,000 shares of Common Stock to certain service providers, and (D)
currently outstanding options or commitments to purchase 1,780,000 shares of
Common Stock granted to employees and other service providers pursuant to the
Company's 1999 Stock Option Plan (the "Option Plan") or other arrangement
approved by the Board of Directors, 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.
The Company is not a party or subject to any agreement or understanding, and, to
the Company's knowledge, there is no agreement or understanding between any
persons and/or entities, which affects or relates to the voting or giving of
written consents with respect to any security or by a director of the Company.
(d) Except as set forth on the Schedule of Exceptions hereto, no
stock plan, stock purchase, stock option or other agreement or understanding
between the Company and any holder of any equity securities or right to purchase
equity securities provides for acceleration or other changes in the vesting
provisions or other terms of such agreement or understanding as the result of
any merger, consolidated sale of stock or assets, change of control or other
similar transaction by the Company.
2.3 Subsidiaries. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
2.4 Authorization. All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement, the Investors' Rights Agreement and the
Ancillary Agreements, the performance of all obligations of the Company
hereunder and thereunder, and the authorization, issuance (or reservation for
issuance), sale and delivery of the Series A Preferred Stock being sold
hereunder and the Common Stock issuable upon conversion of the Series A
Preferred Stock has been taken or will be taken prior to the Initial Closing,
and this Agreement, the Investors' Rights Agreement and the Ancillary Agreements
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, and (iii) to the extent the indemnification
provisions contained in the Investors' Rights Agreement may be limited by
applicable federal or state securities laws.
2.5 Valid Issuance of Preferred and Common Stock. The Series A Preferred
Stock that is being purchased by the Investors hereunder, when issued, sold and
delivered in accordance with the terms of this Agreement for the consideration
expressed herein, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Investors' Rights
Agreement and under applicable state and federal securities laws. The Common
Stock issuable upon conversion of the Series A Preferred Stock purchased under
this Agreement has been duly and validly reserved for issuance and, upon
issuance in accordance with the terms of the Restated Certificate,
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will be duly and validly issued, fully paid, and nonassessable and will be free
of restrictions on transfer other than restrictions on transfer under this
Agreement and the Investors' Rights Agreement and under applicable state and
federal securities laws.
2.6 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement, except (i) the filing of the Restated Certificate with the
Secretary of State of Delaware; and (ii) the filing pursuant to Section 25102(f)
of the California Corporate Securities Law of 1968, as amended, and the rules
thereunder, which filing will be effected within 15 days of the sale of the
Series A Preferred Stock hereunder, or such other post-closing filings as may be
required.
2.7 Offering. Subject in part to the truth and accuracy of each
Investor's representations set forth in Section 3 of this Agreement, the offer,
sale and issuance of the Series A Preferred Stock as contemplated by this
Agreement are exempt from the registration requirements of any applicable state
and federal securities laws, and neither the Company nor any authorized agent
acting on its behalf will take any action hereafter that would cause the loss of
such exemption.
2.8 Litigation. There is no action, suit, proceeding or investigation
pending or, to the Company's knowledge, currently threatened against the Company
that questions the validity of this Agreement, the Investors' Rights Agreement
or any Ancillary Agreements, or the right of the Company to enter into such
agreements, or to consummate the transactions contemplated hereby or thereby, or
that might result, either individually or in the aggregate, in any material
adverse changes in the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company, nor is the Company aware that there is any basis for the foregoing. The
foregoing includes, without limitation, actions, suits, proceedings or
investigations pending or threatened involving the prior employment of any of
the Company's employees, their use in connection with the Company's business of
any information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or that the Company intends to initiate.
2.9 Proprietary Information Agreements. Each employee, officer and
consultant of the Company has executed a Proprietary Information and Inventions
Agreement in substantially the form provided to special counsel to the
Investors. The Company is not aware that any of its employees, officers or
consultants are in violation thereof and the Company will use its diligent
efforts to prevent any such violation. No employee, officer or consultant of the
Company has excluded works or inventions made prior to his or her employment
with the Company from his or her assignment of inventions pursuant to such
employee, officer or consultant's Proprietary Information and Inventions
Agreement.
