Exhibit 10.13
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES C PREFERRED STOCK PURCHASE AGREEMENT (the "AGREEMENT") is
entered into as of April 16, 1998 by and between Art Technology Group, Inc., a
Delaware corporation (the "COMPANY"), and Xxxxx X. Xxxxx (the "PURCHASER"). In
consideration of the mutual promises and covenants contained in this Agreement,
the Company and the Purchaser agree as follows:
1 SALE OF SHARES
Subject to the terms and conditions of this Agreement, the Company
agrees to sell and issue to the Purchaser, and the Purchaser agrees to
purchase, for the purchase price of $1.62 per share, 246,914 shares
(the "SHARES") of the Company's Series C Convertible Preferred Stock,
$.01 par value per share, having the rights, restrictions, privileges
and preferences set forth in the Certificate of Designations of the
Preferred Stock of the Company, filed with the Secretary of State of
the State of Delaware on November 12, 1997 (the "SERIES C PREFERRED").
On the date hereof, the Company shall deliver to the Purchaser a
certificate for the Shares registered in the name of the Purchaser,
upon the receipt of payment to the Company of the purchase price
therefor.
2 REPRESENTATIONS OF THE COMPANY
Subject to and except as disclosed by the Company in EXHIBIT A hereto
(the "DISCLOSURE SCHEDULE"), the Company hereby represents and warrants
to the Purchaser, as of the Closing Date, as follows:
2.1 ORGANIZATION AND STANDING. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to conduct its
business as presently conducted and as proposed to be conducted by it
and to enter into and perform this Agreement and to carry out the
transactions contemplated by this Agreement. The Company is duly
qualified to do business as a foreign corporation in every other
jurisdiction in which the failure to so qualify would have a material
adverse effect on the operations or financial condition of the Company.
2.2 CAPITALIZATION. The authorized capital stock of the Company consists of
25,000,000 shares of common stock, $.01 par value per share (the
"COMMON STOCK"), of which, as of the date hereof, 5,959,752 shares are
issued and outstanding, and 10,000,000 shares of Preferred Stock, $.01
par value per share, 1,300,000 of which shares have been designated as
Series A Convertible Preferred Stock (all of which are issued and
outstanding as of the date hereof), 851,064 of which shares have been
designated as Series B Convertible Preferred Stock (425,532 of which
are issued and outstanding as of the date hereof) and 2,000,000 shares
of Series C Preferred (1,209,875 of which are issued or outstanding as
of the date hereof). All of the issued and outstanding shares of
capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable. Except as set forth in the
Disclosure Schedule or as
contemplated by this Agreement, (i) no subscription, warrant, option,
convertible security or other right (contingent or otherwise) to
purchase or acquire any shares of capital stock of the Company is
authorized or outstanding, (ii) the Company has no obligation
(contingent or otherwise) to issue any subscription, warrant, option,
convertible security or other such right or to issue or distribute to
holders of any shares of its capital stock any evidences of
indebtedness or assets of the Company, and (iii) the Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any shares of its capital stock or any interest therein or to
pay any dividend or make any other distribution in respect thereof. All
of the issued and outstanding shares of capital stock of the Company
have been offered, issued and sold by the Company in compliance with
applicable federal and state securities laws.
2.3 SUBSIDIARIES, ETC. The Company has no subsidiaries and does not own or
control, directly or indirectly, any shares of capital stock of any
other corporation or any interest in any partnership, joint venture or
other non-corporate business enterprise.
2.4 STOCKHOLDER LIST AND AGREEMENTS. Set forth in the Disclosure Schedule
is a true and complete list of the stockholders of the Company, showing
the number of shares of Common Stock or other securities of the Company
held by each stockholder as of the date of this Agreement. Except as
provided in, or contemplated by, this Agreement, or as set forth on the
Disclosure Schedule, there are no agreements, written or oral, between
the Company and any holder of its capital stock, or, to the best of the
Company's knowledge, among any holders of its capital stock, relating
to the acquisition (including without limitation rights of first
refusal or pre-emptive rights), disposition, registration under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), or voting of
the capital stock of the Company.
