Exhibit 10.11
xxx.xxx, inc.
SERIES A PREFERRED STOCK
AND WARRANT PURCHASE AGREEMENT
January 8, 1999
TABLE OF CONTENTS
Page
-----
1. PURCHASE AND SALE OF STOCK AND WARRANTS................................. 1
1.1 Sale and Issuance of Series A Preferred Stock and Warrants........... 1
1.2 Closing.............................................................. 2
2. COMPANY RIGHT TO REPURCHASE WARRANT SHARES.............................. 2
2.1 Scope of Repurchase Right............................................ 2
2.2 Repurchase Cost...................................................... 2
2.3 Exercise of Repurchase Right......................................... 2
2.4 Termination of Rights as Stockholder................................. 4
2.5 Definition........................................................... 4
2.6 Transfer Restrictions................................................ 4
2.7 Legend............................................................... 4
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................... 5
3.1 Organization, Good Standing and Qualification........................ 5
3.2 Capitalization and Voting Rights..................................... 5
3.3 Subsidiaries......................................................... 6
3.4 Authorization........................................................ 6
3.5 Valid Issuance of Preferred and Common Stock and Warrants............ 6
3.6 Governmental Consents................................................ 7
3.7 Offering............................................................. 7
3.8 Litigation........................................................... 7
3.9 Proprietary Information and Shareholders' Agreements................. 7
3.10 Patents and Trademarks............................................... 7
3.11 Compliance with Other Instruments.................................... 8
3.12 Agreements; Action................................................... 8
3.13 Related-Party Transactions........................................... 9
3.14 Permits.............................................................. 10
3.15 Environmental and Safety Laws........................................ 10
3.16 Manufacturing and Marketing Rights................................... 10
3.17 Disclosure........................................................... 10
3.18 Business Plan........................................................ 10
3.19 Registration Rights.................................................. 10
3.20 Corporate Documents.................................................. 10
3.21 Title to Property and Assets......................................... 10
3.22 Financial Statements................................................. 11
3.23 Changes.............................................................. 11
3.24 Employee Benefit Plans............................................... 11
3.25 Tax Returns, Payments and Elections.................................. 11
3.26 Insurance............................................................ 12
3.27 Minutes.............................................................. 12
3.28 Labor Agreements and Actions; Employee Compensation.................. 12
3.29 Section 83(b) Elections.............................................. 12
3.30 Real Property Holding Company........................................ 12
3.31 Net Operating Loss Carryforward...................................... 13
3.32 Brokers.............................................................. 13
3.33 Significant Customers and Suppliers.................................. 13
3.34 Qualified Small Business Stock....................................... 13
3.35 Year 2000............................................................ 13
3.36 No Outstanding Preferred Stock....................................... 13
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS......................... 13
-i-
4.1 Authorization........................................................ 13
4.2 Purchase Entirely for Own Account.................................... 14
4.3 Disclosure of Information............................................ 14
4.4 Investment Experience................................................ 14
4.5 Accredited Investor.................................................. 14
4.6 Restricted Securities................................................ 14
4.7 Further Limitations on Disposition................................... 14
4.8 Legends.............................................................. 15
4.9 Investors' State of Residence........................................ 15
5. CONDITIONS OF INVESTORS' OBLIGATIONS AT CLOSING......................... 16
5.1 Representations and Warranties....................................... 16
5.2 Performance.......................................................... 16
5.3 Compliance Certificate............................................... 16
5.4 Qualifications....................................................... 16
5.5 Proceedings and Documents............................................ 16
5.6 Proprietary Information and Shareholders' Agreement.................. 16
5.7 Bylaws............................................................... 16
5.8 Voting Agreement..................................................... 16
5.9 Board of Directors................................................... 17
5.10 Opinion of Company Counsel........................................... 17
5.11 Investors' Rights Agreement.......................................... 17
5.12 Co-Sale Agreement.................................................... 17
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING...................... 17
6.1 Representations and Warranties....................................... 17
6.2 Qualifications....................................................... 17
7. MISCELLANEOUS........................................................... 17
7.1 Survival or Warrants................................................. 17
7.2 Successors and Assigns............................................... 17
7.3 Governing Law........................................................ 17
7.4 Counterparts......................................................... 18
7.5 Titles and Subtitles................................................. 18
7.6 Notices.............................................................. 18
7.7 Finder's Fee......................................................... 18
7.8 Expenses............................................................. 18
7.9 Amendments and Waivers............................................... 18
7.10 Severability......................................................... 18
7.11 Corporate Securities Law............................................. 19
7.12 Aggregation of Stock................................................. 19
7.13 Entire Agreement..................................................... 19
-ii-
SCHEDULE A Schedule of Investors
EXHIBIT A Restated Certificate of Incorporation
EXHIBIT B Warrant to Purchase Series A Preferred Stock
EXHIBIT C List of Stockholders
EXHIBIT D Voting Agreement
EXHIBIT E Opinion of Counsel for the Company
EXHIBIT F Investors' Rights Agreement
EXHIBIT G Co-Sale Agreement
EXHIBIT H Shareholders' Agreement
-iii-
xxx.xxx, inc.
SERIES A PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT is made as of
the 8th day of January, 1999, by and among xxx.xxx, inc., a Delaware corporation
(the "Company"), and the investors listed on Schedule A hereto, each of which is
herein referred to as an "Investor" and together as the "Investors."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock and Warrants.
---------------------------------------
1.1 Sale and Issuance of Series A Preferred Stock and Warrants.
----------------------------------------------------------
(a) The Company shall adopt and file with the Secretary of State of
Delaware on or before the Closing (as defined below) the Restated Certificate of
Incorporation in the form attached hereto as Exhibit A (the "Restated
---------
Certificate").