2.10 Patents and Trademarks. To its knowledge, the Company owns or
possesses sufficient legal rights to all patents, trademarks, service marks,
tradenames, copyrights,
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trade secrets, licenses, information and proprietary rights and processes
necessary for its business as now conducted and as proposed to be conducted in
the future without any conflict with, or infringement of, the rights of others
and believes it can obtain, on commercially reasonable terms, any additional
rights necessary for the conduct of its business as proposed to be conducted.
There are no outstanding options, licenses, or agreements of any kind relating
to the foregoing, nor is the Company bound by or a party to any options,
licenses or agreements of any kind with respect to the patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other person or entity, except, in
either case, for end-user, object code, internal-use software license and
support/maintenance agreements. The Company has not received any communications
alleging that the Company has violated or, by conducting its business as
proposed, would violate any of the patents, trademarks, service marks, trade
names, copyrights or trade secrets or other proprietary rights of any other
person or entity. The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his or
her best efforts to promote the interests of the Company or that would conflict
with the Company's business as proposed to be conducted. Neither the execution
nor delivery of this Agreement, the Investors' Rights Agreement or the Ancillary
Agreements, nor the carrying on of the Company's business by the employees of
the Company, nor the conduct of the Company's business as proposed, will, to the
Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated. The
Company does not believe it is or will be necessary to utilize any inventions,
trade secrets or proprietary information of any of its employees (or people it
currently intends to hire) made prior to or outside the scope of their
employment by the Company.
2.11 Compliance with Other Instruments. The Company is not in violation
or default of any provision of its Restated Certificate or Bylaws, or of any
instrument, judgment, order, writ, decree or contract to which it is a party or
by which it is bound, or, to the best of its knowledge, of any provision of any
federal or state statute, rule or regulation applicable to the Company. The
execution, delivery and performance of this Agreement, the Investors' Rights
Agreement and the Ancillary Agreements, and the consummation of the transactions
contemplated hereby and thereby will not result in any such violation or be in
conflict with or constitute, with or without the passage of time and giving of
notice, either a default under any such provision, instrument, judgment, order,
writ, decree or contract or an event that results in the creation of any lien,
charge or encumbrance upon any assets of the Company or the suspension,
revocation, impairment, forfeiture, or nonrenewal of any material permit,
license, authorization, or approval applicable to the Company, its business or
operations or any of its assets or properties. To its knowledge, the Company has
avoided every condition, and has not performed any act, the occurrence of which
would result in the Company's loss of any material right granted under any
license, distribution agreement or other agreement.
2.12 Agreements; Action.
(a) Except for agreements explicitly contemplated hereby and by
the Investors' Rights Agreement and the Ancillary Agreements, there are no
agreements,
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understandings or proposed transactions between the Company and any of its
officers, directors, affiliates, or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or by which it is bound that may involve (i) obligations
(contingent or otherwise) of, or payments to the Company in excess of, $10,000,
or (ii) the license of any patent, copyright, trade secret or other proprietary
right to or from the Company (other than the license by the Company of its
software and products to third-party customers in the ordinary course of
business or licenses of commercial off-the-shelf software used by the Company
for internal purposes), or (iii) provisions restricting or affecting the
development, manufacture or distribution of the Company's products or services,
or (iv) indemnification by the Company with respect to infringements of
proprietary rights.
(c) The Company has not (i) declared or paid any dividends or
authorized or made any distribution upon or with respect to any class or Series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities individually in excess of $10,000 or, in the case of
indebtedness and/or liabilities individually less than $10,000, in excess of
$50,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under its
Restated Certificate or Bylaws that adversely affects its business, its
properties or its financial condition.
(f) The Company has not engaged in the past six (6) months in
any discussion (i) with any representative of any corporation or corporations
regarding the consolidation or merger of the Company with or into any such
corporation or corporations, (ii) with any corporation, partnership, association
or other business entity or any individual regarding the sale, conveyance or
disposition of all or substantially all of the assets of the Company or a
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company is disposed of, or (iii) regarding any
other form of acquisition, liquidation, dissolution or winding up of the
Company.