2.5 ISSUANCE OF SHARES. The issuance, sale and delivery of the Shares in
accordance with this Agreement, and the issuance and delivery of the
shares of Common Stock issuable upon conversion of the Shares, have
been duly authorized by all necessary corporate action on the part of
the Company. The Shares so issued, sold and delivered against payment
therefor in accordance with the provisions of this Agreement are, and
the shares of Common Stock issuable upon conversion of the Shares when
issued upon such conversion will be, duly and validly issued, fully
paid and non-assessable.
2.6 AUTHORITY FOR AGREEMENT. The execution, delivery and performance by the
Company of this Agreement and the Registration Rights Amendment (as
defined in Section 2.7), and the consummation by the Company of the
transactions contemplated hereby and thereby, have been duly authorized
by all necessary corporate action. This Agreement and the Registration
Rights Amendment have been duly executed and delivered by the Company
and constitute valid and binding obligations of the Company enforceable
in accordance with their respective terms. The execution of and
performance of the transactions contemplated by this Agreement and the
Registration Rights Amendment and compliance with their provisions by
the Company does not violate any provision of law and does not conflict
with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, or require a consent or
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waiver under, its Certificate of Incorporation or By-Laws (each as
amended to date) or any indenture, lease, agreement or other instrument
to which the Company is a party or by which it or any of its properties
is bound, or any decree, judgment, order, statute, rule or regulation
applicable to the Company.
2.7 GOVERNMENTAL CONSENTS. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing
with, any governmental authority is required on the part of the Company
in connection with the execution and delivery of this Agreement or the
Registration Rights Amendment, the offer, issuance, sale and delivery
of the Shares, or the other transactions contemplated hereby, except
such filings as have been made prior hereto and are effective on the
date hereof. Based on the representations made by the Purchaser in
Section 3 of this Agreement, the offer and sale of the Shares to the
Purchaser is in compliance with applicable federal and state securities
laws.
2.8 LITIGATION. There is no action, suit or proceeding, or governmental
inquiry or investigation, pending, or, to the best of the Company's
knowledge, any basis therefor, against the Company, which questions the
validity of this Agreement or the right of the Company to enter into
it, or which might result, either individually or in the aggregate, in
any material adverse change in the business or financial condition of
the Company.
2.9 TAXES. The Company has filed all federal, state, county, local and
foreign tax returns which are required to be filed by it, such returns
are true and correct and all taxes, if any, shown thereon to be due
have been timely paid with exceptions not material to the Company.
2.10 PROPERTY AND ASSETS. The Company has good title to all of its material
properties and assets and none of such properties or assets is subject
to any mortgage, pledge, lien, security interest, lease, charge or
encumbrance.
2.11 INTELLECTUAL PROPERTY. Set forth on the Disclosure Schedule is a true
and complete list of all patents, patent applications, trademarks,
service marks, trademark and service xxxx applications owned by the
Company (the "INTELLECTUAL PROPERTY RIGHTS"). The Company owns, or has
the right to use, all third-party technology and intellectual property
necessary for the conduct of the Company's business. The Company has
taken all actions reasonably necessary to protect the Intellectual
Property Rights. To the best of the Company's knowledge, the business
conducted or proposed by the Company does not and will not cause the
Company to infringe or violate any of the patents, trademarks, service
marks, trade names, copyrights, licenses, trade secrets or other
intellectual property rights of any other person or entity. No other
person or entity (including without limitation any prior employer of
any employee of the Company) has any right to or interest in any
inventions, improvements, discoveries or other confidential information
of the Company.
