Exhibit 10.78
S2 TECHNOLOGIES, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
February 3, 2004
S2 TECHNOLOGIES, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES C PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
made and entered into as of February 3, 2004, by and among S2 TECHNOLOGIES,
INC., a California corporation (the "Company"), and each of those persons and
entities, severally and not jointly, whose names are set forth on the Schedule
of Purchasers attached hereto as Exhibit A (which persons and entities are
hereinafter collectively referred to as "Purchasers" and each individually as a
"Purchaser"). Together, the Company and the Purchasers are referred to as
"parties" and each as a "party."
RECITALS
WHEREAS, the Company has authorized the sale and issuance of an
aggregate of four million seven hundred fourteen thousand two hundred
eighty-five (4,714,285) shares of its Series C Preferred Stock (the "Shares");
WHEREAS, Purchasers desire to purchase the Shares on the terms and
conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Shares to Purchasers
on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises, representations, warranties, and covenants hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 Authorization of Shares. On or prior to the Initial
Closing (as defined in Section 2 below), the Company shall have authorized (a)
the sale and issuance to Purchasers of the Shares and (b) the issuance of such
shares of Common Stock to be issued upon conversion of the Shares (the
"Conversion Shares"). The Shares and the Conversion Shares shall have the
rights, preferences, privileges and restrictions set forth in the Second Amended
and Restated Articles of Incorporation of the Company, in the form attached
hereto as Exhibit B (also referred to as the "Restated Charter").
1.2 Sale and Purchase. Subject to the terms and conditions
hereof, at the Initial Closing (as hereinafter defined) the Company shall issue
and sell to each Purchaser listed on Exhibit A hereto, severally and not
jointly, and each Purchaser shall purchase from the Company, severally and not
jointly, the number of Shares set forth opposite such Purchaser's name as set
forth on the Schedule of Purchasers attached hereto as Exhibit A (the "Schedule
of Purchasers") under the heading "First Closing," at a purchase price of
seventy cents ($0.70) per share.
1.
2. CLOSING, DELIVERY AND PAYMENT.
2.1 Closing. The closing of the sale and purchase of a minimum
of 2,857,142 Shares set forth under the heading "First Closing" on Exhibit A
(the "Initial Closing") shall take place at 12:00 p.m. on the date hereof, at
the offices of Xxxxxx Godward LLP located at 0000 Xxxxxxxx Xxxx, Xxx Xxxxx, XX
00000 or at such other time or place as the Company and Purchasers may mutually
agree (such date is hereinafter referred to as the "Closing Date").
2.2 Second Closing. Oryx Ventures, LLC shall purchase, within
30 days of the Initial Closing (the "Sceond Closing"), an additional 1,285,714
Shares at a purchase price of seventy cents ($0.70).
2.3 Subsequent Sales of Shares. At any time after the 30th day
and on or before the 90th day following the Initial Closing or at such later
time as the Company and the holders of a majority of the Shares purchased at the
Initial Closing and Second Closing (pursuant to Section 2.1 and 2.2) may
mutually agree, the Company may sell up to the balance of the authorized shares
of Series C Preferred Stock not sold at the Initial Closing and Second Closing
(the "Remaining Shares") to such persons as may be approved by the Company (the
"Additional Purchasers") provided, however, that no such sales of Remaining
Shares may be made hereunder unless the Purchasers at the Initial Closing and
Second Closing hereunder (the "Prior Purchasers") are first offered a right to
purchase their pro rata portion of the Remaining Shares offered at any such
Additional Closing (as defined below). Each Prior Purchaser's "pro rata
portion", for the purposes of this Section 2.3 only, shall be equal to the
number of shares that such Prior Purchaser actually purchased at the Initial
Closing or Second Closing divided by the total number of Shares sold by the
Company to all Prior Purchasers at the Initial Closing and Second Closing. If
the Company proposes to sell Remaining Shares, it shall give each Prior
Purchaser written notice of its intention. Each Prior Purchaser shall have ten
(10) days from the giving of such notice to agree to purchase up to its pro rata
portion of the Remaining Shares on the terms and conditions specified in this
Agreement by giving written notice to the Company and stating therein the
quantity of Remaining Shares to be purchased and delivering the requisite
purchase price for such shares. If not all of the Prior Purchasers elect to
purchase their entire pro rata portion of the Remaining Shares then being
offered by the Company, the Company shall have sixty (60) days thereafter to
sell any such Remaining Shares to persons selected in the Company's discretion,
on the terms and conditions of this Agreement during the ninety (90) day period
referenced in the first sentence of this Section 2.3. All such sales made at any
additional closings (each an "Additional Closing", and along with the Initial
Closing and Second Closing, each a "Closing"), (i) shall be made on the terms
and conditions set forth in this Agreement, (ii) the representations and
warranties of the Company set forth in Section 3 hereof (and the Schedule of
Exceptions) shall speak as of the Initial Closing, and (iii) the representations
and warranties of the Additional Purchasers in Section 4 hereof shall speak as
of such Additional Closing. This Agreement, including without limitation, the
Schedule of Purchasers, may be amended by the Company without the consent of
Purchasers to include any Additional Purchasers. Any shares of Series C
Preferred Stock sold pursuant to this Section 2.3 shall be deemed to be "Shares"
for all purposes under this Agreement and any Additional Purchasers thereof
shall be deemed to be "Purchasers" for all purposes under this Agreement.
2.
2.4 Delivery. At each Closing, subject to the terms and
conditions hereof, the Company will deliver to each Purchaser a certificate
representing the number of Shares purchased at such Closing by such Purchaser,
against payment of the purchase price therefor by check, wire transfer made
payable to the order of the Company, cancellation of indebtedness or any
combination of the foregoing.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth on a Schedule of Exceptions delivered by
the Company to the Purchasers at the Closing, the Company hereby represents and
warrants to each Purchaser as of the date of this Agreement as set forth below.
3.1 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 California. The Company has all requisite corporate power
and authority to own and operate its properties and assets, to execute and
deliver this Agreement, the Amended and Restated Investor Rights Agreement in
the form attached hereto as Exhibit C (the "Investor Rights Agreement"), the
Amended and Restated Co-Sale Agreement in the form attached hereto as Exhibit D
(the "Co-Sale Agreement"), and the Amended and Restated Voting Agreement in the
form attached hereto as Exhibit E (the "Voting Agreement") (collectively, the
"Related Agreements"), to issue and sell the Shares and the Conversion Shares,
and to carry out the provisions of this Agreement, the Related Agreements and
the Restated Charter and to carry on its business as presently conducted and as
presently proposed to be conducted.
3.2 Subsidiaries. The Company does not own or control any
equity security or other interest of any other corporation, limited partnership
or other business entity. The Company is not a participant in any joint venture,
partnership or similar arrangement.
3.3 Capitalization; Voting Rights.
(a) The authorized capital stock of the Company,
immediately prior to the Closing, consists of (i) forty-eight million
(48,000,000) shares of common stock of the Company ("Common Stock"), six million
one hundred six thousand two hundred and fifty (6,106,250) shares of which are
issued and outstanding, and (ii) twenty million one hundred twenty-eight
thousand three hundred three (20,128,303) shares of preferred stock of the
Company ("Preferred Stock"), two million five hundred ninety-two thousand five
hundred ninety-three (2,592,593) shares of which are designated Series A
Preferred Stock, all of which are issued and outstanding, ten million
(10,000,000) shares of which are designated Series B Preferred Stock, nine
million nine hundred sixty-four thousand two hundred and eighty-six (9,964,286)
of which are issued and outstanding and two million eight hundred fifty-seven
thousand one hundred thirty-nine (2,857,139) shares are designated Series B-1
Preferred Stock, all of which are issued and outstanding immediately prior to
the Closing. Of the Preferred Stock four million seven hundred fourteen thousand
two hundred eighty-five (4,714,285) shares are designated Series C Preferred
Stock, none of which are issued and outstanding immediately prior to the
Closing.
3.
(b) Under the Company's 2000 Equity Incentive Plan
(the "Plan"), (i) three hundred six thousand five hundred (306,500) shares have
been issued pursuant to restricted stock purchase agreements and/or the exercise
of outstanding options, (ii) options to purchase one million eight hundred
fifty-three thousand five hundred (1,853,500) shares of Common Stock have been
granted and are currently outstanding, and (iii) one million four hundred
forty-seven thousand six hundred fifty-seven (1,447,657) shares of Common Stock
remain available for future issuance to officers, directors, employees and
consultants of the Company.
(c) Other than (i) the shares reserved for issuance
under the Plan, (ii) warrants to purchase up to seven hundred thousand (700,000)
shares of Common Stock pursuant to that certain Business Consultant and
Management Agreement dated July 20, 2000, between the Company and Oryx
Technologies, Inc., all of which have been exercised, and (iii) warrants to
purchase up to thirty five thousand seven hundred fourteen (35,714) shares of
the Company's Series B Preferred Stock issued to VMR High Octane Fund and except
as may be granted pursuant to this Agreement and the Related Agreements, there
are no outstanding options, warrants, rights (including conversion or preemptive
rights and rights of first refusal), proxy or shareholder agreements, or
agreements of any kind for the purchase or acquisition from the Company of any
of its securities.
(d) All issued and outstanding shares of the
Company's Common Stock (i) have been duly authorized and validly issued and are
fully paid and nonassessable, and (ii) were issued in compliance with all
applicable state and federal laws concerning the issuance of securities.
(e) The rights, preferences, privileges and
restrictions of the Shares are as stated in the Restated Charter. Other than
Series B-1 Preferred Stock, each series of Preferred Stock is convertible into
Common Stock on a one-for-one basis as of the date hereof. Each share of Series
B-1 Preferred Stock is convertible into two (2) shares of Common Stock as of the
date hereof. The Conversion Shares have been duly and validly reserved for
issuance. When issued in compliance with the provisions of this Agreement and
the Restated Charter, the Shares and the Conversion Shares will be validly
issued, fully paid and nonassessable, and will be free of any liens or
encumbrances; provided, however, that the Shares and the Conversion Shares may
be subject to restrictions on transfer under state and/or federal securities
laws as set forth herein or as otherwise required by such laws at the time a
transfer is proposed and will be subject to the terms of the Investor Rights
Agreement, Co-Sale Agreement and the Company's Bylaws.
(f) No stock plan, stock purchase, stock option or
other agreement or understanding between the Company and any holder of any
equity securities or rights 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, consolidation, sale of
stock or assets, change in control or any other transaction(s) by the Company.
3.4 Authorization; Binding Obligations. All corporate action
on the part of the Company, its officers, directors and shareholders necessary
for the authorization of this Agreement and the Related Agreements, the
performance of all obligations of the Company hereunder and thereunder at the
Closing and the authorization, sale, issuance and delivery of the Shares
4.
pursuant hereto and the Conversion Shares pursuant to the Restated Charter has
been taken or will be taken prior to the Closing. The Agreement and the Related
Agreements, when executed and delivered, will be valid and binding obligations
of the Company enforceable in accordance with their terms, except (a) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application affecting enforcement of creditors' rights, (b) general
principles of equity that restrict the availability of equitable remedies, and
(c) to the extent that the enforceability of the indemnification provisions in
Section 2.9 of the Investor Rights Agreement may be limited by applicable laws.
The sale of the Shares and the subsequent conversion of the Shares into
Conversion Shares are not and will not be subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied with.
3.5 Liabilities. The Company has no material liabilities and
knows of no material contingent liabilities, except current liabilities incurred
in the ordinary course of business which have not been, either in any individual
case or in the aggregate, materially adverse.
3.6 Agreements; Action.
(a) Except for agreements explicitly contemplated
hereby and agreements between the Company and its individual employees with
respect to the sale of the Company's Common Stock, there are no agreements,
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 which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $25,000 (other than obligations of, or payments to, the
Company arising from purchase or sale agreements entered into in the ordinary
course of business), or (ii) the transfer or license of any patent, copyright,
trade secret or other proprietary right to or from the Company (other than
licenses arising from the purchase of "off the shelf" or other standard
products), or (iii) indemnification by the Company with respect to infringements
of proprietary rights (other than indemnification obligations arising from
purchase or sale or license agreements entered into by the Company for the
benefit of its customers in the ordinary course of business).