2.13 Related-Party Transactions. No employee, officer, or director of
the Company or member of his or her immediate family is indebted to the Company,
nor is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the Company's knowledge, none of such persons has any
direct or indirect ownership interest in any firm or corporation with which the
Company is affiliated or with which the Company has a business relationship, or
any firm or corporation that competes with the Company, except that
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employees, officers, or directors of the Company and members of their immediate
families may own stock in publicly traded companies that may compete with the
Company. No member of the immediate family of any officer or director of the
Company is directly or indirectly interested in any material contract with the
Company.
2.14 Permits. The Company has all franchises, permits, licenses, and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company, and the
Company believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. The
Company is not in default in any material respect under any of such franchises,
permits, licenses, or other similar authority.
2.15 Registration Rights. Except as provided in the Investors' Rights
Agreement, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
2.16 Corporate Documents. The Restated Certificate and Bylaws of the
Company are in the form previously provided to special counsel for the
Investors. The copy of the minute books of the Company provided to the
Investors' special counsel contains minutes of all meetings of directors and
stockholders and all actions by written consent without a meeting by the
directors and stockholders since the date of incorporation and reflects all
actions by the directors (and any committee of directors) and stockholders with
respect to all transactions referred to in such minutes accurately in all
material respects.
2.17 Title to Property and Assets. The Company owns its property and
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens that arise in the ordinary course of business and do
not materially impair the Company's ownership or use of such property or assets.
With respect to the property and assets it leases, the Company is in compliance
with such leases and, to its knowledge, holds a valid leasehold interest free of
any liens, claims or encumbrances.
2.18 Material Liabilities. The Company has no material liability or
obligation, absolute or contingent (individually or in the aggregate), except
(i) obligations and liabilities incurred after the date of incorporation in the
ordinary course of business that are not material, individually or in the
aggregate, and (ii) obligations under contracts made in the ordinary course of
business that would not be required to be reflected in financial statements
prepared in accordance with generally accepted accounting principles.
2.19 Employee Benefit Plans. The Company does not have any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
2.20 Tax Returns, Payments and Elections. The Company has filed all tax
returns and reports (including information returns and reports) as required by
law. The Company has paid all taxes and other assessments due, except those
contested by it in good faith that are listed in the Schedule of Exceptions and
except to the extent that a reserve has been reflected on its financial
statements in accordance with generally accepted accounting principles. The
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Company has never had any tax deficiency proposed or assessed against it and has
not executed any waiver of any statute of limitations on the assessment or
collection of any tax or governmental charge. None of the Company's federal
income tax returns and none of its state income or franchise tax or sales or use
tax returns has ever been audited by governmental authorities. Since the date of
its financial statements, the Company has not incurred any taxes, assessments or
governmental charges other than in the ordinary course of business and the
Company has made adequate provisions on its books of account for all taxes,
assessments and governmental charges with respect to its business, properties
and operations for such period. The Company has withheld or collected from each
payment made to each of its employees, the amount of all taxes (including, but
not limited to, federal income taxes, Federal Insurance Contribution Act taxes
and Federal Unemployment Tax Act taxes) required to be withheld or collected
therefrom, and has paid the same to the proper tax receiving officers or
authorized depositories.
2.21 Labor Agreements and Actions; Employee Compensation. The Company is
not bound by or subject to (and none of its assets or properties is bound by or
subject to) any written or oral, express or implied, contract, commitment or
arrangement with any labor union or any collective bargaining agreements with
any of its employees, and no labor union has requested or, to the Company's
knowledge, has sought to represent any of the employees, representatives or
agents of the Company. There is no strike or other labor dispute involving the
Company pending, or to the Company's knowledge, threatened, that could have a
material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees. The Company is not
aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, nor does the Company
have a present intention to terminate the employment of any of the foregoing.
The employment of each officer and employee of the Company is terminable at the
will of the Company. To its knowledge, the Company has complied in all material
respects with all applicable state and federal equal employment opportunity and
other laws related to employment. No employee has any agreement or contract,
written or verbal, regarding his or her employment. The Company is not a party
to or bound by any currently effective employment contract, deferred
compensation agreement, bonus plan, incentive plan, profit sharing plan,
retirement agreement, or other employee compensation agreement. The Company has
not entered into any agreement that granted any employee (including any officer)
the right to continued employment by the Company or to any material compensation
following termination of employment with the Company. Each officer of the
Company is currently devoting his or her full business time during normal
business hours to the conduct of the Business of the Company. The Company is not
aware of any officer or key employee of the Company planning to work less than
full time at the Company in the future.