2.12 FINANCIAL STATEMENTS. The Company has furnished to the Purchaser its
unaudited income statement and balance sheet as at December 31, 1997
and its unaudited
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balance sheet (the "Balance Sheet") as of March 31, 1998 (the "Balance
Sheet Date") (collectively, the "Financial Statements"). The Financial
Statements are complete and correct, are in accordance with the books
and records of the Company and present fairly the financial condition
and results of operations of the Company as at the dates and for the
periods indicated, and have been prepared in accordance with generally
accepted accounting principles consistently applied, except that the
Financial Statements have been prepared for the internal use of
management and may not be in accordance with generally accepted
accounting principles because of the absence of footnotes normally
contained therein and are subject to normal year-end audit adjustments
which in the aggregate will not be material.
2.13 ABSENCE OF CHANGES. Since the Balance Sheet Date, there has been no
material adverse change in the condition, financial or otherwise, net
worth or results of operations of the Company, other than changes
occurring in the ordinary course of business which changes have not,
individually or in the aggregate, had a materially adverse effect on
the business, prospects, properties or condition, financial or
otherwise, of the Company.
2.14 COMPLIANCE. The Company has, in all material respects, complied with
all laws, regulations and orders applicable to its business and has all
material permits and licenses required thereby.
2.15 EMPLOYEES. The Company's relations with its employees are good. All
employees of the Company whose employment responsibility requires
access to confidential or proprietary information of the Company have
executed and delivered nondisclosure and assignment of invention
agreements, the form of which has been made available to the Purchaser
for review.
2.16 ERISA. The Company does not have or otherwise contribute to or
participate in any employee benefit plan subject to the Employee
Retirement Income Security Act of 1974 other than a medical benefit
plan with respect to which the Company has made all required
contributions and has complied with all applicable laws.
3 REPRESENTATIONS OF THE PURCHASER
The Purchaser represents and warrants to the Company as follows:
3.1 INVESTMENT. The Purchaser is acquiring the Shares, and the shares of
Common Stock into which the Shares may be converted, for his own
account for investment and not with a view to, or for sale in
connection with, any distribution thereof, nor with any present
intention of distributing or selling the same; and the Purchaser has no
present or contemplated agreement, undertaking, arrangement,
obligation, indebtedness or commitment providing for the disposition
thereof.
3.2 AUTHORITY. The Purchaser has full power and authority to enter into and
to perform this Agreement. This Agreement has been duly executed and
delivered by the Purchaser and constitutes valid and binding obligation
of the Purchaser enforceable in accordance with its terms.
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3.3 EXPERIENCE. The Purchaser has carefully reviewed the representations
concerning the Company contained in this Agreement and has made
detailed inquiry concerning the Company, its business and its
personnel; and the officers of the Company have made available to the
Purchaser business and financial data concerning the Company and any
and all other written information which he has requested and have
answered to the Purchaser's satisfaction all inquiries made by the
Purchaser. The Purchaser has sufficient knowledge and experience in
investing in companies similar to the Company so as to be able to
evaluate the risks and merits of his investment in the Company and is
able financially to bear the risks thereof. The Purchaser's overall
commitment to investments which are not readily marketable is not
disproportionate to the Purchaser's net worth and the Purchaser's
investment in the Company will not cause such overall commitment to
become excessive. The Purchaser has adequate net worth and means of
providing for current needs and personal contingencies to sustain a
complete loss of the Purchaser's investment in the Company, and the
Purchaser has no need for liquidity in this investment.
3.4 SECURITIES LAWS. The Purchaser acknowledges that no federal or state
agency has made any finding or determination as to the fairness of the
terms of this offering. The Shares have not been recommended or
endorsed by any federal or state securities commission or regulatory
agency nor have any of the foregoing authorities confirmed the accuracy
or determined the adequacy of the materials and information provided to
the Purchaser by the Company.