(b) On or prior to the Closing (as defined below), the Company shall
have authorized (i) the sale and issuance to the Investors of 3,500,000 shares
of Series A Preferred Stock (as defined below), (ii) the issuance of the shares
of Common Stock (as defined below) to be issued upon conversion of the Series A
Preferred Stock (the "Common Shares"), (iii) the sale and issuance to the
Investors of warrants in substantially the form attached hereto as Exhibit B
---------
(each individually a "Warrant" and collectively the "Warrants") exercisable for
up the number shares of Series B Preferred Stock (as defined below) set forth
opposite each respective Investor's name on Schedule A hereto and (iv) the
issuance of the Series B Preferred Stock upon exercise of the Warrants (the
"Warrant Shares") and the issuance of the Common Stock issuable upon conversion
of the Warrant Shares. The Common Shares and shares of Common Stock issuable
upon conversion of the Warrant Shares are collectively referred to herein as the
"Conversion Shares." The Series A Preferred Stock and the Conversion Shares
shall have the rights, preferences, privileges and restrictions set forth
herein, in the Investors' Rights Agreement of even date herewith, and in the
Restated Certificate.
(c) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally and not jointly, to purchase at the Closing and the
Company agrees to sell and issue to each Investor at the Closing that number of
shares of the Company's Series A Preferred Stock set forth opposite such
Investor's name on Schedule A hereto for the purchase price set forth thereon.
----------
In addition, the Company agrees to issue the Warrants to the Investors, in
consideration of the Investors' participation in the transaction contemplated by
this Agreement. The Warrants received by each Investor shall be exercisable for
the number of shares of the Company's Series B Preferred Stock set forth
opposite such Investor's name on Schedule A hereto at the initial per share
exercise price specified in Section 2 of the Warrant (subject to adjustment as
set forth in the Warrants), in accordance with the terms of the Warrants.
-2-
1.2 Closing. The purchase and sale of the Series A Preferred Stock and
-------
Warrants shall take place at the offices of Day, Xxxxx and Xxxxxx LLP, CityPlace
I, Hartford, Connecticut, at 9:30 A.M., on January 8, 1999, or at such other
time and place as the Company and Investors acquiring in the aggregate more than
fifty percent (50%) the shares of Series A Preferred Stock sold pursuant hereto
mutually agree upon orally or in writing (which time and place are designated as
the "Closing"). At the Closing the Company shall deliver to each Investor a
certificate representing the Series A Preferred Stock purchased thereby against
payment of the purchase price therefor by wire transfer, cancellation of
indebtedness, or any combination thereof. The Company shall also deliver the
Warrants to the Investors. In the event that payment by an Investor is made, in
whole or in part, by cancellation of indebtedness, then such Investor shall
surrender to the Company for cancellation at the Closing any evidence of such
indebtedness or shall execute an instrument of cancellation in form and
substance acceptable to the Company.
2. Company Right to Repurchase Warrant Shares.
------------------------------------------
2.1 Scope of Repurchase Right. Each time an Investor or any transferee of
-------------------------
all or a part of its Warrant ("Holder") chooses to exercise such Warrant
pursuant to Section 4 or Section 5 of the Warrant (a "Warrant Exercise") all
Warrant Shares purchased thereby, and all shares of Common Stock issued or
issuable upon conversion of such Warrant Shares, initially shall be Restricted
Shares (as defined in Section 2.5 below) and shall be subject to a right (but
not an obligation) of repurchase by the Company (the "Repurchase Right") until
five business days after the closing of a Public Offering (as defined in Section
2.3 below) or Acquisition Transaction (as defined in Section 2.3 below) as
provided below.
2.2 Repurchase Cost. If the Company exercises the Repurchase Right with
---------------
respect to outstanding Warrant Shares, it shall pay the Holder thereof an amount
in cash or cash equivalents equal to the Exercise Price (as defined in the
Warrant) paid with respect to each of the Restricted Shares being repurchased
(as adjusted for stock splits, stock dividends, reverse stock splits,
recapitalizations and the like after the date of exercise), plus interest on the
Exercise Price from the date the applicable Warrant was exercised for such
Shares to the date of repurchase at the rate of eight percent (8%) per annum,
less any dividends which have been paid (or for which the record date has
passed) on such Restricted Shares since the date they were issued.
2.3 Exercise of Repurchase Right. The Repurchase Right shall be
----------------------------
exercisable, in whole or in part, as follows:
(a) The Repurchase Right shall be exercisable by the Company (or its
successor) as to all Warrant Shares commencing immediately prior to, but subject
in all events to the completion of, the occurrence of one of the following
events, if such event occurs on or prior to January 8, 2000:
(i) the closing of a firm commitment underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended (a "Public Offering"), at a price to the public of not
less than $5.00 for each share of Series B Preferred Stock, or the Common
Stock issuable upon conversion of one share of Series B Preferred Stock (as
adjusted for stock splits, reverse stock splits and the like effected after
the date of this Agreement); or
-3-
(ii) the closing of the Company's sale of all or substantially
all of its assets or the acquisition of the Company by another entity by
means of merger, consolidation or other transaction or series of related
transactions resulting in the exchange of the outstanding shares of the
Company's capital stock such that the stockholders of the Company prior to
such transaction own, directly or indirectly, less than 50% of the voting
power of the surviving entity (an "Acquisition Transaction"), if the Fair
Market Value (as defined below) of the consideration to be received for one
share of Series B Preferred Stock upon such event is greater than or equal
to five (5) times the Exercise Price.