2.22 Real Property Holding Company. The Company is not currently, and
has not been during the prior five years, a United States real property holding
corporation within the meaning of Section 897 of the Code and the Company has
filed with the Internal Revenue Service all statements, if any, with its United
States income tax returns which are required under Section 1.897-2(h) of the
Treasury Regulations.
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2.23 Brokers. The Company has no contract, arrangement or understanding
with any broker, finder or similar agent with respect to the transactions
contemplated by this Agreement.
2.24 Disclosure. The Company has fully provided each Investor with all
the information that such Investor has requested for deciding whether to
purchase the Series A Preferred Stock and all the information the Company
believes is reasonably necessary to enable such Investor to make such decision.
Neither this Agreement, the Investors' Rights Agreement, the Ancillary
Agreements nor any exhibits hereto contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
or therein not misleading.
2.25 Financial Compilation. The Company has delivered to each Investor
that has requested it a copy of a financial compilation as of August 31, 1999
(the "Financial Compilation"). The Financial Compilation fairly presents the
financial condition of the Company. Except as set forth in the Financial
Compilation, the Company has no material liabilities, contingent or otherwise,
other than liabilities incurred in the ordinary course of business.
2.26 Section 83(b) Elections. To the Company's knowledge, all elections
and notices permitted by Section 83(b) of the Internal Revenue Code and any
analogous provisions of applicable sales tax laws have been filed by all
employees who have purchased shares of the Company's common stock prior to the
Closing under agreements that provide for the vesting of such shares.
2.27 Insurance. The Company has, or will obtain following the Initial
Closing fire and casualty insurance policies with coverage customary for
companies similarly situated to the Company.
3. Representations and Warranties of the Investors. Each Investor hereby
represents and warrants that:
3.1 Authorization. Such Investor has full power and authority to enter
into this Agreement, the Investors' Rights Agreement and each Ancillary
Agreement, and each such agreement constitutes its valid and legally binding
obligation, enforceable in accordance with its terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies, and (iii) to the extent the
indemnification provisions contained in the Investors' Rights Agreement may be
limited by applicable federal or state securities laws.
3.2 Purchase Entirely for Own Account. This Agreement is made with such
Investor in reliance upon such Investor's representation to the Company, which
by such Investor's execution of this Agreement such Investor hereby confirms,
that the Series A Preferred Stock to be received by such Investor and the Common
Stock issuable upon conversion thereof (collectively, the "Securities") will be
acquired for investment for such Investor's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part
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thereof, and that such Investor has no present intention of selling, granting
any participation in, or otherwise distributing the same. By executing this
Agreement, such Investor further represents that such Investor does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Securities.
3.3 Disclosure of Information. Such Investor believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Series A Preferred Stock. Such Investor further represents that
it has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series A Preferred
Stock and the business, properties, prospects and financial condition of the
Company. The foregoing, however, does not limit or modify the representations
and warranties of the Company in Section 2 of this Agreement or the right of the
Investors to rely thereon.
3.4 Investment Experience. Such Investor is 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 investment, and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Series A Preferred Stock. If other
than an individual, Investor also represents it has not been organized for the
purpose of acquiring the Series A Preferred Stock.
3.5 Accredited Investor. Such Investor is an "accredited investor"
within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D, as presently in effect.
3.6 Restricted Securities. Such Investor understands that the Securities
it is purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act, only in certain limited circumstances. In this connection, such
Investor represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
3.7 Further Limitations on Disposition. Without in any way limiting the
representations set forth above, such Investor further agrees not to make any
disposition of all or any portion of the Securities unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3 and the Investors' Rights Agreement provided and to the extent
this Section and such agreement are then applicable, and:
(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to
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the Company that such disposition will not require registration of such shares
under the Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(c) Notwithstanding the provisions of Paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an Investor that is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner or the transfer
by gift, will or intestate succession of any partner to his or her spouse or to
the siblings, lineal descendants or ancestors of such partner or his or her
spouse, if the transferee agrees in writing to be subject to the terms hereof to
the same extent as if he or she were an original Investor hereunder.