3.5 RISK. The Purchaser understands that an investment in the Company
involves significant risks, and the Purchaser has carefully reviewed
and is aware of all of the risk factors related to the purchase of the
Shares. The Purchaser understands and has fully considered for purposes
of this investment that: (1) the Company is an enterprise with limited
financial and operating history; (2) the Shares and the Common Stock
issuable upon conversion thereof represent an extremely speculative
investment which involves a high degree of risk of loss; (3) there are
substantial restrictions on the transferability of, and there is
currently and may in the future be no public market for, the Shares and
the Common Stock issuable upon conversion thereof, and, accordingly, it
may not be possible for the Purchaser to liquidate his investment in
the Shares and the Common Stock issuable upon conversion thereof; and
(4) there have been no representations as to the possible future value,
if any, of the Shares and the Common Stock issuable upon conversion
thereof. In making this investment, the Purchaser has relied
exclusively on the representations and warranties of the Company set
forth in Section 2 of this Agreement and the Financial Statements. The
Purchaser represents and warrants that it has not relied on any other
information or material relating to the Company, including but not
limited to the draft of private placement memorandum dated September
19, 1997, which the Company disclaims in its entirety.
3.6 ACCREDITED INVESTOR. The Purchaser is an "accredited investor" as
defined in Rule 501(a) under the Securities Act.
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4 COVENANTS
4.1 RESERVATION OF COMMON STOCK. The Company shall reserve and maintain a
sufficient number of shares of Common Stock for issuance upon
conversion of all of the outstanding Shares.
4.2 ADDITIONAL PURCHASES. The Purchaser shall not, without the prior
written consent of the Company, purchase, receive or otherwise acquire
any securities of the Company except pursuant to the conversion of the
Shares.
4.3 TERMINATION OF COVENANTS. The covenants of the Company and the
Purchaser contained in Sections 4.1 and 4.2 shall terminate and be of
no further force or effect on the earlier to occur of (a) the closing
of the Company's first public offering of Common Stock covered by a
registration statement filed by the Company under the Securities Act or
(b) the date on which the Purchaser and any transferee to which he has
transferred Shares in accordance with the provisions of this Agreement
collectively hold less than ten percent (10%) of the Shares purchased
hereunder.
4.4 REGISTRATION RIGHTS AMENDMENT. In order to grant the Purchaser
registration rights with respect to the shares of Common Stock issuable
upon conversion of the Shares, the Company and the Purchaser shall
enter into, and the Company shall use its best efforts to cause the
other parties thereto to enter into, an amendment of the Amended and
Restated Registration Rights Agreement dated as of December 8, 1997, as
amended, among the Purchasers (as defined therein) and the Company.
5 TRANSFER OF SHARES
5.1 RESTRICTED SHARES. "Restricted Shares" means (i) the Shares, (ii) the
shares of Common Stock issued or issuable upon conversion of the
Shares, and (iii) any other shares of capital stock of the Company
issued in respect of such shares (as a result of stock splits, stock
dividends, reclassifications, recapitalizations or similar events);
PROVIDED, HOWEVER, that shares of Common Stock which are Restricted
Shares shall cease to be Restricted Shares (i) upon any sale that is
registered under the Securities Act, (ii) upon any sale pursuant to
Section 4(1) of, or Rule 144 under, the Securities Act, or (iii) at
such time as they become eligible for resale under Rule 144(k) under
the Securities Act.
5.2 REQUIREMENTS FOR TRANSFER.
Restricted Shares shall not be sold or transferred unless either (i)
they first shall have been registered under the Securities Act, or (ii)
the Company first shall have been furnished with an opinion of legal
counsel, reasonably satisfactory to the Company, to the effect that
such sale or transfer is exempt from the registration requirements of
the Securities Act.
5.3 TRANSFEREES. Any permitted transferee to whom Shares are transferred by
the Purchaser shall, as a condition to such transfer, deliver to the
Company a written instrument by which such transferee agrees to be
bound by the obligations imposed upon the Purchaser under this
Agreement to the same extent as if such transferee were
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a party hereto and shall, if such transferee will receive confidential
information from the Company and is not at such time a party to a
confidentiality agreement with the Company, execute and deliver to the
Company a confidentiality agreement in form and substance acceptable to
the Company. A permitted transferee to whom rights are transferred
pursuant to this Section 5 may not again transfer such rights to any
other person or entity.