(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 (other than with respect to dividend
obligations, distributions, indebtedness and other obligations incurred in the
ordinary course of business) individually in excess of $25,000 or, in the case
of indebtedness and/or liabilities individually less than $25,000, 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.
5.
(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.
3.7 Obligations to Related Parties. There are no obligations
of the Company to officers, directors, shareholders, or employees of the Company
other than (a) for payment of salary for services rendered, (b) reimbursement
for reasonable expenses incurred on behalf of the Company, and/or (c) for other
standard employee benefits made generally available to all employees (including
stock option agreements outstanding under any stock option plan approved by the
Board of Directors of the Company). None of the officers, directors, key
employees or shareholders of the Company, or any members of their immediate
families, is indebted to the Company. None of the officers, directors or, to the
best of the Company's knowledge, key employees or shareholders of the Company or
any members of their immediate families, 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 which
competes with the Company, other than passive investments in publicly traded
companies (representing less than 1% of such company) which may compete with the
Company. The Company is not a guarantor or indemnitor of any indebtedness of any
other person, firm or corporation.
3.8 Title to Properties and Assets; Liens, Etc. The Company
has good and marketable title to its properties and assets, including the
properties and assets reflected in the Company's most recent balance sheet dated
September 31, 2003, a copy of which has been provided to the Purchasers, and
good title to its leasehold estates, in each case subject to no mortgage,
pledge, lien, lease, encumbrance or charge, other than (a) those resulting from
taxes which have not yet become delinquent, (b) minor liens and encumbrances
which do not materially detract from the value of the property subject thereto
or materially impair the operations of the Company, and (c) those that have
otherwise arisen in the ordinary course of business. The Company is in
compliance with all material terms of each lease to which it is a party or is
otherwise bound.
3.9 Intellectual Property.
(a) The Company owns or possesses sufficient legal
rights to all patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information and other proprietary rights and processes
necessary for its business as now conducted and as presently proposed to be
conducted, without any known infringement of the rights of others. There are no
outstanding options, licenses or agreements of any kind relating to the
foregoing proprietary rights, 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 and other proprietary rights and processes of any other person or
entity other than such licenses or agreements arising from the purchase of "off
the shelf" or standard products.
6.
(b) The Company has not received any communications
alleging that the Company has violated or, by conducting its business as
presently proposed in the Business Plan (as defined in Section 3.18 hereof),
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.
(c) 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
their duties to the Company or that would conflict with the Company's business
as presently proposed to be conducted in the Business Plan. Each employee,
officer and consultant of the Company has executed a Proprietary Information and
Inventions Agreement in the form of Exhibit F attached hereto. 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. 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 made prior to their employment by the Company, except
for inventions, trade secrets or proprietary information that have been assigned
to the Company.
(d) Neither the execution nor delivery of this
Agreement or the Related Agreements, nor the carrying on of the Company's
business by the employees of the Company, nor the conduct of the Company's
business 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 employee is now obligated.
3.10 Compliance with Other Instruments. The Company is not in
violation or default of any term of its Restated Charter or Bylaws, or of any
provision of any mortgage, indenture, contract, agreement, instrument or
contract to which it is party or by which it is bound or of any judgment,
decree, order, writ. The execution, delivery, and performance of and compliance
with this Agreement, and the Related Agreements, and the issuance and sale of
the Shares pursuant hereto and of the Conversion Shares pursuant to the Restated
Charter, will not, with or without the passage of time or giving of notice,
result in any such material violation, or be in conflict with or constitute a
default under any such term, or result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon any of the properties or assets of the Company
or the suspension, revocation, impairment, forfeiture or nonrenewal of any
permit, license, authorization or approval applicable to the Company, its
business or operations or any of its assets or properties. 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 right granted under any license,
distribution agreement or other agreement required to be disclosed on the
Schedule of Exceptions.
3.11 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, or the
Related Agreements or the right of the Company to enter into any of such
agreements, or to consummate the transactions contemplated hereby or thereby, or
which might result, either individually or in the aggregate, in any material
7.
adverse change 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 any of the
foregoing. The foregoing includes, without limitation, actions pending or, to
the Company's knowledge, threatened or any basis therefor known by the Company
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 which the
Company intends to initiate.
3.12 Tax Returns and Payments. The Company has filed all tax
returns (federal, state and local) required to be filed by it. All taxes shown
to be due and payable on such returns, any assessments imposed, and to the
Company's knowledge all other taxes due and payable by the Company on or before
the Closing, have been paid or will be paid prior to the time they become
delinquent. The Company has no knowledge of any liability of any tax to be
imposed upon its properties or assets as of the date of this Agreement that is
not adequately provided for.
3.13 Employees. The Company has no collective bargaining
agreements with any of its employees. There is no labor union organizing
activity pending or, to the Company's knowledge, threatened with respect to the
Company. The Company is not a party to or bound by any currently effective
employment contract, deferred compensation arrangement, bonus plan, incentive
plan, profit sharing plan, retirement agreement or other employee compensation
plan or agreement. To the Company's knowledge, no employee of the Company, nor
any consultant with whom the Company has contracted, is in violation of any term
of any employment contract, proprietary information agreement or of any other
agreement relating to the right of any such individual to be employed by, or to
contract with, the Company because of the nature of the business to be conducted
by the Company; and to the Company's knowledge the continued employment by the
Company of its present employees, and/or the performance of the Company's
contracts with its independent contractors, will not result in any such
violation. The Company has not received any notice alleging that any such
violation has occurred. No employee of the Company has been granted the right to
continued employment by the Company or to any compensation following termination
of employment with the Company. The Company has no knowledge that any officer,
key employee or group of employees intends to terminate his, her or their
employment with the Company, nor does the Company have a present intention to
terminate the employment of any officer, key employee, group of employees, or
contractor.
3.14 Obligations of Management. Each officer and key employee
of the Company is currently devoting substantially all of his or her business
time to the conduct of the business of the Company. The Company is not aware
that any officer or key employee of the Company is planning to work less than
full time at the Company in the future. No officer or key employee is currently
working or, to the Company's knowledge, plans to work for a competitive
enterprise, whether or not such officer or key employee is or will be
compensated by such enterprise.
8.
3.15 Registration Rights and Voting Rights. Except as required
pursuant to the Investor Rights Agreement, the Company is not under any
obligation, and has not granted any rights, to register (as defined in Section
1.1 of the Investor Rights Agreement) any of the Company's presently outstanding
securities or any of its securities that may hereafter be issued. To the
Company's knowledge, except as contemplated in the Voting Agreement, no
shareholder of the Company has entered into any agreement with respect to the
voting of equity securities of the Company.
3.16 Compliance with Laws; Permits. The Company is not in
violation of any applicable statute, rule, regulation, order or restriction of
any domestic or foreign government or any instrumentality or agency thereof in
respect of the conduct of its business or the ownership of its properties which
violation would materially and adversely affect the business, assets,
liabilities, financial condition, operations or prospects of the Company. No
governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required to be
filed in connection with the execution and delivery of this Agreement and the
issuance of the Shares or the Conversion Shares, except such as has been duly
and validly obtained or filed, or with respect to any filings that must be made
after the Closing, as will be filed in a timely manner. The Company (a) 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 (b) believes it can obtain, without undue burden or
expense, any similar authority for the conduct of its business as planned to be
conducted in the Business Plan.
3.17 Offering Valid. Assuming the accuracy of the
representations and warranties of the Purchasers contained in Section 4.2
hereof, the offer, sale and issuance of the Shares and the Conversion Shares
will be exempt from the registration requirements of the Securities Act of 1933,
as amended (the "Securities Act"), and will have been registered or qualified
(or are exempt from registration and qualification) under the registration,
permit or qualification requirements of all applicable state securities laws.
Neither the Company nor any agent on its behalf has solicited or will solicit
any offers to sell or has offered to sell or will offer to sell all or any part
of the Shares to any person or persons so as to bring the sale of such Shares by
the Company within the registration provisions of the Securities Act or any
state securities laws.
3.18 Full Disclosure. The Company has provided the Purchasers
with all information requested by the Purchasers in connection with their
decision to purchase the Shares, including all information the Company believes
is reasonably necessary to make such investment decision. Neither this
Agreement, the exhibits hereto, the Related Agreements nor any other document
delivered by the Company to Purchasers or their attorneys or agents in
connection herewith or therewith or with the transactions contemplated hereby or
thereby, contain any untrue statement of a material fact nor, omit to state a
material fact necessary in order to make the statements contained herein or
therein not misleading. To the Company's knowledge, there are no facts which
(individually or in the aggregate) materially adversely affect the business,
assets, liabilities, financial condition, prospects or operations of the Company
that have not been set forth in the Agreement, the exhibits hereto, the Related
Agreements or in other documents delivered to Purchasers or their attorneys or
agents in connection herewith.
9.
3.19 Section 83(b) Elections. To the Company's knowledge, all
elections and notices permitted by Section 83(b) of the Code and any analogous
provisions of applicable state tax laws have been timely filed by all employees
who have purchased shares of the Company's common stock under agreements that
provide for the vesting of such shares.
3.20 Insurance. The Company has or will obtain promptly
following the Closing general commercial, product liability, fire and casualty
insurance policies with coverage customary for companies similarly situated to
the Company.
3.21 Qualified Small Business. The Company represents and
warrants to the Purchasers that, to the best of its knowledge, the Company is a
"qualified small business" within the meaning of Section 1202(d) of the Internal
Revenue Code of 1986, as amended (the "Code") as of the date hereof and that
upon issuance the Shares should qualify as "qualified small business stock" as
defined in Section 1202(c) of the Code as of the date hereof.
3.22 U.S. Real Property Holding Corporation. The Company is
not now and has never been a "United States real property holding corporation"
as defined in Section 897(c)(2) of the Code and Section 1.897-2(b) of the
Regulations promulgated by the Internal Revenue Service, 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
such Regulations.
3.23 Compliance with Environmental Laws. The Company has not
caused or allowed, or contracted with any party for, the generation, use,
transportation, treatment, storage or disposal of any Hazardous Substances (as
defined below) in connection with the operation of its business or otherwise. To
its knowledge, the Company, the operation of its business, and any real property
that the Company owns, leases or otherwise occupies or uses (the "Premises") are
in compliance with all applicable Environmental Laws (as defined below) and
orders or directives of any governmental authorities having jurisdiction under
such Environmental Laws. The Company has not received any citation, directive,
letter or other communication, written or oral, or any notice of any proceeding,
claim or lawsuit, from any person arising out of the ownership or occupation of
the Premises, or the conduct of its operation, and the Company is not aware of
any basis therefor. For purposes of this Agreement, the term "Environmental
Laws" shall mean any Federal, state or local law or ordinance or regulation
pertaining to the protection of human health or the environment. For purposes of
this Agreement, the term "Hazardous Substances" shall include any materials
classified as hazardous or toxic under any Environmental Laws.
3.24 Minute Books. The minute books of the Company made
available to the Investors contain a complete summary of all meetings of
directors and shareholders of the Company since the time of incorporation of the
Company.
10.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser hereby represents and warrants to the Company
as follows (such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
4.1 Requisite Power and Authority. Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and the Related Agreements and to carry out their
provisions. All action on Purchaser's part required for the lawful execution and
delivery of this Agreement and the Related Agreements have been or will be
effectively taken prior to the Closing. Upon their execution and delivery, this
Agreement and the Related Agreements will be valid and binding obligations of
Purchaser, enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights, (b) as limited
by general principles of equity that restrict the availability of equitable
remedies, and (c) to the extent that the enforceability of the indemnification
provisions of Section 2.9 of the Investor Rights Agreement may be limited by
applicable laws.
4.2 Investment Representations. Purchaser understands that
neither the Shares nor the Conversion Shares have been registered under the
Securities Act. Purchaser also understands that the Shares are being offered and
sold pursuant to an exemption from registration contained in the Securities Act
based in part upon Purchaser's representations contained in the Agreement.