3.8 Legends. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act."
(b) Any legend required by the laws of the State of California,
including any legend required by the California Department of Corporations and
Sections 417 and 418 of the California Corporations Code.
4. Conditions of Investors' Obligations at Initial Closing. The
obligations of each Investor under subsection 1.1(b) of this Agreement are
subject to the fulfillment on or before the Initial Closing of each of the
following conditions, the waiver of which shall not be effective against any
Investor who does not consent thereto:
4.1 Representations and Warranties. The representations and warranties
of the Company contained in Section 2 shall be true on and as of the Initial
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Initial Closing.
4.2 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 Initial
Closing.
4.3 Compliance Certificate. The President of the Company shall deliver
to each Investor at the Initial Closing a certificate stating that the
conditions specified in Sections 4.1 and 4.2 have been fulfilled and stating
that there shall have been no adverse change in the business, affairs,
operations, properties, assets or condition of the Company since the date of
incorporation.
4.4 Qualifications. All authorizations, approvals, or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in
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connection with the lawful issuance and sale of the Securities pursuant to this
Agreement shall be duly obtained and effective as of the Initial Closing.
4.5 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Initial Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Investors' special counsel, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
4.6 Board of Directors. The directors of the Company shall be Xxx
Xxxxxxxxx, Xxxx Xxxxxxx and Xxxxxxx Xxxxxxxxx, who serve as the designees of the
holders of Common Stock, one designee of Xxxx.xxx, Inc., and there shall be two
vacancies on the Board of Directors, to be filled by outside industry experts
who shall be elected by holders of a majority of Common Stock and Preferred
Stock, voting together as a single class.
4.7 Investors' Rights Agreement. The Company and each Investor shall
have entered into an Investors' Rights Agreement in the form attached as Exhibit
B.
4.8 Voting Agreement. The Company and each Investor shall have entered
into a Voting Agreement in the form attached as Exhibit C.
4.9 Co-Sale Agreements. Xxx Xxxxxxxxx and each Investor shall each have
entered into a Co-Sale Agreement in the form attached hereto as Exhibit D.
4.10 Opinion of Company Counsel. Each Investor shall have received from
Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx & Xxxxxxxxx, LLP, counsel for the
Company, an opinion, dated as of the Initial Closing, in the form attached
hereto as Exhibit E.
4.11 Restated Certificate of Incorporation. The Company's Restated
Certificate of Incorporation shall have been filed with the Delaware Secretary
of State.
4.12 Proprietary Information and Inventions Agreement. The Company and
each of its employees shall have entered into the Company's standard form
Proprietary Information and Inventions Agreement, in substantially the form
provided to the special counsel for the Investors.
5. Conditions of the Company's Obligations at Initial Closing. The
obligations of the Company to each Investor under this Agreement are subject to
the fulfillment on or before the Initial Closing of each of the following
conditions by that Investor:
5.1 Representations and Warranties. The representations and warranties
of the Investors contained in Section 3 shall be true on and as of the Initial
Closing with the same effect as though such representations and warranties had
been made on and as of the Initial Closing.
5.2 Payment of Purchase Price. Each Investor shall have delivered the
purchase price specified in Section 1.2 opposite such Investors name and the
Investors shall collectively have acquired and paid for at the Initial Closing
at least 2,150,537 shares of Series A Preferred Stock hereunder.
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5.3 Qualifications. All authorizations, approvals, or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Securities pursuant to this Agreement shall be duly obtained and effective as of
the Initial Closing.
5.4 Investors' Rights Agreement. The Company and each Investor shall
have entered into an Investors' Rights Agreement.
5.5 Voting Agreement. The Company and each Investor shall have entered
into a Voting Agreement.
5.6 Co-Sale Agreements. Xxx Xxxxxxxxx and each Investor shall each have
entered into a Co-Sale Agreement.
5.7 Restated Certificate of Incorporation. The Company's Restated
Certificate of Incorporation shall have been filed with the Delaware Secretary
of State.