(b) Commencing immediately prior to, and subject in all events to the
completion of, the closing of a Public Offering or the closing of an Acquisition
Transaction after January 8, 2000, the Repurchase Right shall be exercisable for
the number of Warrant Shares determined as follows:
(i) if the fair market value of one share of Series B Preferred
Stock upon such Public Offering or Acquisition Transaction (as determined
in good faith by the Board of Directors of the Company, or in the event of
a Public Offering, by the initial "Price to Public" of one share of such
Series B Preferred Stock, or Common Stock issuable upon conversion of such
Series B Preferred Stock, specified in the final prospectus with respect to
such offering) (the "Fair Market Value") is more than ten (10) times
greater than the Exercise Price (as defined in the Warrants), the
Repurchase Right may be exercised to repurchase that number of Warrant
Shares issued pursuant to each Warrant computed by the following formula,
with all Warrant Shares issued pursuant to such Warrant in excess of such
amount no longer subject to the Repurchase Right:
A = (BxD)((C/D) - 10)
Where: A = the number of Warrant Shares subject to exercise of the
Repurchase Right
B = ten percent (10%) of the Originally Purchasable Number of Shares
(as defined in the Warrant), as adjusted pursuant to Section
8 of the Warrant
C = the Fair Market Value
D = the Exercise Price (as defined in the Warrant)
(ii) if A is equal to or greater than the number of Warrant
Shares issued pursuant to a Warrant, then all Warrant Shares issued
pursuant to such Warrant shall be subject to the Repurchase Right, and the
amount by which A exceeds such number of shares shall be known as the
"Excess Repurchasable Shares" with respect to such Warrant (or, if such
Warrant is later transferred in part, with respect to all parts of such
Warrant).
-4-
(iii) if the Fair Market Value is less than or equal to ten (10)
times greater than the Exercise Price, no Warrant Shares shall be subject
to the Repurchase Right.
(c) The Repurchase Right shall be exercisable only by written notice
delivered to the Holder at least three (3) business days prior to the closing of
a Public Offering or Acquisition Transaction. The notice shall set forth the
date on which the repurchase is to be effected and shall specify that the
repurchase shall be conditioned upon the closing of such transaction. Such date
shall not be more than five (5) business days after the date of such closing.
If such transaction does not occur for any reason, all Warrant Shares which were
Restricted Shares shall continue to be Restricted Shares. The certificate(s)
representing the Restricted Shares to be repurchased shall, prior to the close
of business on the date specified for the repurchase, be delivered to the
Company properly endorsed for transfer. The Company shall, concurrently with
the receipt of such certificate(s), pay to the Investors or their transferees
the purchase price determined according to Subsection 2.2 above. Payment shall
be made in cash or cash equivalents.
(d) The Repurchase Right shall expire, and all Restricted Shares
shall cease to be subject to the Repurchase Right, on the sixth business day
following the closing of a Public Offering or Acquisition Transaction.
2.4 Termination of Rights as Stockholder. If the Company makes available,
------------------------------------
at the time and place and in the amount and form provided in this Agreement, the
consideration for the Restricted Shares to be repurchased in accordance with
this Section 2, then after such time the person from whom such Restricted Shares
are to be repurchased shall no longer have any rights as a holder of such
Restricted Shares (other than the right to receive payment of such consideration
in accordance with this Agreement). Such Restricted Shares shall be deemed to
have been repurchased in accordance with the applicable provisions hereof,
whether or not the certificate(s) therefor have been delivered as required by
this Agreement.
2.5 Definition. "Restricted Share" shall mean a Warrant Share that is
----------
subject to a Repurchase Right.
2.6 Transfer Restrictions. The Restricted Shares may not be transferred,
---------------------
assigned, encumbered, or otherwise disposed of prior to the expiration of the
Repurchase Right, except to a transferee who agrees in writing to be bound by
the provisions of this Section 2 and the Voting Agreement. Any attempted
transfer of such shares, unless in accordance with this Section 2.6, shall be
void and have no effect. The Restricted Shares held by a Holder and all of its
transferees of Restricted Shares shall be aggregated for purposes of determining
the number of Warrant Shares subject to the Repurchase Right, and the Company's
Repurchase Right shall apply to each Holder and its transferees of Warrant
Shares on a pro rata basis, based upon the number of Restricted Shares held by
each (without regard to any unexercised shares issuable pursuant to the
Warrant).
2.7 Legend. Each certificate representing Restricted Shares shall bear
------
the following legend upon its face until such time as the Repurchase Right has
expired:
-5-
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
REPURCHASE RIGHT UNDER THAT CERTAIN SERIES A STOCK AND WARRANT
PURCHASE AGREEMENT DATED JANUARY 7,1999 ("THE AGREEMENT', A COPY
OF WHICH MAY BE OBTAINED FROM THE SECRETARY OF THE COMPANY), AND
MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
ACCORDANCE WITH THE AGREEMENT."
3. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to each Investor that, except as set forth on a Schedule
of Exceptions (the "Schedule of Exceptions") furnished each Investor and special
counsel for the Investors, specifically identifying the relevant subparagraph
hereof, which exceptions shall be deemed to be representations and warranties as
if made hereunder:
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 Delaware and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure to so qualify would have a material adverse
effect on its business or properties.
3.2 Capitalization and Voting Rights.
--------------------------------
(a) The authorized capital of the Company consists, or will consist
immediately prior to the Closing, of: (i) 7,500,000 shares of Preferred Stock,
par value $.001 per share (the "Preferred Stock"), 4,000,000 of which have been
designated Series A Preferred Stock (the "Series A Preferred Stock"), up to
3,812,500 of which will be issued or issuable pursuant to this Agreement, and
the convertible notes (the "Bridge Notes") and warrants (the "Bridge Warrants")
described on the Schedule of Exceptions, and 3,500,000 of which have been
designated Series B Preferred Stock (the "Series B Preferred Stock"); and (ii)
20,000,000 shares of common stock, par value $.001 per share ("Common Stock"),
of which 6,300,000 shares are issued and outstanding. The rights, privileges
and preferences of the Common Stock, Series A Preferred Stock and Series B
Preferred Stock will be as stated in the Restated Certificate.
(b) The outstanding shares of Common Stock are owned by the
stockholders, in the numbers specified and subject to the restrictions set forth
in Exhibit C hereto.