Purchaser hereby represents and warrants as follows:
(a) Purchaser Bears Economic Risk. Purchaser has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that Purchaser
is capable of evaluating the merits and risks of its investment in the Company
and has the capacity to protect its own interests. Purchaser must bear the
economic risk of this investment indefinitely unless the Shares (or the
Conversion Shares) are registered pursuant to the Securities Act, or an
exemption from registration is available. Purchaser understands that the Company
has no present intention of registering the Shares, the Conversion Shares or any
shares of its Common Stock. Purchaser also understands that there is no
assurance that any exemption from registration under the Securities Act will be
available and that, even if available, such exemption may not allow Purchaser to
transfer all or any portion of the Shares or the Conversion Shares under the
circumstances, in the amounts or at the times Purchaser might propose.
(b) Acquisition for Own Account. Purchaser is
acquiring the Shares and the Conversion Shares for Purchaser's own account for
investment only, and not with a view towards their distribution.
(c) Purchaser Can Protect Its Interest. Purchaser
represents that by reason of its, or of its management's, business or financial
experience, Purchaser has the capacity to protect its own interests in
connection with the transactions contemplated in this Agreement, and the Related
Agreements. Further, Purchaser is aware of no publication of any advertisement
in connection with the transactions contemplated in the Agreement.
11.
(d) Accredited Investor. Purchaser represents that it
is an accredited investor within the meaning of Regulation D under the
Securities Act.
(e) Company Information. Purchaser has received and
read the Company's financial statements and Business Plan and has had an
opportunity to discuss the Company's business, management and financial affairs
with directors, officers and management of the Company and has had the
opportunity to review the Company's operations and facilities. Purchaser has
also had the opportunity to ask questions of and receive answers from, the
Company and its management regarding the terms and conditions of this
investment.
(f) Rule 144. Purchaser acknowledges and agrees that
the Shares, and, if issued, the Conversion Shares, must be held indefinitely
unless they are subsequently registered under the Securities Act or an exemption
from such registration is available. Purchaser has been advised or is aware of
the provisions of Rule 144 promulgated under the Securities Act as in effect
from time to time, which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things: the availability of certain current public information about the
Company, the resale occurring following the required holding period under Rule
144 and the number of shares being sold during any three-month period not
exceeding specified limitations.
(g) Residence. If the Purchaser is an individual,
then the Purchaser resides in the state or province identified in the address of
the Purchaser set forth on Exhibit A; if the Purchaser is a partnership,
corporation, limited liability company or other entity, then the office or
offices of the Purchaser in which its investment decision was made is located at
the address or addresses of the Purchaser set forth on Exhibit A.
4.3 Transfer Restrictions. Each Purchaser acknowledges and
agrees that the Shares and, if issued, the Conversion Shares, are subject to
restrictions on transfer as set forth in the Investor Rights Agreement and are
subject to voting requirements as set forth in the Voting Agreement.
5. CONDITIONS TO CLOSING.
5.1 Conditions to Purchasers' Obligations at the Closing.
Purchasers' obligations to purchase the Shares at the Closing are subject to the
satisfaction, at or prior to the Closing Date, of the following conditions:
(a) Representations and Warranties True; Performance
of Obligations. The representations and warranties made by the Company in
Section 3 hereof shall be true and correct in all material respects as of the
Closing Date with the same force and effect as if they had been made as of the
Closing Date, and the Company shall have performed all obligations and
conditions herein required to be performed or observed by it on or prior to the
Closing.
(b) Legal Investment. On the Closing Date, the sale
and issuance of the Shares and the proposed issuance of the Conversion Shares
shall be legally permitted by all laws and regulations to which Purchasers and
the Company are subject.
12.
(c) Consents, Permits, and Waivers. The Company shall
have obtained any and all consents, permits and waivers necessary or appropriate
for consummation of the transactions contemplated by the Agreement and the
Related Agreements (except for such as may be properly obtained subsequent to
the Closing).
(d) Filing of Restated Charter. The Restated Charter
shall have been filed with the Secretary of State of California and shall
continue to be in full force and effect as of the Closing Date.
(e) Corporate Documents. The Company shall have
delivered to Purchasers or their counsel, copies of all corporate documents of
the Company as Purchasers shall reasonably request.
(f) Reservation of Conversion Shares. The Conversion
Shares issuable upon conversion of the Shares issuable at the Closing shall have
been duly authorized and reserved for issuance upon such conversion.
(g) Compliance Certificate. The Company shall have
delivered to Purchasers a Compliance Certificate, executed by the President of
the Company, dated the Closing Date, to the effect that the conditions specified
in subsections (a), (c), (d) and (f) of this Section 5.1 have been satisfied.
(h) Secretary's Certificate. The Purchasers shall
have received from the Company's Secretary, a certificate having attached
thereto (i) the Company's Articles of Incorporation as in effect at the time of
the Closing, (ii) the Company's Bylaws as in effect at the time of the Closing,
(iii) resolutions approved by the Board of Directors authorizing the
transactions contemplated hereby, (iv) resolutions approved by the Company's
shareholders authorizing the filing of the Restated Charter, and (v) good
standing certificates (including tax clearance) with respect to the Company from
the applicable authority(ies) in California and any other jurisdiction in which
the Company is qualified to do business, dated a recent date before the Closing.
(i) Investor Rights Agreement. The Investor Rights
Agreement shall have been executed and delivered by the parties thereto.
(j) Co-Sale Agreement. The Co-Sale Agreement shall
have been executed and delivered by the parties thereto. The stock certificates
representing the shares subject to the Co-Sale Agreement shall have been
delivered to the Secretary of the Company and shall have had appropriate legends
placed upon them to reflect the restrictions on transfer set forth on the
Co-Sale Agreement.
(k) Voting Agreement. The Voting Agreement shall have
been executed and delivered by the parties thereto.
(l) Board of Directors. Upon the Closing, the
authorized size of the Board of Directors of the Company shall be five (5)
members and the Board shall consist of Xxxxxxx Xxxxxxx, Xxxx Xxxxxxxxx, Xxxx
Xxxxxxx, Xxxx Xxxxxxxx and one (1) other member, as further specified in the
Voting Agreement.
13.
(m) Proceedings and Documents. All corporate and
other proceedings in connection with the transactions contemplated at the
Closing hereby and all documents and instruments incident to such transactions
shall be reasonably satisfactory in substance and form to the Purchasers and
their special counsel, and the Purchasers and their special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as they may reasonably request.
(n) Proprietary Information and Inventions Agreement.
The Company and each of its officers, employees and consultants shall have
entered into the Company's standard form of Proprietary Information and
Inventions Agreement, in substantially the form attached hereto as Exhibit F or
in other form reasonably acceptable to the Purchasers.
5.2 Conditions to Purchasers' Obligations at an Additional
Closing. Purchasers' obligations to purchase the Shares at any Additional
Closing are subject to the satisfaction, at or prior to the date of the
Additional Closing of the following conditions:
(a) Legal Investment. The sale and issuance of the
Shares and the proposed issuance of the Conversion Shares shall be legally
permitted by all laws and regulations to which Purchasers and the Company are
subject.
(b) Filing of Restated Charter. The Restated Charter
shall have been filed with the Secretary of State of the State of California and
shall continue to be in full force and effect.
(c) Reservation of Conversion Shares. The Conversion
Shares issuable upon conversion of the Shares shall have been duly authorized
and reserved for issuance upon such conversion.
(d) Compliance Certificate. The Company shall have
delivered to the Additional Purchasers at such Additional Closing (i) a
Compliance Certificate, executed by the President of the Company, dated as of
the date of the Additional Closing, to the effect that the conditions specified
in subsections (b) and (c) of this Section 5.2 have been satisfied and (ii) a
Certificate of the Chief Executive Officer that there have been no material
changes to representations and warranties of the Company set forth in Section 3
herein or, if they have so changed, then said Certificate shall be accompanied
by a revised Schedule of Exceptions dated as of the date of the Closing.
(e) Secretary's Certificate. The Additional
Purchasers at such Additional Closing shall have received from the Company's
Secretary, a certificate having attached thereto (i) the Company's Articles of
Incorporation as in effect at the time of the respective Additional Closing,
(ii) the Company's Bylaws as in effect at the time of the respective Additional
Closing, (iii) resolutions approved by the Board of Directors authorizing the
transactions contemplated hereby, (iv) resolutions approved by the Company's
shareholders authorizing the filing of the Restated Charter, and (v) good
standing certificates (including tax clearance) with respect to the Company from
the applicable authority(ies) in California and any other jurisdiction in which
the Company is qualified to do business, dated a recent date before the given
Additional Closing.
14.
5.3 Conditions to Obligations of the Company. The Company's
obligation to issue and sell the Shares at the Closing and at each Additional
Closing is subject to the satisfaction, on or prior to the Closing or the
Additional Closing, as the case may be, of the following conditions by each
Purchaser participating in the Closing or the Additional Closing, as the case
may be (except that with respect to any Additional Closing, the references to
"Closing" shall instead be deemed to refer to the applicable "Additional
Closing"):
(a) Representations and Warranties True. The
representations and warranties in Section 4 made by those Purchasers acquiring
Shares shall be true and correct in all material respects at the date of the
Closing, with the same force and effect as if they had been made on and as of
said date.
(b) Performance of Obligations. Such Purchasers shall
have performed and complied with all agreements and conditions herein required
to be performed or complied with by such Purchasers on or before the Closing.
(c) Filing of Restated Charter. The Restated Charter
shall have been filed with the Secretary of State of the State of California.
(d) Investor Rights Agreement. The Investor Rights
Agreement shall have been executed and delivered by the parties thereto.
(e) Co-Sale Agreement. The Co-Sale Agreement shall
have been executed and delivered by the parties thereto.
(f) Voting Agreement. The Voting Agreement shall have
been executed and delivered by the parties thereto.
(g) Consents, Permits, and Waivers. The Company shall
have obtained any and all consents, permits and waivers necessary or appropriate
for consummation of the transactions contemplated by the Agreement and the
Related Agreements (except for such as may be properly obtained subsequent to
the Closing).
6. MISCELLANEOUS.
6.1 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and performed entirely in
California.
6.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
6.3 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
15.
the parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
6.4 Entire Agreement. This Agreement, the exhibits and
schedules hereto, the Related Agreements and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement among
the parties with regard to the subjects hereof, and no party shall be liable or
bound to any other in any manner by any representations, warranties, covenants
and agreements except as specifically set forth herein and therein.
6.5 Severability. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
6.6 Amendment and Waiver.
(a) This Agreement shall be amended or modified only
upon the written consent of the Company and holders of at least a majority of
the outstanding Shares (treated as if converted and including any Conversion
Shares into which the Shares have been converted that have not been sold to the
public).
(b) The obligations of the Company and the rights of
the holders of the Shares and the Conversion Shares under the Agreement may be
waived only with the written consent of the holders of at least a majority of
the outstanding Shares (treated as if converted and including any Conversion
Shares into which the Shares have been converted that have not been sold to the
public).
6.7 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any party, upon any breach, default or
noncompliance by another party under this Agreement, the Related Agreements or
the Restated Charter, shall impair any such right, power or remedy, nor shall it
be construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of any similar breach, default or noncompliance
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on any Purchaser's part of any breach, default or noncompliance under
this Agreement, the Related Agreements or under the Restated Charter or any
waiver on such party's part of any provisions or conditions of the Agreement,
the Related Agreements, or the Restated Charter must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, the Related Agreements, the Restated
Charter, by law, or otherwise afforded to any party, shall be cumulative and not
alternative.
6.8 Notices. All notices required or permitted hereunder shall
be in writing and shall be deemed effectively given: (a) upon personal delivery
to the party to be notified; (b) when sent by confirmed facsimile if sent during
normal business hours of the recipient, if not, then on the next business day,
provided that any facsimile transmission shall be followed immediately by notice
sent registered or certified mail as provided herein; (c) five (5) days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid; or (d) upon delivery to recipient after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the Company
16.
at the address as set forth on the signature page hereof and to Purchaser at the
address set forth on Exhibit A attached hereto or at such other address as the
Company or Purchaser may designate by ten (10) days advance written notice to
the other parties hereto.
6.9 Expenses. The Company shall pay all costs and expenses
that it incurs with respect to the negotiation, execution, delivery and
performance of the Agreement. The Company shall, immediately following the
Closing, reimburse the reasonable fees of and expenses of one counsel for all
Investors and shall reimburse such counsel for reasonable expenses incurred in
connection with the negotiation, execution, delivery and performance of this
Agreement; provided, however, that the cumulative amount of said fees and
expenses to such counsel shall not exceed $5,000.