5.4 LEGEND. Each certificate representing Restricted Shares shall bear a
legend substantially in the following form:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such shares are registered under
such Act or an opinion of counsel satisfactory to the Company
is obtained to the effect that such registration is not
required.
The foregoing legend shall be removed from the certificates
representing any Restricted Shares, at the request of the holder
thereof, at such time as they become eligible for resale pursuant to
Rule 144(k) under the Securities Act.
5.5 RULE 144A INFORMATION. The Company shall, at all times during which it
is neither subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), nor exempt from reporting pursuant to Rule 12g3-2(b) under the
Exchange Act, upon the written request of the Purchaser, provide in
writing to the Purchaser and to any prospective transferee of any
Restricted Shares the information concerning the Company described in
Rule 144A(d)(4) under the Securities Act ("RULE 144A INFORMATION"). The
Company also shall, upon the written request of the Purchaser,
cooperate with and assist the Purchaser or any member of the National
Association of Securities Dealers, Inc. PORTAL system in applying to
designate and thereafter maintain the eligibility of the Restricted
Shares for trading through PORTAL. The Company's obligations under this
Section 5.5 shall at all times be contingent upon receipt from the
prospective transferee of Restricted Shares of a written agreement to
take all reasonable precautions to safeguard the Rule 144A Information
from disclosure to anyone other than persons who will assist such
transferee in evaluating the purchase of any Restricted Shares.
6 MISCELLANEOUS
6.1 SUCCESSORS AND ASSIGNS. Except as provided in Section 5 hereof, the
rights granted pursuant to this Agreement may not be transferred or
assigned, and any transfer in violation of the provisions of this
Section 6.1 shall be null and void and of no force or effect. Subject
to the foregoing, the provisions of this Agreement shall be binding
upon, and inure to the benefit of, the respective successors, assigns,
heirs, executors and administrators of the parties hereto.
6.2 NOTICES. All notices, requests, consents and other communications under
this Agreement shall be in writing and shall be delivered by hand,
telecopy or overnight
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courier (by a nationally recognized carrier) or mailed by first class
certified or registered mail, return receipt requested, postage
prepaid:
If to the Company: Art Technology Group, Inc.
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: President
with a copy to: Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxxx, Esq.
If to the Purchaser: Xx. Xxxxx X. Xxxxx
0000 Xxxx 000xx Xxxxxx
Xxxxxx, XX 00000
or at such other address or addresses as may have been furnished by the
parties in accordance with this Section 6.2. Notices provided in
accordance with this Section 6.2 shall be deemed delivered upon
personal delivery, upon receipt of a telecopy confirmation, one day
after deposit with an overnight delivery service or three business days
after deposit in the mail.
6.3 BROKERS. Each of the Company and the Purchaser (i) represents and
warrants to the other party that it or he has retained no finder or
broker in connection with the transactions contemplated by this
Agreement, and (ii) will indemnify and hold the other party harmless
from and against any and all claims, liabilities or obligations with
respect to brokerage or finders' fees or commissions, or consulting
fees in connection with the transactions contemplated by this Agreement
asserted by any person on the basis of any statement or representation
alleged to have been made by such indemnifying party.
6.4 ENTIRE AGREEMENT. This Agreement (including the Schedule and Exhibits
hereto) embodies the entire agreement and understanding between the
parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings relating to such subject matter.
6.5 AMENDMENTS AND WAIVERS. Except as otherwise expressly set forth in this
Agreement, 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), with
the written consent of the Company and the Purchaser. Any amendment or
waiver effected in accordance with this Section 6.5 shall be binding
upon the Purchaser, each future holder of the Shares (including shares
of Common Stock into which such Shares have been converted) and the
Company. No waivers of or exceptions to any term, condition or
provision of this Agreement, in any one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of any
such term, condition or provision.
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6.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all
of which shall be one and the same document.
6.7 SECTION HEADINGS. The section headings are for the convenience of the
parties and in no way alter, modify, amend, limit or restrict the
contractual obligations of the parties.