---------
(c) The outstanding shares of Common Stock are all duly and validly
authorized and issued, fully paid and nonassessable, and were issued in
accordance with the registration or qualification provisions of the Securities
Act of 1933, as amended (the "Act"), and any relevant state securities laws, or
pursuant to valid exemptions therefrom.
(d) Except for (A) the conversion privileges of the Series A
Preferred Stock to be issued under this Agreement and under the Bridge Notes,
(B) the rights provided in Section 2.4 of the Investors' Rights Agreement, (C)
the Warrants, and (D) the Bridge Warrants, there are not outstanding any
options, warrants, rights (including conversion or preemptive rights) or
-6-
agreements for the purchase or acquisition from the Company of any shares of its
capital stock. In addition to the aforementioned options, the Company intends to
reserve 3,700,000 shares of its Common Stock for purchase upon exercise of
options to be granted in the future to directors, officers, employees,
consultants and advisors under a stock plan to be adopted by the Company (the
"Option Plan"). Except for the Shareholders' Agreement in the form attached
hereto as Exhibit H and the Voting Agreement, the Company is not a party or
---------
subject to any agreement or understanding, and, to the best of the Company's
knowledge, there is no agreement or understanding between any persons and/or
entities, which affects or relates to the voting or giving of written consents
with respect to any security or by a director of the Company.
3.3 Subsidiaries. The Company does not presently own or control, directly
------------
or indirectly, any interest in any other corporation, association, or other
business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
3.4 Authorization. All corporate action on the part of the Company, its
-------------
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement and the Investors' Rights Agreement, the Co-Sale
Agreement, the Voting Agreement, and the Warrants, all of even date herewith
(collectively, the "Ancillary Agreements"), the performance of all obligations
of the Company hereunder and thereunder, and the authorization, issuance (or
reservation for issuance), sale and delivery of the Series A Preferred Stock
being sold hereunder, the Series B Preferred Stock issuable upon exercise of the
Warrants, and the Common Stock issuable upon conversion of the Series A
Preferred Stock being sold hereunder and the Warrant Shares has been taken or
will be taken prior to the Closing, and this Agreement and the Ancillary
Agreements constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally, (ii)
as limited by laws and principles relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Investors' Rights
Agreement may be limited by applicable federal or state securities laws.
3.5 Valid Issuance of Preferred and Common Stock and Warrants. The Series
---------------------------------------------------------
A Preferred Stock that is being purchased by the Investors hereunder, when
issued, sold and delivered in accordance with the terms of this Agreement for
the consideration expressed herein, will be duly and validly issued, fully paid,
and nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement, the Voting Agreement and the
Investors' Rights Agreement and under applicable state and federal securities
laws. The Warrants purchased pursuant to this Agreement and the Warrant Shares
issuable upon exercise of the Warrants will be free of restrictions on transfer
other than restrictions on transfer under the Warrants, the Investors' Rights
Agreement, the Voting Agreement and this Agreement, and under applicable state
and federal securities laws. The Conversion Shares have been duly and validly
reserved for issuance and, upon issuance in accordance with the terms of the
Restated Certificate and, if applicable, the Warrants, will be duly and validly
issued, fully paid, and nonassessable and will be free of restrictions on
transfer other than restrictions on transfer under this Agreement, the Voting
Agreement, and the Investors' Rights Agreement and under applicable state and
federal securities laws.
-7-
3.6 Governmental Consents. No consent, approval, order or authorization
---------------------
of, or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement, except (i) the filing of the Restated Certificate with the
Secretary of State of Delaware; and (ii) the filings pursuant to Regulation D
under the Act and Section 25102(f) of the California Corporate Securities Law of
1968, as amended, and the rules thereunder, which filings will be effected
within 15 days of the sale of the Series A Preferred Stock hereunder, and such
other post-closing filings as may be required.
3.7 Offering. Subject in part to the truth and accuracy of each
--------
Investor's representations set forth in Section 4 of this Agreement, the offer,
sale and issuance of the Series A Preferred Stock and Warrants as contemplated
by this Agreement are exempt from the registration requirements of any
applicable state and federal securities laws, and neither the Company nor any
authorized agent acting on its behalf will take any action hereafter that would
cause the loss of such exemption.
3.8 Litigation. There is no action, suit, proceeding or known
----------
investigation pending or, to the Company's knowledge, currently threatened
against the Company that questions the validity of this Agreement or the
Investors' Rights Agreement or any Ancillary Agreements, or the right of the
Company to enter into such agreements, or to consummate the transactions
contemplated hereby or thereby, or that might result, either individually or in
the aggregate, in any material adverse changes in the assets, condition, affairs
or prospects of the Company, financially or otherwise, or any change in the
current equity ownership of the Company, nor is the Company aware that there is
any basis for the foregoing. The foregoing includes, without limitation,
actions, suits, proceedings or investigations pending or threatened (or any
basis therefor known to 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 that the Company intends to initiate.
3.9 Proprietary Information and Shareholders' Agreements. Each employee
----------------------------------------------------
and officer of the Company, and each consultant who has had access to
confidential or proprietary information of the Company, has executed a
Proprietary Information and Inventions Agreement. Each Founder has executed or
will execute prior to the Closing a Shareholders' Agreement in a form provided
to special counsel to the Investors, which agreement supersedes all prior
agreements between the Company and the Founders related to the capital stock of
the Company held by the Founders. The Company is not aware that any of its
employees, officers or consultants are in violation thereof, and the Company
will use its best efforts to prevent any such violation.
3.10 Patents and Trademarks. The Company has sufficient title and
----------------------
ownership of or licenses to all patents, trademarks, service marks, trade names,
copyrights, trade secrets,
-8-
information, proprietary rights and processes necessary for its business as now
conducted and as proposed to be conducted without any violation or infringement
of the rights of others, except for such items as have yet to be conceived or
developed or that are expected to be available for licensing on reasonable terms
from third parties. The Company has no patents or pending patent applications.