6.10 Attorneys' Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including, without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
6.11 Titles and Subtitles. The titles of the sections and
subsections of the Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
6.12 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument. This Agreement may be executed and
delivered by facsimile and upon such delivery the facsimile signature will be
deemed to have the same effect as if the original signature had been delivered
to the other party.
6.13 Broker's Fees. Except for commissions paid to Xxxxxxx
Xxxxxxx in connection with the letter agreement between him and the Company
dated January __, 2004, each party hereto represents and warrants that no agent,
broker, investment banker, person or firm acting on behalf of or under the
authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 6.13 being untrue.
6.14 Confidentiality. Each party hereto agrees that, except
with the prior written consent of the other party or parties, as applicable, it
shall at all times keep confidential and not divulge, furnish or make accessible
to anyone any confidential information, knowledge or data concerning or relating
to the business or financial affairs of the other parties to which such party
has been or shall become privy by reason of this Agreement or the Related
Agreements, discussions or negotiations relating to this Agreement or the
Related Agreements, the performance of its obligations hereunder or the
ownership of the Shares purchased hereunder. The provisions of this Section 6.14
shall be in addition to, and not in substitution for, the provisions of any
separate nondisclosure agreement executed by the parties hereto.
17.
Notwithstanding anything herein to the contrary, any party to this
Agreement (and any employee, representative, or other agent of any party to this
Agreement) may disclose to any and all persons, without limitation of any kind,
the tax treatment and tax structure of the transactions contemplated by this
Agreement and all materials of any kind (including opinions or other tax
analyses) that are provided to it relating to such tax treatment and tax
structure; provided however, that such disclosure may not be made to the extent
reasonably necessary to comply with any applicable federal or state securities
laws. For the purposes of the foregoing sentence, (i) the "tax treatment" of a
transaction means the purported or claimed federal income tax treatment of the
transaction, and (ii) the "tax structure" of a transaction means any fact that
may be relevant to understanding the purported or claimed federal income tax
treatment of the transaction.
Thus, for the avoidance of doubt, the parties acknowledge and agree
that the tax treatment and tax structure of any transaction does not include the
name of any party to a transaction or any sensitive business information
(including, without limitation, the name and other specific information about
any party's intellectual property or other proprietary assets) unless such
information may be related or relevant to the purported or claimed federal
income tax treatment of the transaction.
6.15 Pronouns. All pronouns contained herein, and any
variations thereof, shall be deemed to refer to the masculine, feminine or
neutral, singular or plural, as to the identity of the parties hereto may
require.
6.16 California Corporate Securities Law. THE SALE OF THE
SECURITIES WHICH 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
THEREFOR PRIOR TO SUCH QUALIFICATION OR IN THE ABSENCE OF AN EXEMPTION FROM SUCH
QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH CONSIDERATION BY THE
COMPANY, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION
BEING AVAILABLE.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
18.
IN WITNESS WHEREOF, the parties hereto have executed the SERIES C
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
COMPANY: PURCHASERS:
S2 TECHNOLOGIES, INC. Sigma International
Signature: __________________________ Signature: __________________________
Print Name: _________________________ Print Name: _________________________
Title: ______________________________ Title: ______________________________
Address: 0000 Xxx Xxxxx Xxxxxx
Xxxxxxx, XX 00000
High Octane Fund
Signature: __________________________
Print Name: _________________________
Title: ______________________________
Europe Interchange BV
Signature: __________________________
Print Name: _________________________
Title: ______________________________
[SERIES C PREFERRED STOCK PURCHASE AGREEMENT SIGNATURE PAGE]
Raisin Social Led Retirement Benefit
Scheme
Signature: __________________________
Print Name: _________________________
Title: ______________________________
Kanton Services Ltd
Signature: __________________________
Print Name: _________________________
Title: ______________________________
Ashcolin SA (Cushag)
Signature: __________________________
Print Name: _________________________
Title: ______________________________
Streamhurst Management Limited
Signature: __________________________
Print Name: _________________________
Title: ______________________________
[SERIES C PREFERRED STOCK PURCHASE AGREEMENT SIGNATURE PAGE]
Xxxxx Xxxxxxx
Signature: __________________________
Print Name: _________________________
Title: ______________________________
Xx. Xxxxx Xxxxxx
Signature: __________________________
Print Name: _________________________
Title: ______________________________
Xxxx Xxxxxxx
Signature: __________________________
Print Name: _________________________
Title: ______________________________
NDCA Corporation (Holding) SA
Signature: __________________________
Print Name: _________________________
Title: ______________________________
[SERIES C PREFERRED STOCK PURCHASE AGREEMENT SIGNATURE PAGE]
Oryx Ventures, LLC
Signature: __________________________
Print Name: _________________________
Title: ______________________________
[SERIES C PREFERRED STOCK PURCHASE AGREEMENT SIGNATURE PAGE]
TABLE OF CONTENTS
PAGE
1. AGREEMENT TO SELL AND PURCHASE...........................................................................1
1.1 Authorization of Shares.........................................................................1
1.2 Sale and Purchase...............................................................................1
2. CLOSING, DELIVERY AND PAYMENT............................................................................2
2.1 Closing and Subsequent Closing..................................................................2
2.2 Delivery........................................................................................2
2.3 Subsequent Sale of Shares.......................................................................2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................3
3.1 Organization, Good Standing and Qualification...................................................3
3.2 Subsidiaries....................................................................................3
3.3 Capitalization; Voting Rights...................................................................3
3.4 Authorization; Binding Obligations..............................................................4
3.5 Liabilities.....................................................................................5
3.6 Agreements; Action..............................................................................5
3.7 Obligations to Related Parties..................................................................5
3.8 Title to Properties and Assets; Liens, Etc......................................................6
3.9 Intellectual Property...........................................................................6
3.10 Compliance with Other Instruments...............................................................7
3.11 Litigation......................................................................................7
3.12 Tax Returns and Payments........................................................................8
3.13 Employees.......................................................................................8
3.14 Obligations of Management.......................................................................8
3.15 Registration Rights and Voting Rights...........................................................8
3.16 Compliance with Laws; Permits...................................................................9
3.17 Offering Valid..................................................................................9
3.18 Full Disclosure.................................................................................9
3.19 Section 83(b) Elections........................................................................10
3.20 Insurance......................................................................................10
3.21 Qualified Small Business.......................................................................10
3.22 U.S. Real Property Holding Corporation.........................................................10
i.
TABLE OF CONTENTS
PAGE
3.23 Compliance with Environmental Laws.............................................................10
3.24 Minute Books...................................................................................10
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS........................................................11
4.1 Requisite Power and Authority..................................................................11
4.2 Investment Representations.....................................................................11
4.3 Transfer Restrictions..........................................................................12
5. CONDITIONS TO CLOSING...................................................................................12
5.1 Conditions to Purchasers' Obligations at the Closing...........................................12
5.2 Conditions to Purchasers' Obligations at an Additional Closing.................................14
5.3 Conditions to Obligations of the Company.......................................................15
6. MISCELLANEOUS...........................................................................................15
6.1 Governing Law..................................................................................15
6.2 Survival.......................................................................................16
6.3 Successors and Assigns.........................................................................16
6.4 Entire Agreement...............................................................................16
6.5 Severability...................................................................................16
6.6 Amendment and Waiver...........................................................................16
6.7 Delays or Omissions............................................................................16
6.8 Notices........................................................................................17
6.9 Expenses.......................................................................................17
6.10 Attorneys' Fees................................................................................17
6.11 Titles and Subtitles...........................................................................17
6.12 Counterparts...................................................................................17
6.13 Broker's Fees..................................................................................17
6.14 Confidentiality................................................................................17
6.15 Pronouns.......................................................................................18
6.16 California Corporate Securities Law............................................................18
ii.
LIST OF EXHIBITS
Schedule of Purchasers Exhibit A
Amended and Restated Articles of Incorporation Exhibit B
Amended and Restated Investor Rights Agreement Exhibit C
Amended and Restated Co-Sale Agreement Exhibit D
Amended and Restated Voting Agreement Exhibit E
Proprietary Information and Inventions Agreement Exhibit F
EXHIBIT A
SCHEDULE OF PURCHASERS
PURCHASE PRICE PAYABLE IN
IMMEDIATELY AVAILABLE
PURCHASER SHARES FUNDS AT FIRST CLOSING
----------------------------------------------------------- ------------ ---------------------------------
FIRST CLOSING
Sigma International II, L.P. 357,142 $250,000.00
11/12 Xxxx Xxxx
Xxxxxx XX 0X 0XX
Xxxx Xxxxxx Fund 357,142 $250,000.00
Akara Xxxx
00 Xx Xxxxxx Xxxxxx
Wickhams Cay 1
Road Town
Tortola, British Virgin Island
Correspondence to: XX Xxx 000, Xxxxxxxx Xx.
Xxxxxxx, Xxxx xx Xxx, XX00 0XX
Europe Interchange BV 35,714 $25,000.00
Alastair Holbertson
0xx Xxxxx 00 Xxxxxxx Xxxx
Xxxxxxxx 0000
Xxxx Xxxx, Xxxxx Xxxxxx
Raisin Social Led Retirement Benefit Scheme 35,714 $25,000.00
00 Xxxxxx Xxxxxx Xxxx
Xxxxx Xxxxxxx, XX0 0XX
Kanton Services Ltd 1,428,571 $1,000,000.00
Akara Xxxx
00 Xx Xxxxxx Xxxxxx
Wickhams Cay 1
Road Town
Tortola, British Virgin Island
Correspondence to: XX Xxx 000, Xxxxxxxx Xx.
Xxxxxxx, Xxxx xx Xxx, XX00 0XX
Ashcolin SA (Cushag) 57,142 $40,000.00
00 Xxxxxxxxx Xxxxxx
Xxxxxx X00 0XX
Streamhurst Management Limited 128,571 $90,000.00
Akara Xxxx
00 Xx Xxxxxx Xxxxxx
Wickhams Cay 1
Road Town
Tortola, British Virgin Island
Correspondence to: XX Xxx 000, Xxxxxxxx Xx.
Xxxxxxx, Xxxx xx Xxx, XX00 0XX
Voyager Group Holdings Ltd. 428,535 $299,975.00
X.X. Xxx 000, Xxxxx 0
Xxxxxxxxxxx 0
Xxxxxxxxx, Xxxxxxxxx
Dr. Xxxxx Xxxxx 142,857 $100,000.00
00 Xxxxxxx Xxxx
Xxxxx, XX 00000
Xxxx Xxxxxxx 35,714 $25,000.00
0000 Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
NDCA Corporation (Holding) SA 35,714 $25,000.00
Societe Anonyme Holding
00 xxxxxx xx Xxxx
X-0000 Xxxxxxxxxx
X.X.X. Luxembourg B No.93.415
C/o Mr. Xxxxxx Xxxx
00 Xxxxxxx Xxxxxx
Xxxx Xxxxx
Xxxxxx X0 0XX
Xxxxxx Xxxx 42,857 $30,000.00
00 Xxxxxxx Xxxxxx
Xxxx Xxxxx
Xxxxxx X0 0XX
Ronan O'Caoimh 35,697 $24,988.00
Glencarrig House
Delgany
Co Wicklow
Ireland
Acomex Executive Pension Fund 71,392 $49,975.00
Address: c/o Fiske PLC
Xxxxxxxxx Xxxxx Xxxxxx Xxxx
Xxxxxx XX0X 0XX
TOTAL FOR FIRST CLOSING: 3,192,762 $2,234,938.00
--------- -------------
SECOND CLOSING
Oryx Ventures, LLC 1,285,714 $900,000.00
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
TOTAL FOR SECOND CLOSING: 1,285,714 $900,000.00
--------- -------------
TOTAL FOR FINANCING: 4,478,479 $3,134,938.00
--------- -------------
EXHIBIT B
AMENDED AND Restated Articles of Incorporation
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
S2 TECHNOLOGIES, INC.
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
S2 TECHNOLOGIES, INC.
Xxxx Xxxxxxxxx hereby certifies that:
ONE: He is the duly elected and acting President and Secretary of S2
Technologies, Inc., a California corporation (the "Corporation").
TWO: The Amended and Restated Articles of Incorporation of this
Corporation are hereby amended and restated to read in full as follows:
"I.
