Stock Purchase Agreement (the "Agreement") effective as of August 31, 1998
by and between VCS Technologies, Inc., a Delaware corporation (the "Company"),
and Xxxxx XxXxxxxx, an individual with a business address at 000 Xxxxxxxxx Xxxx,
Xxxxxxxx, XX 00000 ("XxXxxxxx"). The Company and XxXxxxxx may be referred to
herein collectively as the "Parties" or individually as a "Party."
WHEREAS the Parties have agreed to enter into this Agreement for the
purpose of facilitating a possible initial public offering of securities
currently proposed to be conducted by the Company during 1998,
NOW, THEREFORE, in consideration of the promises and the mutual covenants
contained herein, the Parties hereby agree as follows:
1 Acknowledgments. The Parties acknowledge that from time to time the Company
has deferred payments of amounts due to XxXxxxxx for accrued salary, commissions
and reimbursable expenses (collectively, the "Company Obligation"). On December
1, 1997, in consideration for XxXxxxxx'x consent that the Company be permitted
to further defer payment of portions of the Company Obligation, the Company
issued to XxXxxxxx warrants (the "Warrants") to purchase an aggregate of 60,000
shares of Company's common stock (the "Common Stock") at an exercise price of
$5.00 per share. The Parties further acknowledge that all references herein to
the Common Stock are effective as of the date of this Agreement. Upon the
effective date (if any) of an anticipated reverse stock split of the outstanding
Common Stock to be effected following the date of this Agreement, all references
to the Common Stock contained herein shall be deemed adjusted in accordance with
such reverse stock split.
2 Purchase of Common Stock. Effective as of the date hereof, XxXxxxxx hereby
agrees to purchase from the Company, and the Company agrees to sell to XxXxxxxx,
60,000 shares of Common Stock. As payment therefor, XxXxxxxx hereby (i) waives
the Company Obligation and releases the Company from any obligation to pay any
portion thereof; and (ii) surrenders the Warrants to the Company for
cancellation. Accordingly, the Warrants are hereby canceled, null and void, and
of no further effect. The Company shall deliver to XxXxxxxx a certificate
representing the shares of Common Stock purchased hereby as soon as practicable
following the date of this Agreement.
3 Representations and Warranties of the Company. The Company represents and
warrants to XxXxxxxx as follows:
3.1 The Company is duly organized, validly existing and in good standing
under the laws of the state of Delaware with full power and authority to operate
its business as currently conducted.
3.2 The authorized capital stock of the Company consists of 9,990,000
shares of Common Stock and 10,000 shares of Preferred Stock. Each outstanding
share of Common Stock is duly authorized, validly issued, fully paid and
non-assessable, and has not been issued and is not owned or held in violation of
any preemptive rights of stockholders. No shares of Preferred Stock are
currently outstanding.
3.3 The Company has all requisite power and authority to execute, deliver
and perform its obligations under this Agreement. This Agreement has been duly
authorized by the Company and, when executed and delivered by the Company will
constitute the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
3.4 No consent, authorization, approval, order, license, certificate or
permit of or from, or declaration or filing with, any federal, state, local or
other governmental authority, or any court or any other tribunal, is required by
the Company for the execution, delivery or performance by the Company under this
Agreement (except for such filings as may be required under federal and state
securities laws).
3.5 The shares of Common Stock purchased hereby have been duly reserved for
such issuance. Such shares are duly authorized and are validly issued, fully
paid and non-assessable, and have not been issued in violation of any preemptive
or other rights of stockholders or other parties.
4 Representations and Warranties of XxXxxxxx. XxXxxxxx hereby represents and
warrants to the Company as follows:
4.1 XxXxxxxx is a bona fide resident of the state set forth in Section 7.3
of this Agreement and is legally competent to execute this Agreement.