6.8 SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
6.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts,
excluding its choice of law rules.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COMPANY:
ART TECHNOLOGY GROUP, INC.
By: /s/ Xxxx Xxxxx
---------------------------
Xxxx Xxxxx, President
PURCHASER:
XXXXX X. XXXXX
/s/ Xxxxx X. Xxxxx
----------------------------
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EXHIBIT A
DISCLOSURE SCHEDULE
Each disclosure contained in this Disclosure Schedule shall be deemed
to have been made with respect to each applicable representation and warranty
contained in Section 3 of the Agreement, irrespective of the section of this
Disclosure Schedule in which such disclosure appears.
3.2 CAPITALIZATION.
A. The Company has reserved a total of 2,000,000 shares of Common
Stock for issuance pursuant to the Company's 1996 Stock Option
Plan (the "Plan"). Options to purchase 1,680,964 shares of
Common Stock are outstanding under the Plan.
B. The Company has issued a Performance Warrant to Softbank
Ventures Inc. for the purchase of certain shares of Series B
Convertible Preferred Stock at an exercise price of $7.05. The
number of shares subject to the warrant is based on the
financial performance of the Company. The warrant is
exercisable between February 28, 1998 and the earlier to occur
of an initial public offering of the Company and February 28,
1999.
C. The Conversion Price of the Company's Series B Convertible
Preferred Stock has been adjusted in connection with the
issuance of shares of Series C Preferred Stock on November 12,
1997 resulting in the conversion of such Series B Convertible
Preferred Stock into a greater number of shares of Common
Stock. Such Conversion Price will be adjusted again as a
result of the issuance and sale of the Shares pursuant to this
Agreement.
D. The Company has entered into a Consulting Agreement with Xx.
Xxxxxx Xxxxxxx, a shareholder and director of the Company,
pursuant to which Xx. Xxxxxxx will provide strategic and
financial consulting services to the Company for a one-year
period ending on November 12, 1998 in consideration for the
grant of an option to purchase 130,000 shares of common stock
at an exercise price of $.75 per share, to be exercisable in
full on November 12, 1998. In addition, the Company has agreed
to use its best efforts to ensure that Xx. Xxxxxxx continues
to be elected to the Board of Directors of the Company until
an initial public offering of the Company or his death or
resignation.
E. The Company has agreed that in the event that the Company
enters into an exclusive arrangement with an investment bank
or investment advisor, the Company will ensure that such
arrangement does not preclude the Company's existing holders
of Series C Stock from making additional equity investments in
the Company as mutually agreed by such stockholders and the
Company.
F. The Company has granted a warrant to Silicon Valley Bank
("SVB"), in connection with the extension of credit by SVB to
the Company (see 3.13.A below), to purchase up to 46,292
shares of Series C Preferred Stock of the
A-1
Company at an exercise price of $1.62 per share and, in
connection with a modification of its credit facility with
SVB, a warrant to purchase up to 10,000 shares of Series C
Preferred Stock of the Company at an exercise price of $.01
per share (collectively, the "SVB Warrants"). The Company has
also granted SVB certain rights with respect to the
registration of the Common Stock issuable upon exercise of the
SVB Warrants. Under certain circumstances, if the Company is
acquired and the SVB Warrants are not assumed by the acquiror,
the Company may be required to repurchase the shares under the
SVB Warrants.
G. The Company's Series B Convertible Preferred Stock may be
redeemed for $7.05 per share plus accrued but unpaid dividends
on each December 31 of 2001 (up to 25% of such shares), 2002
(up to 50% of such shares), 2003 (up to 75% of such shares)
and 2004 (up to 100% of such shares).
3.4 STOCKHOLDER LIST AND AGREEMENTS.
A. See Stockholder Lists attached hereto.
B. Agreements.
1. Stock Purchase Agreement dated as of July, 1995,
among the Company, Xxxxxxxxx Xxxxx and B.U. Xxxxx.