The name of the Corporation is S2 TECHNOLOGIES, INC. (the
"Corporation").
II.
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation is authorized to issue is sixty-eight million
two hundred six thousand eight hundred seventy-eight (68,206,878) shares,
forty-eight million (48,000,000) shares of which shall be Common Stock (the
"Common Stock") and twenty million one hundred twenty-eight thousand three
hundred three (20,128,303) shares of which shall be Preferred Stock (the
"Preferred Stock").
B. Two million five hundred ninety-two thousand five hundred
ninety-three (2,592,593) of the authorized shares of Preferred Stock are hereby
designated "Series A Preferred Stock" (the "Series A Preferred"), ten million
(10,000,000) of the authorized shares of Preferred Stock are hereby designated
"Series B Preferred Stock" (the "Series B Preferred"), two million eight hundred
fifty-seven thousand one hundred thirty-nine (2,857,139) of the authorized
shares of Preferred Stock are hereby designated "Series B-1 Preferred Stock"
(the "Series B-1 Preferred") and four million seven hundred fourteen thousand
two hundred eighty-five (4,714,285) of the authorized shares of Preferred Stock
are hereby designated "Series C Preferred Stock" (the "Series C Preferred") (the
Series A Preferred, Series B Preferred, Series B-1 Preferred and Series C
Preferred are referred to herein collectively as the "Series Preferred").
1.
C. The rights, preferences, privileges, restrictions and other matters
relating to the Series Preferred are as follows:
1. DIVIDEND RIGHTS.
(a) Holders of Series Preferred, in preference to the holders
of any other stock of the Corporation ("Junior Stock"), shall be entitled to
receive, when, as and if declared by the Board of Directors, but only out of
funds that are legally available therefor, cash dividends at the rate of eight
percent (8%) of the applicable Original Issue Price (as defined below) per annum
on each outstanding share of Series Preferred (as adjusted for any stock
dividends, combinations, splits recapitalizations and the like with respect to
such shares). The "Original Issue Price" of the Series A Preferred shall be
twenty-seven cents ($0.27) (the "Series A Original Issue Price"). The Original
Issue Price of the Series B Preferred shall be thirty-five cents ($0.35) (the
"Series B Original Issue Price"). The Original Issue Price of the Series B-1
Preferred shall be thirty-five cents ($0.35) (the "Series B-1 Original Issue
Price"). The Original Issue Price of the Series C Preferred shall be seventy
cents ($0.70) (the "Series C Original Issue Price"). Such dividends shall be
payable only when, as and if declared by the Board of Directors and shall be
non-cumulative.
(b) So long as any shares of Series Preferred shall be
outstanding, no dividend, whether in cash or property, shall be paid or
declared, nor shall any other distribution be made, on any Junior Stock, nor
shall any shares of any Junior Stock of the Corporation be purchased, redeemed,
or otherwise acquired for value by the Corporation (except for acquisitions of
Common Stock by the Corporation pursuant to agreements which permit the
Corporation to repurchase such shares upon termination of services to the
Corporation or in exercise of the Corporation's right of first refusal upon a
proposed transfer) until all dividends (set forth in Section 1(a) above) on the
Series Preferred shall have been paid or declared and set apart. In the event
dividends are paid on any share of Common Stock, an additional dividend shall be
paid with respect to all outstanding shares of Series Preferred in an amount
equal per share (on an as-if-converted to Common Stock basis) to the dividend
amount paid or set aside for each share of Common Stock. The provisions of this
Section 1(b) shall not, however, apply to (i) a dividend payable in Common
Stock, (ii) the acquisition of shares of any Junior Stock in exchange for shares
of any other Junior Stock, or (iii) any repurchase of any outstanding securities
of the Corporation that is unanimously approved by the Corporation's Board of
Directors. The holders of the Series Preferred expressly waive their rights, if
any, as described in Sections 502 and 503 of the General Corporation Law of
California as they relate to repurchase of shares of Junior Stock upon
termination of employment or service by any person as a consultant or director.
2. VOTING RIGHTS.
(a) General Rights. Except as otherwise provided herein or as
required by law, the Series Preferred shall be voted equally with the shares of
the Common Stock of the Corporation and not as a separate class, at any annual
or special meeting of shareholders of the Corporation, and may act by written
consent in the same manner as the Common Stock, in either case upon the
following basis: each holder of shares of Series Preferred shall be entitled to
such number of votes as shall be equal to the whole number of shares of Common
Stock into which such holder's aggregate number of shares of Series Preferred
are convertible (pursuant to Section 4 hereof) immediately after the close of
2.
business on the record date fixed for such meeting or the effective date of such
written consent.
(b) Separate Vote of Series Preferred. With respect to the
Series A Preferred, so long as at least one million (1,000,000) shares of Series
A Preferred remain outstanding, and with respect to the Series B Preferred
and/or Series B-1 Preferred and/or Series C Preferred, so long as, in the
aggregate, at least four million (4,000,000) shares of Series B Preferred and/or
Series B-1 Preferred and/or Series C Preferred remain outstanding (in each case
subject to adjustment for any stock split, reverse stock split or other similar
event affecting the Series Preferred), in addition to any other vote or consent
required herein or by law, the vote or written consent of the holders of, as the
case may be, a majority of the outstanding Series A Preferred and/or sixty-six
and two-thirds percent (662/3%) of the outstanding Series B Preferred, Series
B-1 Preferred and Series C Preferred, in the aggregate, shall be necessary for
effecting or validating the actions described in all enumerated clauses (i)-(x)
of this clause (b) except for clause (ii), as to which the respective Series
Preferred affected adversely must vote in favor of such adverse change by the
described percentage vote:
(i) Any amendment, alteration, or repeal of any
provision of the Articles of Incorporation or the Bylaws of the Corporation
(including any filing of a Certificate of Determination);
(ii) Any adverse change to the powers, rights,
preferences, privileges, or restrictions of the Series Preferred;
(iii) Any increase in the authorized number of shares
of Preferred Stock;
(iv) Any authorization or any designation, whether by
reclassification or otherwise, of any new class or series of stock or any other
securities convertible into equity securities of the Corporation ranking on a
parity with or senior to the Series Preferred in rights of redemption,
liquidation preference, voting or dividends or any increase in the authorized or
designated number of any such new class or series;
(v) Any repurchase or redemption of Preferred Stock
(except as expressly contemplated by the Articles of Incorporation);
(vi) Any redemption, repurchase, payment of dividends
or other distributions with respect to Junior Stock (except for acquisitions of
Common Stock by the Corporation pursuant to agreements which permit the
Corporation to repurchase such shares upon termination of services to the
Corporation or in exercise of the Corporation's right of first refusal upon a
proposed transaction; provided that excluding circumstances involving the
Corporation's right of first refusal, the repurchase price is equal to or less
than the original purchase price for such shares);
(vii) Any agreement by the Corporation or its
shareholders regarding an Asset Transfer or Acquisition (each as defined in
Section 3(c));
3.
(viii) Any action that results in the payment or
declaration of a dividend on any shares of Common Stock or Preferred Stock;
(ix) Any voluntary dissolution or liquidation of the
Corporation; or
(x) Any change in the authorized number of members of
the Corporation's Board of Directors.
(c) Election of Board of Directors. The authorized number of
members on the Corporation's Board of Directors shall be five (5). For so long
as at least one million (1,000,000) shares of Series A Preferred remain
outstanding (subject to adjustment for any stock split, reverse stock split or
similar event affecting the Series A Preferred) the holders of Series A
Preferred, voting as a separate class, shall be entitled to elect two (2)
members of the Board of Directors (also referred to as the "Board") at each
meeting or pursuant to each consent of the Corporation's shareholders for the
election of directors, and to remove from office such directors and to fill any
vacancy caused by the resignation, death or removal of such directors.
Notwithstanding the foregoing, in the event of a change in control, dissolution
or liquidation of either Oryx Ventures or Oryx Technologies Corp. (collectively
referred to as "Oryx") or both, thereafter the holders of Series A shall be
entitled to elect only one (1) member of the Board. For so long as at least one
million (1,000,000) shares of Series B Preferred and/or Series B-1 Preferred, in
the aggregate, remain outstanding (subject to adjustment for any stock split,
reverse stock split or similar event affecting the Series B Preferred and/or
Series B-1 Preferred) the holders of Series B Preferred and Series B-1
Preferred, voting together as a single class, shall be entitled to elect one (1)
member of the Corporation's Board of Directors at each meeting or pursuant to
each consent of the Corporation's shareholders for the election of directors,
and to remove from office such director and to fill any vacancy caused by the
resignation, death or removal of such director. The holders of Common Stock,
voting as a separate class, shall be entitled to elect all remaining members of
the Board of Directors at each meeting or pursuant to each consent of the
Corporation's shareholders for the election of directors, and to remove from
office such directors and to fill any vacancy caused by the resignation, death
or removal of such directors. For the purposes of this Section 2(c) only, a
change of control shall mean:
(i) any consolidation or merger of Oryx Ventures or
Oryx Technologies Corp. with or into any other corporation or other entity or
person, or any other corporate reorganization, in which the shareholders of Oryx
Ventures or Oryx Technologies Corp., as the case may be, immediately prior to
such consolidation, merger or reorganization, own less than 50% of the given
entity's voting power immediately after such consolidation, merger or
reorganization, or any transaction or series of related transactions to which
Oryx Ventures or Oryx Technologies Corp. is a party in which in excess of fifty
percent (50%) of the given entity's voting power is transferred, excluding any
consolidation or merger effected exclusively to change the domicile of Oryx
Ventures or Oryx Technologies Corp.; or
(ii) a sale, lease, pledge, license or other
disposition of all or substantially all of the assets of either Oryx Ventures or
Oryx Technologies Corp.
4.
3. LIQUIDATION RIGHTS.
(a) Upon any liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, before any distribution or
payment shall be made to the holders of any Junior Stock, the holders of the
respective Series Preferred shall be entitled to be paid out of the assets of
the Corporation an amount per share of Series Preferred equal to the applicable
Original Issue Price for the respective Series Preferred plus all declared and
unpaid dividends on such shares of Preferred Stock (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like with respect to
such shares) for each share of Series Preferred held by them. If, upon any such
liquidation, dissolution, or winding up, the assets of the Corporation shall be
insufficient to make payment in full to all holders of Series Preferred of the
liquidation preference set forth in this Section 3(a), then such assets shall be
distributed among the holders of the respective Series Preferred at the time
outstanding, ratably in proportion to the full amounts to which they would
otherwise be respectively entitled.
(b) After payment of the full liquidation preference of the
Series Preferred as set forth in Section 3(a) above, any remaining assets of the
Corporation legally available for distribution, if any, shall be distributed
ratably to the holders of the Common Stock and the Series Preferred on the basis
of Common Stock equivalents.
(c) The following events shall be considered a liquidation
under this Section 3:
(i) any consolidation or merger of the Corporation
with or into any other corporation or other entity or person, or any other
corporate reorganization, in which the shareholders of the Corporation
immediately prior to such consolidation, merger or reorganization, own less than
50% of the Corporation's voting power immediately after such consolidation,
merger or reorganization, or any transaction or series of related transactions
to which the Corporation is a party in which in excess of fifty percent (50%) of
the Corporation's voting power is transferred (an "Acquisition"), excluding any
consolidation or merger effected exclusively to change the domicile of the
Corporation;
(ii) a sale, lease, pledge, license or other
disposition of all or substantially all of the assets of the Corporation (an
"Asset Transfer");
(iii) in any of such events, if the consideration
received by this Corporation is other than cash, its value will be deemed its
fair market value as determined in good faith by the Board of Directors. Any
securities shall be valued as follows:
(A) Securities not subject to investment
letter or other similar restrictions on free marketability covered by clause (B)
immediately below:
(1) If traded on a securities
exchange or through the Nasdaq National Market, the value shall be deemed to be
the average of the closing prices of the securities on such quotation system
over the thirty (30) day period ending three (3) days prior to the closing;
(2) If actively traded
over-the-counter, the value shall be deemed to be the average of the closing bid
or sale prices (whichever is applicable) over the thirty (30) day period ending
three (3) days prior to the closing; and
5.
(3) If there is no active public
market, the value shall be the fair market value thereof, as determined by the
Board of Directors.