4.2 XxXxxxxx has received, read carefully and is familiar with this
Agreement. Respecting the Company, XxXxxxxx is familiar with the Company's
business and financial condition and any other matters relating to the
transactions contemplated hereby; XxXxxxxx has received all materials which have
been requested by him, has had a reasonable opportunity to ask questions of the
Company and its representatives, and the Company has answered all inquiries that
XxXxxxxx has put to it. XxXxxxxx has taken all the steps necessary to evaluate
the merits and risks of the transactions effected hereby.
4.3 XxXxxxxx has been advised by the Company to consider retaining legal
counsel in connection with the preparation and the execution of this Agreement.
4.4 XxXxxxxx represents that he is an "accredited investor" as such term is
defined in Rule 501 of the Rules and Regulations promulgated under the
Securities Act of 1933, as amended (the "Securities Act").
4.5 XxXxxxxx has such knowledge and experience in finance, securities,
investments and other business matters so as to be able to evaluate the merits
and risks of his investment in the Company.
4.6 XxXxxxxx has adequate means of providing for his current and
foreseeable future needs and has no need for liquidity of his investment in the
Company. XxXxxxxx recognizes and is fully cognizant of the fact that his
investment in the Company involves a high degree of risk, and XxXxxxxx
represents that he can afford to bear such risk, including, without limitation,
the risk of losing the entire investment.
4.7 XxXxxxxx has been advised by the Company that (i) shares of Common
Stock purchased hereby (the "Securities") have not been registered under the
Securities Act, and that the Securities will be issued on the basis of the
statutory exemption provided by Section 4(2) of the Securities Act or Regulation
D promulgated thereunder, or both, relating to transactions by an issuer not
involving any public offering, and under similar exemptions under applicable
state securities laws; (ii) none of the Securities have been registered or
qualified with any federal or state agency or self-regulatory organization, and
(iii) the Company's reliance on exemptions from federal and state registration
or qualification requirements is based in part upon the representations made by
XxXxxxxx contained in this Agreement.
4.8 XxXxxxxx has been advised by the Company of, and/or he is otherwise
familiar with, the nature of the limitations on the transfer of the Securities
imposed by the Securities Act and the Rules and Regulations promulgated
thereunder. In particular, XxXxxxxx agrees that no sale, assignment or transfer
of any of the Securities shall be valid or effective (and agrees to not so sell,
assign or transfer any of the Securities), and the Company shall not be required
to give any effect to such a sale, assignment or transfer, unless the sale,
assignment or transfer is (i) registered under the Securities Act, it being
understood that none of the Securities are currently registered for sale; or
(ii) made in accordance with all the requirements and limitations of Rule 144
under the Securities Act. XxXxxxxx acknowledges that the Securities shall be
subject to a stop transfer order and that the certificate or certificates
evidencing the Securities shall bear the following legend (and such other
legends as may be required by state blue sky laws):
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THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (1) A REGISTRATION
STATEMENT UNDER THE ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT WITH
RESPECT TO THESE SECURITIES, OR (2) PURSUANT TO A SPECIFIC EXEMPTION
FROM REGISTRATION UNDER THE ACT BUT ONLY UPON A HOLDER HEREOF FIRST
HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE COMPANY, OR OTHER
COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY, THAT THE PROPOSED
DISPOSITION IS CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE ACT AS
WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR STATE SECURITIES LAW.
4.9 XxXxxxxx is acquiring the Securities for his own account for investment
and not with a view to the sale or distribution thereof or the granting of any
participation therein. XxXxxxxx has no present intention of distributing or
selling to others any of such interest or granting any participation therein.
4.10 It never has been represented, guaranteed or warranted by any of the
Company, the Company's officers, directors, stockholders, employees or agents,
or any other person, whether expressly or by implication, that (i) the Company
or XxXxxxxx will realize any given percentage of profits and/or amount or type
of consideration, profit or loss as a result of the Company's activities or
XxXxxxxx'x investment; or (ii) the past performance or experience of the
management of the Company, or of any other person, will in any way indicate the
predictable results of the Company's activities or the ownership of the
Securities.