2. Stock Restriction Agreement dated as of December 31,
1991 between the Company and Xxxxxxxxxxxx Xxxxx.
3. Stock Restriction Agreement dated as of December 31,
1991 between the Company and Xxxxxx X. Xxxxx.
4. Series B Stock Purchase Agreement dated as of
December 23, 1996, between the Company and Softbank
Ventures, Inc.
5. Stockholders Agreement dated December 23, 1996 among
the Company, Softbank Ventures, Inc. and the other
parties named therein. (A) Section 7.2 of such
Agreement requires to Company to have at least one
outside director, and to have a compensation
committee comprised solely of outside directors. The
Company did not comply with this provision until
November 1997. (B) Article II of this Agreement gives
Softbank a right to require the registration of
certain shares of the Company's Common Stock held by
it. (C) Article III of this Agreement gives Softbank
a right of first refusal to purchase shares of the
Company in this transaction to maintain its current
percentage ownership level in the Company.
6. Series C Preferred Stock Purchase Agreement dated
November 12, 1997.
7. Registration Rights Agreement dated November 12,
1997.
A-2
3.8 LITIGATION. The matters disclosed in Sections 3.9 and 3.13.C and D of
this Disclosure Schedule could result in litigation or governmental
action against the Company.
3.9 TAXES. The Company has been in arrears with respect to the payment of
certain payroll withholding taxes, as described under Section 3.15
below.
3.10 PROPERTY AND ASSETS. All the assets of the Company are subject to liens
pursuant to a lending facility with SVB (See Section 3.13A). Additional
liens on certain of the Company's assets are in favor of Sanwa Leasing
Corporation, AT&T Capital Leasing and IBM Credit Corporation.
3.11 INTELLECTUAL PROPERTY.
A. Trademarks
The Company has filed applications to register its trademarks
ATG (Serial No. 75/150643) and DYNAMO (Serial No. 75/722198)
with the U.S. Patent and Trademark Office.
Sybase, Inc. may be using a trademark similar or identical to
the Company's DYNAMO trademark. The Company has not pursued
formal legal action with respect to such use.
B. Patents
The Company filed U.S. Patent Application No. 08/855379
entitled "Method and apparatus for on-the-fly compilation and
execution of content documents with embedded source program"
with the U.S. Patent and Trademark Office on May 13, 1997.
3.13 ABSENCE OF CHANGES.
A. In December 1997, the Company obtained a lending facility from
SVB in the aggregate amount of $1,000,000, comprising a
$500,000 term loan and a $500,000 revolving line of credit,
each bearing annual interest at 1.25% above SVB's prime
lending rate. The term loan is payable in 36 monthly
installments beginning in January 1998. All principal and
interest on the line of credit are due on December 29, 2000.
Under the loan agreement, the Company is obligated to raise at
least $4,000,000 in equity financing before April 15, 1998. A
failure to raise this financing would constitute a default
under the loan agreement. The Company is in discussions with
SVB regarding an extension of this deadline. In connection
with these lending facilities, SVB has obtained a first
priority security interest in all the Company's assets.
B. The Company is in default on payments due under its real
property lease. A default judgment in the amount of $55,287
against the Company was entered in November 1997 in favor of
First Church of Xxxxxx Scientist of Boston, the Company's
landlord (for property no longer occupied by the Company), on
a claim for amounts past due.
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C. The Company has delayed payments due to substantially all of
its creditors, including employees, and is currently unable to
meet its obligations as they become due.
D. The Company has continued to incur operating losses.
3.14 COMPLIANCE. See 3.9 above with respect to arrears of withholding taxes
and 3.15 below with respect to failure to pay employees.
3.15 EMPLOYEES. The Company is not currently in arrears with respect to the
payment of payroll withholding taxes or employee payroll, although the
Company has recently been delinquent in making such payments.
Governmental taxing authorities may impose penalties on the Company
with respect to such past delinquency. There can be no assurance that
the Company will not, in the future, again become delinquent in the
payment of payroll withholding taxes and/or employee payroll.
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