(B) The method of valuation of securities
subject to investment letter or other restrictions on free marketability (other
than restrictions arising solely by virtue of a shareholder's status as an
affiliate or former affiliate) shall be to make an appropriate discount from the
market value determined as above in (A)(1), (2) or (3) to reflect the
approximate fair market value thereof, as determined by the Board of Directors.
4. CONVERSION RIGHTS.
The holders of the Series Preferred shall have the following rights
with respect to the conversion of the Series Preferred into shares of Common
Stock (the "Conversion Rights"):
(a) Optional Conversion. Subject to and in compliance with the
provisions of this Section 4, any shares of Series Preferred may, at the option
of the holder, be converted at any time into fully-paid and nonassessable shares
of Common Stock. The number of shares of Common Stock to which a holder of
respective Series Preferred shall be entitled upon conversion shall be the
product obtained by multiplying the then in effect "Series A Preferred
Conversion Rate," "Series B Preferred Conversion Rate", "Series B-1 Preferred
Conversion Rate", or "Series C Preferred Conversion Rate" as applicable,
(determined as provided in Section 4(b)) by the number of shares of Series A
Preferred, Series B Preferred, Series B-1 Preferred and Series C Preferred,
respectively, being converted.
(b) Series Preferred Conversion Rate. The conversion rate in
effect at any time for conversion of the Series A Preferred (the "Series A
Preferred Conversion Rate") shall be the quotient obtained by dividing the
Original Issue Price of the Series A Preferred by the "Series A Preferred
Conversion Price," calculated as provided in Section 4(c). The conversion rate
then in effect at any time for conversion of the Series B Preferred (the "Series
B Preferred Conversion Rate") shall be the quotient obtained by dividing the
Original Issue Price of the Series B Preferred by the "Series B Preferred
Conversion Price," calculated as provided in Section 4(c). The conversion rate
then in effect at any time for conversion of the Series B-1 Preferred (the
"Series B-1 Preferred Conversion Rate") shall be the quotient obtained by
dividing the Original Issue Price of the Series B-1 Preferred by the "Series B-1
Preferred Conversion Price," calculated as provided in Section 4(c). The
conversion rate in effect at any time for conversion of the Series C Preferred
(the "Series C Preferred Conversion Rate") shall be the quotient obtained by
dividing the Original Issue Price of the Series C Preferred by the "Series C
Preferred Conversion Price," calculated as provided in Section 4(c).
(c) Conversion Price. The conversion price for the Series A
Preferred shall initially be the Original Issue Price of the Series A Preferred
(the "Series A Preferred Conversion Price"). The conversion price for the Series
B Preferred shall initially be the Original Issue Price of the Series B
Preferred (the "Series B Preferred Conversion Price"). The conversion price for
the Series B-1 Preferred shall be $0.175 (the "Series B-1 Preferred Conversion
Price"). The conversion price for the Series C Preferred shall initially be the
Original Issue Price of the Series C Preferred (the "Series C Preferred
Conversion Price"). Such initial Series Preferred Conversion Price shall be
adjusted from time to time in accordance with this Section 4. All references to
6.
the Series A Preferred Conversion Price, the Series B Preferred Conversion
Price, the Series B-1 Preferred Conversion Price or the Series C Preferred
Conversion Price herein shall mean the Series A Preferred Conversion Price, the
Series B Preferred Conversion Price, the Series B-1 Preferred Conversion Price
and the Series C Preferred Conversion Price, in each case as adjusted.
(d) Mechanics of Conversion. Each holder of Series Preferred
who desires to convert the same into shares of Common Stock pursuant to this
Section 4 shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or any transfer agent for the Series
Preferred, and shall give written notice to the Corporation at such office that
such holder elects to convert the same. Such notice shall state the number of
shares of Series Preferred being converted. Thereupon, the Corporation shall
promptly issue and deliver at such office to such holder a certificate or
certificates for the number of shares of Common Stock to which such holder is
entitled and shall promptly pay (i) in cash or, to the extent sufficient funds
are not then legally available therefor, in Common Stock (at the Common Stock's
fair market value determined by the Board of Directors as of the date of such
conversion), any declared and unpaid dividends on the shares of Series Preferred
being converted and (ii) in cash (at the Common Stock's fair market value
determined by the Board of Directors as of the date of conversion) the value of
any fractional share of Common Stock otherwise issuable to any holder of Series
Preferred. Such conversion shall be deemed to have been made at the close of
business on the date of such surrender of the certificates representing the
shares of Series Preferred to be converted, and the person entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder of such shares of Common Stock on such date.
(e) Adjustment for Stock Splits and Combinations. If the
Corporation shall at any time or from time to time after the date that the first
share of Series C Preferred is issued (the "Series C Original Issue Date")
effect a subdivision of the outstanding Common Stock without a corresponding
subdivision of the Preferred Stock, the Series A Preferred Conversion Price, the
Series B Preferred Conversion Price, the Series B-1 Preferred Conversion Price
and the Series C Preferred Conversion Price in effect immediately before that
subdivision shall be proportionately decreased. Conversely, if the Corporation
shall at any time or from time to time after the Series C Original Issue Date
combine the outstanding shares of Common Stock into a smaller number of shares
without a corresponding combination of the Preferred Stock, the Series A
Preferred Conversion Price, the Series B Preferred Conversion Price, the Series
B-1 Preferred Conversion Price and the Series C Preferred Conversion Price in
effect immediately before the combination shall be proportionately increased.
Any adjustment under this Section 4(e) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(f) Adjustment for Common Stock Dividends and Distributions.
If the Corporation at any time or from time to time after the Series C Original
Issue Date makes, or fixes a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, in each such event the Series A Preferred
Conversion Price, the Series B Preferred Conversion Price, the Series B-1
Preferred Conversion Price and the Series C Preferred Conversion Price that is
then in effect shall be decreased as of the time of such issuance or, in the
event such record date is fixed, as of the close of business on such record
date, by multiplying the Series A Preferred Conversion Price, the Series B
Preferred Conversion Price, the Series B-1 Preferred Conversion Price or the
Series C Preferred Conversion Price then in effect by a fraction (i) the
numerator of which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
7.
business on such record date, and (ii) the denominator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series A Preferred Conversion Price, the Series B Preferred
Conversion Price, the Series B-1 Preferred Conversion Price and the Series C
Preferred Conversion Price shall be recomputed accordingly as of the close of
business on such record date and thereafter the Series A Preferred Conversion
Price, the Series B Preferred Conversion Price, the Series B-1 Preferred
Conversion Price and the Series C Preferred Conversion Price shall be adjusted
pursuant to this Section 4(f) to reflect the actual payment of such dividend or
distribution.
(g) Adjustment for Reclassification, Exchange and
Substitution. If at any time or from time to time after the Series C Original
Issue Date, the Common Stock issuable upon the conversion of the Series
Preferred is changed into the same or a different number of shares of any class
or classes of stock, whether by recapitalization, reclassification or otherwise
(other than an Acquisition or Asset Transfer as defined in Section 3(c) or a
subdivision or combination of shares or stock dividend or a reorganization,
merger, consolidation or sale of assets provided for elsewhere in this Section
4), then in any such event each holder of Series Preferred shall have the right
thereafter to convert such stock into the kind and amount of stock and other
securities and property receivable upon such recapitalization, reclassification
or other change by holders of the maximum number of shares of Common Stock into
which such shares of Series Preferred could have been converted immediately
prior to such recapitalization, reclassification or change, all subject to
further adjustment as provided herein or with respect to such other securities
or property by the terms thereof.
(h) Reorganizations, Mergers or Consolidations. If at any time
or from time to time after the Series C Original Issue Date, there is a capital
reorganization of the Common Stock or the merger or consolidation of the
Corporation with or into another corporation or another entity or person (other
than an Acquisition or Asset Transfer as defined in Section 3(c) or a
recapitalization, subdivision, combination, reclassification, exchange or
substitution of shares provided for elsewhere in this Section 4), as a part of
such capital reorganization, provision shall be made so that the holders of the
Series Preferred shall thereafter be entitled to receive upon conversion of the
Series Preferred the number of shares of stock or other securities or property
of the Corporation to which a holder of the number of shares of Common Stock
deliverable upon conversion would have been entitled on such capital
reorganization, subject to adjustment in respect of such stock or securities by
the terms thereof. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 4 with respect to the rights of
the holders of Series Preferred after the capital reorganization to the end that
the provisions of this Section 4 (including adjustment of the Series A Preferred
Conversion Price, the Series B Preferred Conversion Price, the Series B-1
Preferred Conversion Price and the Series C Preferred Conversion Price then in
8.
effect and the number of shares issuable upon conversion of the respective
Series Preferred) shall be applicable after that event and be as nearly
equivalent as practicable.
(i) Sale of Shares Below Series Preferred Conversion
Price.
(i) If at any time or from time to time
after the Series C Original Issue Date, the Corporation issues or sells, or is
deemed by the express provisions of this Section 4(i) to have issued or sold,
Additional Shares of Common Stock (as defined in clause (iv) of this Section
4(i) below), other than as a dividend or other distribution on any class of
stock as provided in Section 4(f) above, and other than a subdivision or
combination of shares of Common Stock as provided in Section 4(e) above, for an
Effective Price (as defined in clause (iv) of this Section 4(i) below) less than
the then effective Series A Preferred Conversion Price, the Series B Preferred
Conversion Price, the Series B-1 Preferred Conversion Price or the Series C
Preferred Conversion Price, then and in each such case the current Series A
Preferred Conversion Price, the Series B Preferred Conversion Price, the Series
B-1 Preferred Conversion Price or the Series C Preferred Conversion Price, as
the case may be, shall be reduced, as of the opening of business on the date of
such issue or sale, to a price determined by multiplying the Series A Preferred
Conversion Price, the Series B Preferred Conversion Price, the Series B-1
Preferred Conversion Price or the Series C Preferred Conversion Price, as the
case may be, by a fraction (i) the numerator of which shall be (A) the number of
shares of Common Stock deemed outstanding (as defined below) immediately prior
to such issue or sale, plus (B) the number of shares of Common Stock which the
aggregate consideration received (as defined below in clause (ii) of this
Section 4(i)) by the Corporation for the total number of Additional Shares of
Common Stock so issued would purchase at such respective Series A Preferred
Conversion Price, the Series B Preferred Conversion Price, the Series B-1
Preferred Conversion Price or the Series C Preferred Conversion Price, and (ii)
the denominator of which shall be the number of shares of Common Stock deemed
outstanding (as defined below) immediately prior to such issue or sale plus the
total number of Additional Shares of Common Stock so issued or sold. For the
purposes of the immediately preceding sentence, the number of shares of Common
Stock deemed to be outstanding as of a given date shall be the sum of (A) the
number of shares of Common Stock actually outstanding, (B) the number of shares
of Common Stock into which the then outstanding shares of Series Preferred could
be converted if fully converted on the day immediately preceding the given date,
and (C) the number of shares of Common Stock issuable upon the exercise or
conversion of all other rights, options and convertible securities outstanding
on the day immediately preceding the given date. No adjustment shall be made to
the Series A Preferred Conversion Price, the Series B Preferred Conversion
Price, the Series B-1 Preferred Conversion Price or the Series C Preferred
Conversion Price in an amount less than one-quarter of one cent per share. Any
adjustment otherwise required by this Section 4(i) that is not required to be
made due to the immediately preceding sentence shall be included in any
subsequent adjustment to the Series A Preferred Conversion Price, the Series B
Preferred Conversion Price, the Series B-1 Preferred Conversion Price or the
Series C Preferred Conversion Price. For avoidance of doubt, any adjustment to
the Series C Conversion Price as a result of the provisions of Section 4(j) and
4(k) below shall not cause any adjustments to the applicable Conversion Prices
of the Series Preferred pursuant to the provisions of this Section 4(i)(i).