There are no outstanding options, licenses, or agreements of any kind relating
to the foregoing, nor is the Company bound by or a party to any options,
licenses or agreements of any kind with respect to the patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other person or entity. The Company has
not received any communications alleging that the Company has violated or, by
conducting its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity. The Company is not aware that
any of its employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of his or her best efforts to promote the interests of
the Company or that would conflict with the Company's business as proposed to be
conducted. Neither the execution nor delivery of this Agreement or the
Investors' Rights Agreement or the Ancillary Agreements, nor the carrying on of
the Company's business by the employees of the Company, nor the conduct of the
Company's business as proposed, will, to the best of the Company's knowledge,
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any of such employees is now obligated. The Company does not believe it is
necessary to utilize any inventions of any of its employees (or people it
currently intends to hire) made prior to or outside the scope of their
employment by the Company.
3.11 Compliance with Other Instruments. The Company is not in violation or
---------------------------------
default of any provision of its Restated Certificate or Bylaws, or of any
instrument, judgment, order, writ, decree or contract to which it is a party or
by which it is bound, or, to the best of its knowledge, of any provision of any
federal or state statute, rule or regulation applicable to the Company. The
execution, delivery and performance of this Agreement and the Investors' Rights
Agreement and the Ancillary Agreements, and the consummation of the transactions
contemplated hereby and thereby will not result in any such violation or be in
conflict with or constitute, with or without the passage of time and giving of
notice, either a default under any such provision, instrument judgment, order,
writ, decree or contract or an event that results in the creation of any lien,
charge or encumbrance upon any assets of the Company or the suspension,
revocation, impairment, forfeiture, or nonrenewal of any material permit,
license, authorization, or approval applicable to the Company, its business or
operations or any of its assets or properties.
3.12 Agreements; Action.
------------------
(a) Except for agreements explicitly contemplated hereby and by the
Investors' Rights Agreement and the Ancillary Agreements, there are no
agreements, understandings or proposed transactions between the Company and any
of its officers, directors, affiliates, or any affiliate thereof.
-9-
(b) There are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which the Company
is a party or by which it is bound that may involve (i) obligations (contingent
or otherwise) of, or payments to the Company in excess of, $10,000, or (ii) the
license of any patent, copyright, trade secret or other proprietary right to or
from the Company (other than the license of the Company's or generally available
shrink-wrap software and products in the ordinary course of business), or (iii)
provisions restricting or affecting the development, manufacture or distribution
of the Company's products or services, or (iv) indemnification by the Company
with respect to infringements of proprietary rights.
(c) The Company has not (i) declared or paid any dividends or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities individually in excess of $10,000 or, in the case of
indebtedness and/or liabilities individually less than $10,000, in excess of
$25,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) The Company is not a party to and is not bound by any contract,
agreement or instrument, or subject to any restriction under its Restated
Certificate or Bylaws that adversely affects its business as now conducted or as
proposed to be conducted, its properties or its financial condition.
(f) The Company has not engaged in the past three (3) months in any
discussion (i) with any representative of any corporation or corporations
regarding the consolidation or merger of the Company with or into any such
corporation or corporations, (ii) with any corporation, partnership, association
or other business entity or any individual regarding the sale, conveyance or
disposition of all or substantially all of the assets of the Company or a
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company is disposed of, or (iii) regarding any
other form of acquisition, liquidation, dissolution or winding up of the
Company.
3.13 Related-Party Transactions. No employee, officer, or director of the
--------------------------
Company or member of his or her immediate family is indebted to the Company, nor
is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the best of the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company, except
that employees, officers, or directors of the Company and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company. No member of the
-10-
immediate family of any officer or director of the Company is directly or
indirectly interested in any material contract with the Company.
3.14 Permits. The Company has all franchises, permits, licenses, and any
-------
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company, and the
Company believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. The
Company is not in default in any material respect under any of such franchises,
permits, licenses, or other similar authority.
3.15 Environmental and Safety Laws. To the best of its knowledge, the
-----------------------------
Company is not in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and to the best
of its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation.
3.16 Manufacturing and Marketing Rights. The Company has not granted
----------------------------------
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person and is not bound by any agreement that affects the Company's
exclusive right to develop, manufacture, assemble, distribute, market or sell
its products.
3.17 Disclosure. The Company has fully provided each Investor with all
----------
the information that such Investor has requested for deciding whether to
purchase the Series A Preferred Stock and all information that the Company
believes is reasonably necessary to enable such Investor to make such decision.
Neither this Agreement, the Investors' Rights Agreement, nor any other
statements or certificates made or delivered in connection herewith or therewith
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements herein or therein not misleading.
3.18 Business Plan. The 1998-1999 Business Plan dated November, 1998,
-------------
previously delivered to each Investor, has been prepared in good faith by the
Company and does not contain any untrue statement of a material fact nor does it
omit to state a material fact necessary to make the statements made therein not
misleading, except that with respect to projections contained in the Business
Plan, the Company represents only that such projections were prepared in good
faith and that the Company reasonably believes there is a reasonable basis for
such projections.
3.19 Registration Rights. Except as provided in the Investors' Rights
-------------------
Agreement, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
3.20 Corporate Documents. Except for amendments necessary to satisfy
-------------------
representations and warranties or conditions contained herein (the form of which
amendments has been approved by the Investors), the Restated Certificate and
Bylaws of the Company are in the form previously provided to special counsel for
the Investors.
3.21 Title to Property and Assets. The Company owns its property and
----------------------------
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens that
-11-
arise in the ordinary course of business and do not materially impair the
Company's ownership or use of such property or assets. With respect to the
property and assets it leases, the Company is in compliance with such leases
and, to the best of its knowledge, holds a valid leasehold interest free of any
liens, claims or encumbrances.