4.11 XxXxxxxx is not acquiring the Securities as a result of or subsequent
to any advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or
presented at any seminar or meeting, or any solicitation of a share exchange by
a person other than a representative of the Company with whom XxXxxxxx had a
pre-existing relationship.
4.12 XxXxxxxx is not relying on the Company with respect to the tax and
other economic considerations of an investment.
5 Indemnification.
5.1 Survival of Representations and Warranties. The representations and
warranties contained herein shall survive the execution and delivery of this
Agreement and shall continue forever thereafter.
5.2 Indemnification for the Benefit of the Company. XxXxxxxx acknowledges
that he understands the meaning and legal consequences of the representations
and warranties contained in Section 4 hereof, and agrees to indemnify and hold
harmless the Company and each of the Company's officers, directors, employees
and agents from and against any and all loss, damage or liability due to or
arising out of a breach of any such representation or warranty.
5.3 Indemnification for the Benefit of XxXxxxxx. The Company acknowledges
that it understands the meaning and legal consequences of the representations
and warranties contained in Section 3 hereof, and agrees to indemnify and hold
harmless XxXxxxxx from and against any and all loss, damage or liability due to
or arising out of a breach of any such representation or warranty.
6 Company's Right of First Purchase.
6.1 Company's Right of First Purchase. For such time until the date prior
to the effective date of the registration statement filed in connection with the
Company's initial public offering, any shares of Common Stock held by XxXxxxxx
(including, but not limited to, any of the Securities) will be subject to the
Company's right of first purchase. By virtue of that right, (a) such shares of
Common Stock may
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not be transferred during XxXxxxxx'x lifetime to any person other than members
of XxXxxxxx'x Immediate Family (as defined below), a partnership whose members
are XxXxxxxx'x and/or members of XxXxxxxx'x Immediate Family, or a trust for the
benefit of XxXxxxxx and/or members of XxXxxxxx'x Immediate Family, unless such
transfer occurs within the 30 days immediately following either (i) the
expiration of 30 days following written notice by XxXxxxxx to the Company
identifying the prospective transferee and offering the Company the first
opportunity to purchase such stock at its Fair Market Value (as defined below)
in cash; or (ii) the Company's election to not purchase such shares of Common
Stock after receipt of such notice; and (b) upon XxXxxxxx'x death, the Company
will have the right to purchase all or some of such stock at its Fair Market
Value within nine months after the date of death. This right of first purchase
will continue to apply to any such shares of Common Stock after the transfer
during XxXxxxxx'x lifetime of such shares of Common Stock to a member of
XxXxxxxx'x Immediate Family or to a family partnership or trust as aforesaid,
and after any transfer of such shares of Common Stock with respect to which the
Company expressly waived its right of first purchase without also waiving it as
to any subsequent transfers thereof, but it will not apply after a transfer of
such shares of Common Stock with respect to which the Company was offered but
did not exercise or waive its right of first purchase or more than nine months
after XxXxxxxx'x death. The Company may assign all or any portion of its right
of first purchase to any one or more of its stockholders, or to a pension or
retirement plan or trust for employees of the Company, who may then exercise the
right so assigned. The Company's right of first purchase shall terminate on the
date prior to the effective date of the registration statement filed in
connection with the Company's initial public offering.