(ii) For the purpose of making any
adjustment required under this Section 4(i), the consideration received by the
Corporation for any issue or sale of securities shall (A) to the extent it
9.
consists of cash, be computed at the net amount of cash received by the
Corporation after deduction of any underwriting or similar commissions,
compensation or concessions paid or allowed by the Corporation in connection
with such issue or sale but without deduction of any expenses payable by the
Corporation, (B) to the extent it consists of property other than cash, be
computed at the fair value of that property as determined in good faith by the
Board of Directors, and (C) if Additional Shares of Common Stock, Convertible
Securities (as defined in clause (iii) of this Section 4(i) below) or rights or
options to purchase either Additional Shares of Common Stock or Convertible
Securities are issued or sold together with other stock or securities or other
assets of the Corporation for a consideration which covers both, be computed as
the portion of the consideration so received that may be reasonably determined
in good faith by the Board of Directors to be allocable to such Additional
Shares of Common Stock, Convertible Securities or rights or options.
(iii) For the purpose of the adjustment
required under this Section 4(i), if (x) the Corporation issues or sells any (i)
stock or other securities convertible into, Additional Shares of Common Stock
(such convertible stock or securities being herein referred to as "Convertible
Securities") or (ii) rights or options for the purchase of Additional Shares of
Common Stock or Convertible Securities and (y) the Effective Price of such
Additional Shares of Common Stock is less than the Series A Preferred Conversion
Price, the Series B Preferred Conversion Price, the Series B-1 Preferred
Conversion Price or the Series C Preferred Conversion Price, then in each case
the Corporation shall be deemed to have issued at the time of the issuance of
such rights or options or Convertible Securities the maximum number of
Additional Shares of Common Stock issuable upon exercise or conversion thereof
and to have received as consideration for the issuance of such shares an amount
equal to the total amount of the consideration, if any, received by the
Corporation for the issuance of such rights or options or Convertible
Securities, plus, in the case of such rights or options, the minimum amounts of
consideration, if any, payable to the Corporation upon the exercise of such
rights or options, plus, in the case of Convertible Securities, the minimum
amounts of consideration, if any, payable to the Corporation (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) upon the conversion thereof; provided that if in the case of
Convertible Securities the minimum amounts of such consideration cannot be
ascertained, but are a function of antidilution or similar protective clauses,
the Corporation shall be deemed to have received the minimum amounts of
consideration without reference to such clauses; provided further that if the
minimum amount of consideration payable to the Corporation upon the exercise or
conversion of rights, options or Convertible Securities is reduced over time or
on the occurrence or non-occurrence of specified events other than by reason of
antidilution adjustments, the Effective Price shall be recalculated using the
figure to which such minimum amount of consideration is reduced; provided
further that if the minimum amount of consideration payable to the Corporation
upon the exercise or conversion of such rights, options or Convertible
Securities is subsequently increased, the Effective Price shall be again
recalculated using the increased minimum amount of consideration payable to the
Corporation upon the exercise or conversion of such rights, options or
Convertible Securities. No further adjustment of the Series A Preferred
Conversion Price, the Series B Preferred Conversion Price, the Series B-1
Preferred Conversion Price or the Series C Preferred Conversion Price, as
adjusted upon the issuance of such rights, options or Convertible Securities,
shall be made as a result of the actual issuance of Additional Shares of Common
Stock on the exercise of any such rights or options or the conversion of any
such Convertible Securities. If any such rights or options or the conversion
10.
privilege represented by any such Convertible Securities shall expire without
having been exercised, the Series A Preferred Conversion Price, the Series B
Preferred Conversion Price, the Series B-1 Preferred Conversion Price or the
Series C Preferred Conversion Price as adjusted upon the issuance of such
rights, options or Convertible Securities shall be readjusted to the Series A
Preferred Conversion Price, the Series B Preferred Conversion Price, the Series
B-1 Preferred Conversion Price or the Series C Preferred Conversion Price which
would have been in effect had an adjustment been made on the basis that the only
Additional Shares of Common Stock so issued were the Additional Shares of Common
Stock, if any, actually issued or sold on the exercise of such rights or options
or rights of conversion of such Convertible Securities, and such Additional
Shares of Common Stock, if any, were issued or sold for the consideration
actually received by the Corporation upon such exercise, plus the consideration,
if any, actually received by the Corporation for the granting of all such rights
or options, whether or not exercised, plus the consideration received for
issuing or selling the Convertible Securities actually converted, plus the
consideration, if any, actually received by the Corporation (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities; provided that such
readjustment shall not apply to prior conversions of Series Preferred.
(iv) "Additional Shares of Common Stock"
shall mean all shares of Common Stock issued by the Corporation or deemed issued
pursuant to this Section 4(i), whether or not subsequently reacquired or retired
by the Corporation other than: (A) shares of Series C Preferred and/or any
shares of Common Stock issued upon conversion of the Series Preferred; (B)
shares of Common Stock and/or options, warrants or other Common Stock purchase
rights and the Common Stock issued pursuant to such options, warrants or other
rights (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like) after the Series C Original Issue Date to
employees, officers or directors of, or consultants or advisors to the
Corporation or any subsidiary pursuant to stock purchase or stock option plans
or other arrangements that are approved by the Board; (C) shares of Common Stock
issued pursuant to the exercise of options, warrants or convertible securities
outstanding as of the Series C Original Issue Date; (D) shares of Common Stock
issued and/or options, warrants or other Common Stock purchase rights, and the
Common Stock issued pursuant to such options, warrants or other rights for
consideration other than cash pursuant to a merger, consolidation, acquisition
or similar business combination approved by the Board; (E) shares issued in any
bona fide strategic transactions approved by the Board; and (F) shares of Common
Stock issued pursuant to any equipment leasing arrangement, or debt financing
from a bank or similar financial institution approved by the Board. References
to Common Stock in the provisions of this clause (iv) above shall mean all
shares of Common Stock issued by the Corporation or deemed to be issued pursuant
to this Section 4(i). The "Effective Price" of Additional Shares of Common Stock
shall mean the quotient determined by dividing the total number of Additional
Shares of Common Stock issued or sold, or deemed to have been issued or sold by
the Corporation under this Section 4(i), into the aggregate consideration
received, or deemed to have been received by the Corporation for such issue
under this Section 4(i), for such Additional Shares of Common Stock.
(j) Adjustment for Failure to Achieve Milestone
Completion. If, on March 31, 2004, the Corporation has, with new or existing
customers, then current licenses to between fifty-six (56) and sixty-nine (69)
seats for the Corporation's STRIDE software program, then the Series C
Conversion Price will be reduced to $0.475 per share. If, on March 31, 2004, the
Corporation does not have, with new or existing customers, then current licenses
11.
to at least fifty-six (56) seats, for the Corporation's STRIDE software program,
then the Series C Conversion Price will be reduced to $0.35 per share. Such
adjustment shall be automatically effective as of April 1, 2004; provided,
however, that there shall be no adjustments pursuant to this Section 4(j) if the
Corporation, on March 31, 2004, has, with new or existing customers, then
current licenses to at least seventy (70) seats for the Corporation's STRIDE
software program.
(k) Notices of Adjustment for Milestone Completion.
Following any adjustment pursuant to Section 4(j) above of the Series C
Preferred Conversion Price due to the failure of the Corporation to have the
required number of seat licenses, within thirty (30) days following March 31,
2004 the Corporation shall mail to each holder of Series C Preferred a notice
specifying whether or not there was an adjustment to the Series C Conversion
Price pursuant to Section 4(j) hereof. In the case of an adjustment, such notice
shall describe the adjustment and state the then current Series C Conversion
Price. Such notice shall state the actual number of then current seat licenses
for the Corporation's STRIDE software program as of March 31, 2004.
(l) Certificate of Adjustment. In each case of an
adjustment or readjustment of the Series A Preferred Conversion Price, the
Series B Preferred Conversion Price, the Series B-1 Preferred Conversion Price
or the Series C Preferred Conversion Price for the number of shares of Common
Stock or other securities issuable upon conversion of the respective Series
Preferred, if the respective Series Preferred is then convertible pursuant to
this Section 4, the Corporation, at its expense, shall compute such adjustment
or readjustment in accordance with the provisions hereof and prepare a
certificate showing such adjustment or readjustment, and shall mail such
certificate, by first class mail, postage prepaid, to each registered holder of
Series Preferred at the holder's address as shown in the Corporation's books.
The certificate shall set forth such adjustment or readjustment, showing in
detail the facts upon which such adjustment or readjustment is based, including
a statement of (i) the consideration received or deemed to be received by the
Corporation for any Additional Shares of Common Stock issued or sold or deemed
to have been issued or sold, (ii) the Series A Preferred Conversion Price and/or
the Series B Preferred Conversion Price and/or the Series B-1 Preferred
Conversion Price and/or the Series C Preferred Conversion Price, as the case may
be, at the time in effect, (iii) the number of Additional Shares of Common Stock
and (iv) the type and amount, if any, of other property which at the time would
be received upon conversion of the Series Preferred.
(m) Notices of Record Date. Upon (i) any taking by
the Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or (ii) any Acquisition (as defined in Section
3(c) or other capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation with or into any other corporation, or any
Asset Transfer (as defined in Section (3c)), or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail to each holder of Series Preferred at least ten (10) days prior to the
record date specified therein (or such shorter period approved by a majority of
each Series of the outstanding Series Preferred voting separately as a class) a
notice specifying (A) the date on which any such record is to be taken for the
purpose of such dividend or distribution and a description of such dividend or
distribution, (B) the date on which any such Acquisition, reorganization,
12.
reclassification, transfer, consolidation, merger, Asset Transfer, dissolution,
liquidation or winding up is expected to become effective, and (C) the date, if
any, that is to be fixed as to when the holders of record of Common Stock (or
other securities) shall be entitled to exchange their shares of Common Stock (or
other securities) for securities or other property deliverable upon such
Acquisition, reorganization, reclassification, transfer, consolidation, merger,
Asset Transfer, dissolution, liquidation or winding up.
(n) Automatic Conversion.
(i) (A) Each respective share of Series
Preferred shall automatically be converted into shares of Common Stock, based on
the then-effective Series A Preferred Conversion Price, the Series B Preferred
Conversion Price, the Series B-1 Preferred Conversion Price or the Series C
Preferred Conversion Price, as the case may be, immediately upon the closing of
a firmly underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock for the account of the Corporation in which (i) the per
share price is at least $5.00 per share (as adjusted for stock splits,
dividends, recapitalizations and the like), and (ii) the cash proceeds to the
Corporation (before underwriting discounts, commissions and fees) are at least
$20,000,000.
(B) Each share of Series A
Preferred shall automatically be converted into shares of Common Stock, based on
the then-effective Series A Preferred Conversion Price upon the affirmative
election of the holders of at least a majority of the outstanding shares of
Series A Preferred. Each share of Series B Preferred and Series B-1 Preferred
shall automatically be converted into shares of Common Stock, based on the
then-effective Series B Preferred Conversion Price and Series B-1 Preferred
Conversion Price, respectively, upon the affirmative election of the holders of
at least a majority of the outstanding shares of Series B Preferred and Series
B-1 Preferred, voting together as a single class. Each share of Series C
Preferred shall automatically be converted into shares of Common Stock, based on
the then-effective Series C Preferred Conversion Price upon the affirmative
election of the holders of at least a majority of the outstanding shares of
Series C Preferred. Upon such automatic conversion, any declared and unpaid
dividends shall be paid in accordance with the provisions of Section 4(d).
(ii) Upon the occurrence of any of the
events specified in Section 4(l)(i)(A) above, the outstanding shares of Series
Preferred shall be converted automatically without any further action by the
holders of such shares and whether or not the certificates representing such
shares are surrendered to the Corporation or its transfer agent; provided,
however, that the Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion unless the
certificates evidencing such shares of Series Preferred are either delivered to
the Corporation or its transfer agent as provided below, or the holder notifies
the Corporation or its transfer agent that such certificates have been lost,
stolen or destroyed and executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection with such
certificates. Upon the occurrence of such automatic conversion of the Series
Preferred, the holders of Series Preferred shall surrender the certificates
representing such shares at the office of the Corporation or any transfer agent
for the Series Preferred. Thereupon, the Corporation shall issue and deliver to
such holder promptly at such office and in its name as shown on such surrendered
13.
certificate or certificates, a certificate or certificates for the number of
shares of Common Stock into which the shares of Series Preferred surrendered
were convertible on the date on which such automatic conversion occurred, and
any declared and unpaid dividends shall be paid in accordance with the
provisions of Section 4(d).