3.22 Financial Statements. The Company has delivered to Investor its
--------------------
unaudited financial statements (balance sheet and statement of operations) as at
and for the eleven (11) month period ended November 30, 1998 (the "Financial
Statements"). The Financial Statements fairly present the financial condition
and operating results of the Company as of the date, and for the periods,
indicated therein, subject to normal year-end audit adjustments. Except as set
forth in the Financial Statements, the Company has no material liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to November 30, 1998 and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected in the
Financial Statements, which, in both cases, individually or in the aggregate,
are not material to the financial condition or operating results of the Company.
Except as disclosed in the Financial Statements, the Company is not a guarantor
or indemnitor of any indebtedness of any other person, firm or corporation. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.
3.23 Changes. Since November 30, 1998, there has not been any adverse
-------
change in the assets, liabilities, financial condition or operating results of
the Company from that reflected in the Financial Statements, except changes in
the ordinary course of business that have not been, in the aggregate, materially
adverse.
3.24 Employee Benefit Plans. The Company does not have any Employee
----------------------
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
3.25 Tax Returns, Payments and Elections. The Company has filed all tax
-----------------------------------
returns and reports (including information returns and reports) as required by
law. These returns and reports are true and correct in all material respects.
The Company has paid all taxes and other assessments due, except those contested
by it in good faith that are listed in the Schedule of Exceptions. The
provision for taxes of the Company as shown in the Financial Statements is
adequate for taxes due or accrued as of the date thereof. The Company has not
elected pursuant to the Internal Revenue Code of 1986, as amended (the "Code"),
to be treated as a Subchapter S corporation pursuant to Section 1362(a) of the
Code, nor has it made an election pursuant to Section 341(f) of the Code, nor
has it made any other elections pursuant to the Code (other than elections that
relate solely to methods of accounting, depreciation or amortization) that would
have a material effect on the Company, its financial condition, its business as
presently conducted or proposed to be conducted or any of its properties or
material assets. The Company has never had any tax deficiency proposed or
assessed against it and has not executed any waiver of any statute of
limitations on the assessment or collection of any tax or governmental charge.
None of the Company's federal income tax returns and none of its state income or
franchise tax or sales or use tax returns has ever been audited by governmental
authorities. Since the date of the Financial Statements, the Company has not
incurred any taxes, assessments or governmental
-12-
charges other than in the ordinary course of business and the Company has made
adequate provisions on its books of account for all taxes, assessments and
governmental charges with respect to its business, properties and operations for
such period. The Company has withheld or collected from each payment made to
each of its employees, the amount of all taxes (including, but not limited to,
federal income taxes, Federal Insurance Contribution Act taxes and Federal
Unemployment Tax Act taxes) required to be withheld or collected therefrom, and
has paid the same to the proper tax receiving officers or authorized
depositories.
3.26 Insurance. The Company has in full force and effect fire and
---------
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed. The Company has in full force and effect
products liability and errors and omissions insurance in amounts customary for
companies similarly situated.
3.27 Minutes. The minutes of the Company provided to the Investors
-------
contain a complete summary of all meetings of directors and stockholders since
the time of incorporation and reflect all transactions referred to in such
minutes accurately in all material respects.
3.28 Labor Agreements and Actions, Employee Compensation. The Company is
---------------------------------------------------
not bound by or subject to (and none of its assets or properties is bound by or
subject to) any written or oral, express or implied, contract, commitment or
arrangement with any labor union, and no labor union has requested or, to the
best of the Company's knowledge, has sought to represent any of the employees,
representatives or agents of the Company. There is no strike or other labor
dispute involving the Company pending, or to the best of the Company's
knowledge, threatened, that could have a material adverse effect on the assets,
properties, financial condition, operating results, or business of the Company
(as such business is presently conducted and as it is proposed to be conducted),
nor is the Company aware of any labor organization activity involving its
employees. The Company is not aware that any officer or key employee, or that
any group of key employees, intends to terminate their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any of the foregoing. The employment of each officer and employee
of the Company is terminable at the will of the Company. To the best of its
knowledge, the Company has complied in all material respects with all applicable
state and federal equal employment opportunity and other laws related to
employment. The Company is not a party to or bound by any currently effective
employment contract, deferred compensation agreement, bonus plan, incentive
plan, profit sharing plan, retirement agreement, or other employee compensation
agreement.
3.29 Section 83(b) Elections. To the best of the Company's knowledge, all
-----------------------
individuals who have purchased unvested shares of the Company's Common Stock
have timely filed or will timely file elections under Section 83(b) of the Code
and any analogous provisions of applicable state tax laws.
3.30 Real Property Holding Company. The Company is not currently, and has
-----------------------------
not been during the prior five years, a United States real property holding
corporation within the meaning of Section 897 of the Code and the Company has
filed with the Internal Revenue
-13-
Service all statements, if any, with its United States income tax returns which
are required under Section 1.897-2(H) of the Treasury Regulations.
3.31 Net Operating Loss Carryforward. The information contained in the
-------------------------------
Schedule of Exceptions or otherwise provided to counsel for the Investors
regarding the application of Section 382 of the Code to the Company's federal
net operating loss carryforward is true and correct to the best of the Company's
knowledge.
3.32 Brokers. The Company has no contract, arrangement or understanding
-------
with any broker, finder or similar agent with respect to the transactions
contemplated by this Agreement.
3.33 Significant Customers and Suppliers. No customer or supplier that
-----------------------------------
was or is significant to the Company has terminated, materially reduced or
threatened to terminate or materially reduce its purchases from or provision of
products or services to the Company, as the case may be.