6.2 Certain Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms will have the following definitions:
6.2.1 Fair Market Value. The "Fair Market Value" of Common Stock will
mean the price at which one could reasonably expect such stock to be sold in an
arm's length transaction, for cash, other than on an installment basis, to a
person not employed by, controlled by, in control of or under common control
with the issuer of such stock. Such Fair Market Value will be that which has
currently or most recently been determined for this purpose by the Board of
Directors of the Company, or at the sole discretion of the Board by an
independent appraiser or appraisers selected by the Board, in either case giving
due consideration to recent transactions involving shares of such stock, if any,
the issuer's net worth, prospective earning power and dividend-paying capacity,
the goodwill of the issuer's business, the issuer's industry position and its
management, that industry's economic outlook, the values of securities of
issuers whose stock is publicly traded and which are engaged in similar
businesses, the effect of transfer restrictions to which such stock may be
subject under law and under the applicable terms of any contract governing such
stock, the absence of a public market for such stock and such other matters as
the Board or its appraiser or appraisers deem pertinent. The determination by
the Board or its appraiser or appraisers of the Fair Market Value will be
conclusive and binding notwithstanding the possibility that other persons might
make a different determination. If the Fair Market Value to be used was thus
fixed more than sixteen months prior to the day as of which Fair Market Value is
being determined, it will in any event be no less than the book value of the
stock being valued at the end of the most recent period for which financial
statements of the Company are available.
6.2.2 Immediate Family. An individual's "Immediate Family" includes
only his or her spouse, parents or other ancestors, and children and other
direct descendants of that individual or of his or her spouse (including such
ancestors and descendants by adoption).
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7 Miscellaneous.
7.1 Confidentiality. XxXxxxxx hereby acknowledges and agrees that this
Agreement is confidential, and that its terms and contents shall not be
disclosed to any person other than through a press release of the Company.
7.2 Payment of Expenses. Except as expressly otherwise provided, each of
the Parties hereto shall pay all expenses and disbursements incurred by its
officers, employees, attorneys, accountants, financial advisers and other agents
and representatives in connection with this Agreement and the performance of its
obligations hereunder.
7.3 Notices. Any notices required or permitted to be given to, or served
upon, either Party hereto pursuant to this Agreement shall be sufficiently given
or served if sent to such Party by registered or certified mail, addressed to it
at its address, as set forth below, or to such other address as it shall
designate by written notice to the other parties addressed as follows:
VCS Technologies, Inc.
000 Xxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Att: Xxxxxxx Xxxxxxx III, President and CEO
Xxxxx XxXxxxxx
000 Xxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
7.4 Counterparts. This Agreement may be executed in any number of
counterparts and each counterpart shall constitute an original instrument, but
all such separate counterparts shall constitute only one and the same
instrument.
7.5 Entire Agreement. This agreement constitutes the entire agreement
between the Parties hereto and supersedes all prior agreements, understandings
and arrangements, oral or written, between the Parties hereto with respect to
the subject matter hereof.
7.6 Amendments and Waivers. This Agreement may not be modified or amended
except by an instrument or instruments in writing signed by the Party against
whom enforcement of any such modification or agreement is sought. Either Party
hereto may, by an instrument in writing, waive compliance by the other Party
with any term or provision of this Agreement to be performed or complied with by
such other Party hereto. The waiver by any Party of a breach of any term or
provision of this Agreement shall not be construed as a waiver of any subsequent
breach.
7.7 Assignment. This Agreement is personal in nature and neither of the
Parties shall, without the written consent of the other, assign or transfer his
or its rights or obligations hereunder to another person or entity, except as
herein expressly provided or permitted and except that the Company may transfer
all or any portion of its rights or obligations hereunder to any of its
affiliates without such prior written consent. Subject to the foregoing
provisions of this Section 7.7, this Agreement shall be binding upon and inure
to the benefit of the Parties hereto and their respective successors and
assigns.
7.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of New York and all disputes arising hereunder shall be
adjudicated solely before the courts of New York to whose jurisdiction the
Parties hereto consent.
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IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement and
caused the same to be delivered on their behalf as of the date first above
written.
Xxxxx XxXxxxxx VCS Technologies, Inc.
/s/ Xxxxx XxXxxxxx By: /s/ Xxxxxxx Xxxxxxx
----------------------------- ----------------------------------
Xxxxx XxXxxxxx Xxxxxxx Xxxxxxx, President and CEO
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