6. Miscellaneous.
6.1 Survival of Warranties. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Initial Closing and shall in no way be affected by any investigation of the
subject matter thereof made by or on behalf of the Investors or the Company.
6.2 Successors and Assigns. Except as otherwise provided herein, 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 (including
transferees of any Securities). Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
6.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
6.4 Counterparts. 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.
6.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
6.6 Notices. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery to the party to be notified or upon deposit with
the United States Post Office, by registered or certified mail, postage prepaid
and addressed to the party to be notified at the
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address indicated for such party on the signature page hereof, or at such other
address as such party may designate by ten (10) days' advance written notice to
the other parties.
6.7 Finder's Fee. Each party severally and not jointly represents that
it neither is nor will be obligated for any finders' fee or commission in
connection with this transaction. Each Investor agrees severally and not jointly
to indemnify and to hold harmless the Company from any liability for any
commission or compensation in the nature of a finders' fee (and the costs and
expenses of defending against such liability or 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 each Investor from any
liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
6.8 Expenses. Irrespective of whether the Initial Closing is effected,
the Company shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If the
Initial Closing is effected, the Company shall, at the Initial Closing,
reimburse the reasonable fees and out-of-pocket expenses of Venture Law Group,
special counsel for the Investors, not to exceed $15,000.00. If any action at
law or in equity is necessary to enforce or interpret the terms of this
Agreement, the Investors' Rights Agreement, any Ancillary Agreement or the
Restated Certificate, the prevailing party shall be entitled to reasonable
attorney's fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
6.9 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 holders of a majority of the
Common Stock issuable or issued upon conversion of the Series A Preferred Stock.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any securities purchased under this Agreement at the
time outstanding (including securities into which such securities are
convertible), each future holder of all such securities, and the Company.
6.10 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
6.11 Corporate Securities Law. THE SALE OF THE SECURITIES THAT ARE THE
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
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CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
6.12 Aggregation of Stock. All shares of the Preferred Stock held or
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
6.13 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
6.14 Waiver of Conflicts. Each party to this Agreement acknowledges that
Xxxxxxxxx Xxxxxxx, counsel for the Company, has in the past and may continue to
perform legal services for certain of the Investors in matters unrelated to the
transactions described in this Agreement, including the representation of such
Investors in venture capital financings and other matters. Accordingly, each
party to this Agreement hereby (1) acknowledges that they have had an
opportunity to ask for information relevant to this disclosure; (2) acknowledges
that Xxxxxxxxx Xxxxxxx represented the Company in the transaction contemplated
by this Agreement and has not represented any individual Investor or any
individual shareholder or employee of the Company in connection with such
transaction; and (3) gives its informed consent to Xxxxxxxxx Xxxxxxx'x
representation of certain of the Investors in such unrelated matters and to
Xxxxxxxxx Xxxxxxx'x representation of the Company in connection with this
Agreement and the transactions contemplated hereby.
6.15 Delay or Omissions. Except as expressly provided herein, no delay
or omission to exercise any right, power or remedy accruing to any holder of any
of the Series A Preferred Stock, upon any breach or default of the Company under
this Agreement, shall impair any such right, power or remedy of such holder nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence thereto, or of or in any similar breach or default or any other
breach or default theretofore of thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any Investor of any
breach or default under this Agreement, or any waiver on the part of any
Investor of any provisions or conditions of this Agreement, must be in writing
and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any Investor, shall be cumulative and not alternative.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY
XxxXxxxx.xxx, Inc.
By: /s/ Xxx Xxxxxxxxx
---------------------------------
Xxx Xxxxxxxxx
Chief Executive Officer
Address: 00 Xxxxxxxx, Xxxxx 00x
Xxx Xxxx, XX 00000
INVESTOR:
Xxxx.xxx, Inc.
By: /s/ Xxxxx Xxxxxxxxxx
---------------------------------
Title: CEO
------------------------------
Address: 000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
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SCHEDULE A
SCHEDULE OF INVESTORS
NUMBER OF TOTAL PURCHASE
NAME AND ADDRESS SHARES PURCHASED PRICE OF SHARES
---------------- ---------------- ---------------
Xxxx.xxx, Inc. 2,150,537 $1,999,999.40
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
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