3.34 Qualified Small Business Stock. As of the Closing: (i) the Company
------------------------------
will be an eligible corporation as defined in Section 1202(e)(4) of the Internal
Revenue Code of 1986, as amended (the "Code"), (ii) the Company will not have
made any purchases of its own stock during the one-year period proceeding the
Closing having an aggregate value exceeding 5% of the aggregate value of all its
stock as of the beginning of such period and (iii) the Company's aggregate gross
assets, as defined by Code Section 1202(d)(2), at no time through the Closing
have exceeded or will exceed $50 million, taking into account the assets of any
corporations required to be aggregated with the Company in accordance with Code
Section 1202(d)(3).
3.35 Year 2000. The Company's proprietary software is capable of
---------
recording, storing, processing, calculating and displaying calendar dates
falling before, on and after January 1, 2000, without loss of functionality or
data integrity, except where the failure to do so could not reasonably be
expected to have a material adverse affect on the assets, properties, financial
condition, operating results or business of the Company. The foregoing does not
constitute a warranty or representation that the Company's software will be
capable of recording, storing, processing, calculating and displaying correct
calendar dates based on software supplied by or licensed from any party other
than the Company, or that the Company's software will properly interact with
such third party software.
3.36 No Outstanding Preferred Stock. Immediately prior to the Closing,
------------------------------
there shall be no preferred stock of the Company outstanding.
4. Representations and Warranties of the Investors. Each Investor
-----------------------------------------------
hereby represents and warrants that:
4.1 Authorization. Such Investor has full power and authority to enter
-------------
into this Agreement, the Investors' Rights Agreement and the Ancillary
Agreements, and each such Agreement constitutes its valid and legally binding
obligation, enforceable in accordance with its terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief, or other
-14-
equitable remedies, and (iii) to the extent the indemnification provisions
contained in the Investors' Rights Agreement may be limited by applicable
federal or state securities laws.
4.2 Purchase Entirely for Own Account. This Agreement is made with such
---------------------------------
Investor in reliance upon such Investor's representation to the Company, which
by such Investor's execution of this Agreement such Investor hereby confirms,
that the Series A Preferred Stock and the Warrant to be received by such
Investor, the Warrant Shares and the Common Stock issuable upon conversion of
the Series A Preferred Stock and the Warrant Shares (collectively, the
"Securities") will be acquired for investment for such Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, such Investor further represents that such Investor does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Securities.
4.3 Disclosure of Information. Such Investor represents that it has had
-------------------------
an opportunity to ask questions and receive answers from the Company regarding
the terms and conditions of the offering of the Series A Preferred Stock and
Warrant, and the business, properties, prospects and financial condition of the
Company. The foregoing, however, does not limit or modify the representations
and warranties of the Company in Section 3 of this Agreement or the right of the
Investors to rely thereon.
4.4 Investment Experience. Such Investor is an investor in securities of
---------------------
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment, and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Series A Preferred Stock and Warrant.
If other than an individual, such Investor also represents it has not been
organized for the purpose of acquiring the Series A Preferred Stock or Warrant.
4.5 Accredited Investor. Such Investor is an "accredited investor"
-------------------
within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D, as presently in effect.
4.6 Restricted Securities. Such Investor understands that the Securities
---------------------
it is purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act, only in certain limited circumstances. In this connection, such
Investor represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
4.7 Further Limitations on Disposition. Without in any way limiting the
----------------------------------
representations set forth above, such Investor further agrees not to make any
disposition of all or any portion of the Securities unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 4 and the Investors' Rights Agreement provided and to the extent
this Section and such agreement are then applicable, and:
-15-
(a) There is then in effect a Registration Statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of Paragraphs (a) and (b) above,
no such registration statement or opinion of counsel shall be necessary for a
transfer by an Investor that is a partnership to a partner of such partnership
or a retired partner of such partnership who retires after the date hereof, or
to the estate of any such partner or retired partner or the transfer by gift,
will or intestate succession of any partner to his or her spouse or to the
siblings, lineal descendants or ancestors of such partner or his or her spouse,
if the transferee agrees in writing to be subject to the terms hereof to the
same extent as if he or she were an original Investor hereunder.
4.8 Legends.
-------
(a) It is understood that the certificates evidencing the Securities
may bear the following legend:
"These securities have not been registered under the
Securities Act of 1933, as amended, or any state securities
laws. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in
effect with respect to the securities under such Act and
any applicable state securities laws or pursuant to an
opinion of counsel satisfactory to the Company that such
registration is not required or unless sold pursuant to
Rule 144 of such Act."
(b) It is understood that the Warrants shall bear the following
additional legend:
"Shares issuable pursuant to this Warrant are subject to a
repurchase right and certain transfer restrictions under
that certain Series A Preferred Stock and Warrant Purchase
Agreement dated January 8, 1999. Copies of such agreement
may be obtained upon written request to the Secretary of
the Company."
4.9 Investors' State of Residence. Each Investor represents that, as of
-----------------------------
the Closing, it is a resident of the State of California.
-16-
5. Conditions of Investors' Obligations at Closing. The obligations of
-----------------------------------------------
each Investor under subsection I. I (b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
thereto:
5.1 Representations and Warranties. The representations and warranties of
------------------------------
the Company contained in Section 3 shall be true on and as of the Closing with
the same effect as though such representations and warranties had been made on
and as of the date of such Closing.
5.2 Performance. The Company shall have performed and complied with all
-----------
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 Compliance Certificate. The President of the Company shall deliver to
----------------------
each Investor at the Closing a certificate stating that the conditions specified
in Sections 5.1 and 5.2 have been fulfilled and stating that there shall have
been no adverse change in the business, affairs, prospects, operations,
properties, assets or condition of the Company since the date of its Financial
Statements.
5.4 Qualifications. All authorizations, approvals, or permits, if any, of
--------------
any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Securities pursuant to this Agreement shall be duly obtained and effective as of
the Closing.
5.5 Proceedings and Documents. All corporate and other proceedings in
-------------------------
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to
Investors' special counsel, and they shall have received all such counterpart
original and certified or other copies of such documents as they may reasonably
request. This may include, without limitation, good standing certificates and
certification by the Company's Secretary regarding the Restated Certificate and
Bylaws and Board of Director and stockholder resolutions relating to this
transaction.