(o) Fractional Shares. No fractional shares of Common
Stock shall be issued upon conversion of Series Preferred. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than one
share of Series Preferred by a holder thereof shall be aggregated for purposes
of determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Corporation shall, in lieu
of issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board)
on the date of conversion.
(p) Reservation of Stock Issuable Upon Conversion.
The Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Series Preferred, such number of
its shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of the Series Preferred. If at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of the Series
Preferred, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
(q) Notices. Any notice required by the provisions of
this Section 4 shall be in writing and shall be deemed effectively given: (i)
upon personal delivery to the party to be notified, (ii) when sent by confirmed
facsimile if sent during normal business hours of the recipient and if not so
sent within such hours, then on the next business day, provided that such
facsimile notice is followed upon within three (3) days by registered or
certified mail, postage prepaid as set forth in this clause (q), (iii) five (5)
days after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (iv) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All notices shall be addressed to each holder of record
at the address of such holder appearing on the books of the Corporation.
(r) Payment of Taxes. The Corporation will pay all
taxes (other than taxes based upon income) and other governmental charges that
may be imposed with respect to the issue or delivery of shares of Common Stock
upon conversion of shares of Series Preferred, excluding any tax or other charge
imposed in connection with any transfer involved in the issue and delivery of
shares of Common Stock in a name other than that in which the shares of Series
Preferred so converted were registered.
(s) No Dilution or Impairment. Without the consent of
the holders of the then outstanding Series Preferred, as required under Section
2(b), the Corporation shall not amend its Amended and Restated Articles of
Incorporation or participate in any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or take any
other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
14.
hereunder by the Corporation, but shall at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of the holders of the Series Preferred
against dilution or other impairment.
5. REDEMPTION.
(a) Series C Preferred Redemption. The Corporation shall be
obligated to redeem the Series B Preferred, Series B-1 Preferred and Series C
Preferred as follows:
(i) The holders of at least sixty-six and two-thirds
percent (66 2/3%) of the then outstanding shares of Series B Preferred, Series
B-1 Preferred and Series C Preferred, voting together as a single class, may
require the Corporation, to the extent it may lawfully do so, to redeem the
Series B Preferred, Series B-1 Preferred and Series C Preferred in three (3)
equal annual installments beginning on the fifth anniversary after the date that
the first share of Series C Preferred is issued (the "Original Issue Date"), and
ending on the date two (2) years from such first redemption date (each a
"Redemption Date"); provided that the Corporation shall receive at least sixty
(60) days prior to such fifth anniversary written notice of such request of the
Series B Preferred, Series B-1 Preferred and Series C Preferred. The Corporation
shall effect such redemptions on the applicable Redemption Date by paying in
cash in exchange for the shares of Series B Preferred, Series B-1 Preferred and
Series C Preferred to be redeemed a sum equal to the Series B Original Issue
Price, Series B-1 Original Issue Price or Series C Original Issue Price, as
applicable, per share of Series B Preferred, Series B-1 Preferred or Series C
Preferred, as applicable, (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like) plus declared and unpaid dividends with
respect to such shares. The total amount to be paid for the Series B Preferred
is the "Series B Redemption Price". The total amount to be paid for the Series
B-1 Preferred is the "Series B-1 Redemption Price". The total amount to be paid
for the Series C Preferred is the "Series C Redemption Price". The number of
shares of Series B Preferred, Series B-1 Preferred and Series C Preferred that
the Corporation shall be required to redeem on any one Redemption Date shall be
equal to the amount determined by dividing (A) the aggregate number of shares of
Series B Preferred, Series B-1 Preferred and Series C Preferred outstanding
immediately prior to the Redemption Date by (B) the number of remaining
Redemption Dates (including the Redemption Date to which such calculation
applies). Shares subject to redemption pursuant to this Section 5(a) shall be
redeemed from each holder of Series B Preferred, Series B-1 Preferred and Series
C Preferred on a pro rata basis.
(ii) At least thirty (30) days, but no more than
sixty (60) days prior to the first Redemption Date, the Corporation shall send a
notice (a "Redemption Notice") to all holders of Series B Preferred, Series B-1
Preferred and Series C Preferred to be redeemed setting forth (A) the Series B
Redemption Price, the Series B-1 Redemption Price and the Series C Redemption
Price for the shares to be redeemed; and (B) the place at which such holders may
obtain payment of the Series B Redemption Price, the Series B-1 Redemption Price
and Series C Redemption Price upon surrender of their share certificates. If the
Corporation does not have sufficient funds legally available to redeem all
shares to be redeemed at the Redemption Date (including, if applicable, those to
be redeemed at the option of the Corporation), then it shall redeem such shares
pro rata (based on the portion of the aggregate Series B Redemption Price,
15.
Series B-1 Redemption Price and Series C Redemption Price payable to them) to
the extent possible and shall redeem the remaining shares to be redeemed as soon
as sufficient funds are legally available.
(iii) On or prior to the Redemption Date, the
Corporation shall deposit the Series B Redemption Price, Series B-1 Redemption
Price and Series C Redemption Price of all shares to be redeemed with a bank or
trust company having aggregate capital and surplus in excess of $100,000,000, as
a trust fund, with irrevocable instructions and authority to the bank or trust
company to pay, on and after such Redemption Date, the Series B Redemption
Price, Series B-1 Redemption Price and Series C Redemption Price, as applicable,
of the shares to their respective holders upon the surrender of their share
certificates. Any moneys deposited by the Corporation pursuant to this Section
5(b) for the redemption of shares thereafter converted into shares of Common
Stock pursuant to Section 4 hereof no later than the fifth (5th) day preceding
the Redemption Date, as applicable, shall be returned to the Corporation
forthwith upon such conversion. The balance of any funds deposited by the
Corporation pursuant to this Section 5(b) remaining unclaimed at the expiration
of one (1) year following such Redemption Date, as applicable, shall be returned
to the Corporation promptly upon its written request.
(iv) On or after such Redemption Date, each holder of
shares of Series B Preferred, Series B-1 Preferred and Series C Preferred to be
redeemed shall surrender such holder's certificates representing such shares to
the Corporation in the manner and at the place designated in the Redemption
Notice and thereupon the Series B Redemption Price, Series B-1 Redemption Price
and Series C Redemption Price, as applicable, of such shares shall be payable to
the order of the person whose name appears on such certificate or certificates
as the owner thereof and each surrendered certificate shall be canceled. In the
event less than all the shares represented by such certificates are redeemed, a
new certificate shall be issued representing the unredeemed shares. From and
after such Redemption Date, unless there shall have been respectively a default
in payment of the Series B Redemption Price, Series B-1 Redemption Price and
Series C Redemption Price or the Corporation is unable to pay the respective
Series B Redemption Price, Series B-1 Redemption Price and Series C Redemption
Price due to not having sufficient legally available funds, all rights of the
respective holder of Series B Preferred, Series B-1 Preferred and/or Series C
Preferred (except the right to receive the Series B Redemption Price, Series B-1
Redemption Price or Series C Redemption Price, as applicable, without interest
upon surrender of their certificates), shall cease and terminate with respect to
such shares; provided that in the event that shares of Series B Preferred,
Series B-1 Preferred and Series C Preferred are not redeemed due to a default in
payment by the Corporation or because the Corporation does not have sufficient
legally available funds, then such respective shares of Series B Preferred,
Series B-1 Preferred and Series C Preferred shall remain outstanding and shall
be entitled to all of the rights and preferences provided herein.
(v) In the event of a call for redemption of any
shares of Series B Preferred, Series B-1 Preferred and Series C Preferred the
Conversion Rights (as defined in Section 4) for such Series B Preferred, Series
B-1 Preferred and Series C Preferred shall terminate as to the shares designated
for redemption at the close of business on the fifth (5th) day preceding the
Redemption Date, as applicable, unless default is respectively made in payment
of the Series B Redemption Price, Series B-1 Redemption Price and Series C
Redemption Price.
16.
6. NO REISSUANCE OF SERIES PREFERRED.
No share or shares of Series Preferred acquired by the Corporation by
reason of purchase, conversion or otherwise shall be reissued.
IV.
A. The liability of the directors of the Corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law.
B. The Corporation is authorized to provide indemnification of agents
(as defined in Section 317 of the General Corporation Law of California) for
breach of duty to the Corporation and its shareholders through bylaw provisions
or through agreements with agents, or both, in excess of the indemnification
otherwise permitted by Section 317 of the General Corporation Law of California,
subject to the limits on such excess indemnification set forth in Section 204 of
the General Corporation Law of California. If, after the effective date of this
Article IV, California law is amended in a manner which permits a corporation to
limit the monetary or other liability of its directors or to authorize
indemnification of, or advancement of such defense expenses to, its directors or
other persons, in any such case to a greater extent than is permitted on such
effective date, the references in this Article to "California law" shall to that
extent be deemed to refer to California law as so amended.
C. Any repeal or modification of this Article IV shall only be
prospective and shall not affect the rights under this Article in effect at the
time of the alleged occurrence of any action or omission to act giving rise to
liability."
THREE: The foregoing amendment and restatement of the Amended and
Restated Articles of Incorporation has been duly approved by the Board of
Directors of this Corporation.
FOUR: The foregoing Amended and Restated Articles of Incorporation has
been duly approved by the required vote of shareholders in accordance with
Section 902 of the General Corporation Law of California. The total number of
outstanding shares entitled to vote or act by written consent was six million
one hundred six thousand two hundred fifty (6,106,250) shares of Common Stock,
two million five hundred ninety-two thousand five hundred ninety-three
(2,592,593) shares of Series A Preferred, nine million nine hundred sixty-four
thousand two hundred eighty-six (9,964,286) shares of Series B Preferred and two
million eight hundred fifty-seven thousand one hundred thirty-nine (2,857,139)
shares of Series B-1 Preferred. A majority of the outstanding shares of the
Common Stock voting as a single class, a majority of the outstanding shares of
the Series A Preferred Stock voting as a single class, a majority of the
outstanding shares of the Series B-1 Preferred Stock voting as a single class,
sixty-six and two thirds percent (66 2/3%) of the outstanding shares of the
Series B Preferred Stock and Series B-1 Preferred Stock, voting together as a
single class, and a majority of the outstanding shares of the Common Stock and
the Preferred Stock, voting together as a single class, approved the Amended and
Restated Articles of Incorporation by written consent in accordance with Section
603 of the General Corporation Law of California.
17.
The undersigned, Xxxx Xxxxxxxxx, the President and Secretary of S2
TECHNOLOGIES, INC., declares under penalty of perjury under the laws of the
State of California that the matters set out in the foregoing certificate are
true of his own knowledge.
Executed at San Diego, California on January __, 2004.
------------------------------------------
Xxxx Xxxxxxxxx, President and Secretary
AMENDED AND RESTATED ARTICLES OF INCORPORATION
SIGNATURE PAGE
TABLE OF CONTENTS
PAGE
1. DIVIDEND RIGHTS..........................................................................................2
2. VOTING RIGHTS............................................................................................2
(a) General Rights..................................................................................2
(b) Separate Vote of Series Preferred...............................................................2
(c) Election of Board of Directors..................................................................4
3. LIQUIDATION RIGHTS.......................................................................................4
4. CONVERSION RIGHTS........................................................................................6
(a) Optional Conversion.............................................................................6
(b) Series Preferred Conversion Rate................................................................6
(c) Conversion Price................................................................................6
(d) Mechanics of Conversion.........................................................................6
(e) Adjustment for Stock Splits and Combinations....................................................7
(f) Adjustment for Common Stock Dividends and Distributions.........................................7
(g) Adjustment for Reclassification, Exchange and Substitution......................................7
(h) Reorganizations, Mergers or Consolidations......................................................8
(i) Sale of Shares Below Series Preferred Conversion Price..........................................8
(j) Certificate of Adjustment......................................................................11
(k) Notices of Record Date.........................................................................11
(l) Automatic Conversion...........................................................................12
(m) Fractional Shares..............................................................................12
(n) Reservation of Stock Issuable Upon Conversion..................................................13
(o) Notices........................................................................................13
(p) Payment of Taxes...............................................................................13
(q) No Dilution or Impairment......................................................................13
5. REDEMPTION..............................................................................................13
6. NO REISSUANCE OF SERIES PREFERRED.......................................................................15
i.
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