5.6 Proprietary Information and Shareholders' Agreement. Each employee of
---------------------------------------------------
the Company, and each consultant to the Company who has had access to
confidential or proprietary information of the Company, shall have entered into
a Proprietary Information and Inventions Agreement in the form previously
provided to special counsel for the Investors. The Company shall cause each
holder of Common Stock of the Company to enter into a Shareholders' Agreement
(including an irrevocable proxy) in a form reasonably acceptable to special
counsel for the Investors.
5.7 Bylaws. The Bylaws of the Company shall provide that the Board of
------
Directors of the Company shall consist of five (5) persons.
5.8 Voting Agreement. The Company, each Founder (as defined therein) and
----------------
each Investor shall have entered into the Voting Agreement in the form attached
hereto as Exhibit D.
---------
-17-
5.9 Board of Directors. The Board of Directors of the Company,
------------------
immediately following the Closing, shall be comprised of the following members:
Xxxxx Xxxxxxx and Xxxx Xxx as designees of the holders of shares of the Common
Stock of the Company; Xxxxxx Xxxxxxxxxx and Xxxx Xxxxxxxx, as designees of the
holders of shares of Series A Preferred Stock of the Company; and one vacancy.
5.10 Opinion of Company Counsel. Each Investor shall have received from
--------------------------
Day, Xxxxx & Xxxxxx LLP, counsel for the Company, an opinion, dated as of the
Closing, in the form attached hereto as Exhibit E.
---------
5.11 Investors' Rights Agreement. The Company, the Founders and each
---------------------------
Investor shall have entered into the Investors' Rights Agreement in the form
attached as Exhibit F.
---------
5.12 Co-Sale Agreement. The Investors, the Founders and the Company shall
-----------------
each have entered into a Co-Sale Agreement in the form attached hereto as
Exhibit G.
---------
6. Conditions of the Company's Obligations at Closing. The obligations
--------------------------------------------------
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Investor:
6.1 Representations and Warranties. The representations and warranties of
------------------------------
the Investors contained in Section 4 shall be true on and as of the Closing with
the same effect as though such representations and warranties had been made on
and as of the Closing.
6.2 Qualifications. All authorizations, approvals, or permits, if any, of
--------------
any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Securities pursuant to this Agreement shall be duly obtained and effective as of
the Closing.
7. Miscellaneous.
-------------
7.1 Survival of Warranties. The warranties, representations and covenants
----------------------
of the Company and Investors contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the Closing and
shall in no way be affected by any investigation of the subject matter thereof
made by or on behalf of the Investors or the Company.
7.2 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Securities). Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of Connecticut as applied to agreements among
Connecticut residents entered into and to be performed entirely within
Connecticut.
-18-
7.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.5 Titles and Subtitles. The titles and subtitles used in this Agreement
--------------------
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
7.6 Notices. Unless otherwise provided, any notice required or permitted
-------
under this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery to the party to be notified or upon deposit with
the United States Post Office, by registered or certified mail, postage prepaid
and addressed to the party to be notified at the address indicated for such
party on the signature page hereof, or at such other address as such party may
designate by ten (10) days' advance written notice to the other parties.
7.7 Finder's Fee. Each party represents that it neither is nor will be
------------
obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which such Investor or any of its officers, partners,
employees, or representatives is responsible.
The Company agrees to indemnify and hold harmless each Investor from
any liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
7.8 Expenses. Irrespective of whether the Closing is effected, the
--------
Company shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If the
Closing is effected, the Company shall, at the Closing, reimburse the reasonable
fees of special counsel for the Investors and shall, upon receipt of a xxxx
therefor, reimburse the reasonable out-of-pocket expenses of such counsel. If
any action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, the Investors' Rights Agreement or the Restated Certificate, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
7.9 Amendments and Waivers. Any term of this Agreement may be amended and
----------------------
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the holders of a majority of the Common
Stock issuable or issued upon conversion of the Series A Preferred Stock. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any securities purchased under this Agreement at the time
outstanding (including securities into which such securities are convertible),
each future holder of all such securities, and the Company.
7.10 Severability. If one or more provisions of this Agreement are held to
------------
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and
-19-
the balance of the Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
7.11 Corporate Securities Law. THE SALE OF THE SECURITIES THAT ARE THE
------------------------
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
7.12 Aggregation of Stock. All shares of the Preferred Stock held or
--------------------
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
7.13 Entire Agreement. This Agreement and the documents referred to herein
----------------
constitute the entire agreement among the parties with respect to the subject
matter hereof and no party shall be liable or bound to any other party in any
manner by any warranties, representations, or covenants with respect to such
subject matter except as specifically set forth herein or therein.
[Remainder of page intentionally left blank.]
-20-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
COMPANY
xxx.xxx, inc.
By: ______________________________________
Title: ___________________________________
Address: 00 Xxxxxxxxxx Xxxxxx
0xx Xxxxx Xxxx
Xxxx Xxxxxxx, XX 00000
PURCHASERS
VantagePoint Venture Partners 1996, L.P.
0000 Xxxxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
By: ______________________________________
Title: ___________________________________
VantagePoint Communications Partners, L.P.
0000 Xxxxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
By: ______________________________________
Title: ___________________________________
-21-
Schedule A
----------
Schedule of Investors
---------------------
Series A Number of Warrant Total Purchase Price of
Shares Shares Issuable Upon Series A Shares and
Name and Address Purchased Exercise of Warrant Warrants
VantagePoint Venture 1,166,667 1,166,667 $1,166,667
Partners 1996, L.P.
0000 Xxxxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
VantagePoint 2,333,333 2,333,333 $2,333,333
Communications Partners, L.P.
0000 Xxxxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
TOTAL 3,500,000 3,500,000 $3,500,000
