STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of the 11th
day of June, 1999, by and between Xxxxxx'x, Inc., a Delaware corporation (the
"Company"), and Knowledge Net Holdings, L.L.C., a Delaware limited liability
company (the "Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF COMMON STOCK. Contemporaneously with
the execution of a certain Strategic Relationship Agreement by the Company and
Investor (the "Relationship Agreement") and subject to the terms and conditions
of this Agreement, Investor agrees to purchase at the Closing, and the Company
agrees to sell and issue to Investor at the Closing, 1,363,636 (post-split)
shares of the Company's Common Stock, $0.01 par value (the "Stock") for an
aggregate consideration of $7,445,453.
1.2 CLOSING. The purchase and sale of the Stock (the
"Closing") shall take place at the offices of Xxxxxxx, Phleger & Xxxxxxxx LLP,
000 Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000 at 11:00 A.M., on June 11,
1999, or at such other time and place as the Company and Investor mutually agree
upon orally or in writing (which time and place are designated as the "Closing
Date"). At the Closing, the Company shall deliver to Investor a certificate
representing the Stock upon receipt of the purchase price therefor in
immediately available funds.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to Investor that, except as
set forth on a Company Disclosure Statement delivered to the Investor (the
"Company Disclosure Statement"):
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure so to qualify would have a material adverse effect on the
assets, liabilities, business, properties, financial condition, operating
results, or prospects of the Company.
2.2 CAPITALIZATION AND VOTING RIGHTS.
(i) The Company is currently authorized to issue
7,500,000 shares of common stock, $0.01 par value per share ("Common Stock"), of
which 9,265,500 (post-split) shares of Common Stock are issued and outstanding
and are owned of record by the persons, and in the numbers, specified in the
Company Disclosure Statement as of April 30, 1999. As of April 30, 1999, except
as disclosed in the Company Disclosure Statement, no other shares of Common
Stock were outstanding. All issued and outstanding shares of the Company's
Common Stock have been duly and validly authorized and issued, are fully paid
and non-assessable, and were not issued in violation of the preemptive rights of
any past or present stockholder. The
board of directors of the Company has authorized an increase in the
authorized shares to 160,000,000 shares, consisting of 150,000,000 shares of
Common Stock and 10,000,000 shares of undesignated preferred stock. Such
increase will be reflected in an Amended and Restated Certificate of
Incorporation (the "Restated Certificate") to be filed with the Secretary of
State of the State of Delaware. The board of directors has authorized, and
the stockholders of the Company have approved, a 2 for 1 stock split for the
Company's stockholders of record as of May 4, 1999, and all post-split share
amounts reflect such split.
(ii) As of April 30, 1999, there were outstanding
warrants to purchase 2,181,360 (post-split) shares of Common Stock and options
to purchase 2,888,200 (post-split) shares of Common Stock held by the persons,
in the amounts, and with the exercise prices specified in the Company Disclosure
Statement. The Company has reserved an additional 1,084,660 (post-split) shares
of Common Stock for issuance under its stock option plans. The Company has
reserved 200,000 (post-split) shares of Common Stock for issuance under its 1999
Employee Stock Purchase Plan. Additionally, the Company may issue up to
1,642,500 (post-split) shares of Common Stock in connection with contemplated
strategic alliances (including this Agreement with Investor) and an undetermined
number of shares in its contemplated initial public offering. Except as (i) set
forth above, (ii) as set forth on the Company Disclosure Statement and (iii) the
repurchase rights of the Company under its stock option plans, there are not
outstanding any options, warrants, rights (including conversion, preemptive
rights or rights of first refusal), securities convertible into or exchangeable
for capital stock, or agreements of any kind for the purchase, subscription or
acquisition from the Company of any of its securities. All issued and
outstanding shares of Common Stock, warrants to purchase shares of Common Stock
and options to purchase shares of Common Stock have been duly authorized and
validly issued and were issued in accordance with the registration or
qualification provisions of the Securities Act of 1933, as amended, and any
relevant state securities laws or pursuant to valid exemptions therefrom.
Except as otherwise contemplated herein or on the Company Disclosure Statement,
the Company is not a party to 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 that affects or relates to the voting or giving of written
consents, or the sale or restrictions on transfer with respect to any security
of the Company. There are no outstanding obligations of the Company to purchase
or redeem any securities of the Company. The Company Disclosure Statement
describes the registration rights previously granted.
2.3 SUBSIDIARIES. The Company does not currently own or
control, directly or indirectly, any interest in any other corporation,
association, partnership, or other business entity.
2.4 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement and the Relationship
Agreement, the performance of all obligations of the Company hereunder and
thereunder, and the authorization, sale, issuance (or reservation for issuance)
and delivery of the Stock being sold hereunder has been taken or will be taken
prior to the Closing, and this Agreement and the Relationship Agreement
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms. The Stock, when issued in compliance
with the provisions of this Agreement, will be validly issued, fully
paid and nonassessable and, subject to the accuracy of the Investor's
representations in Section 3 hereof, will be issued in compliance with all
applicable federal and state securities laws and will be free of any liens or
encumbrances created by or imposed upon the holders thereof through action of
the Company except as set forth in the Stockholders Agreement attached hereto
as EXHIBIT A (the "Stockholders Agreement"). The Stockholders Agreement has
been executed by all stockholders of record and all amendments to the
Stockholders Agreement have in each case been approved by the requisite vote
or consent of stockholders.
2.5 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
Relationship Agreement, or the right of the Company to enter into such
agreements, or to consummate the transactions contemplated hereby or thereby, or
which might result, either individually or in the aggregate, in any material
adverse change in the assets, properties, liabilities, financial condition,
operating results, prospects, or business of the Company (as such business is
currently conducted and as it is proposed to be conducted) or any change in the
current equity ownership of the Company, nor, to the Company's knowledge, is
there any basis for the foregoing. The Company is not a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
other governmental judicial body. There is no action, suit, proceeding or
investigation by the Company currently pending or which the Company intends to
initiate. The Company Disclosure Statement lists all actions, suits and
proceedings to which the Company is a party and which are currently pending.
2.6 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any provisions of its Certificate of Incorporation (the
"Charter"), Bylaws or any agreement listed on the Company Disclosure Statement
pursuant to Section 2.8. The Company is not in violation or default of any
provision of any instrument, judgment, order, writ, decree or contract to which
it is a party or by which it is bound or of any provision of any law, federal or
state statute, rule or regulation applicable to the Company, the violation or
default of which, as the case may be, would have a material adverse effect upon
the assets, properties, financial condition, liabilities, operating results,
prospects, or business of the Company (as such business is currently conducted
and as it is proposed to be conducted). The execution, delivery and performance
of this Agreement and the Relationship Agreement and the issuance and sale of
the Stock pursuant hereto and the consummation of the transactions contemplated
hereby or thereby will not result in any such violation or default under its
Charter or Bylaws or constitute, with or without the passage of time and giving
of notice, either a violation or default under any provision, instrument,
judgment, order, writ, decree or contract to which the Company is a party or an
event which results in the creation of any lien, charge or encumbrance upon any
assets of the Company. The Company is not required to obtain any consents from
third parties or governmental agencies in connection with the performance of its
obligations hereunder, other than the amendment to the Stockholders Agreement.
2.7 STOCKHOLDERS, DIRECTORS AND OFFICERS; INDEBTEDNESS. The
Company is not currently indebted to its officers, directors, stockholders or
employees of the Company or any of their respective relatives, other than
travel, relocation, and other expenses which are advanced and reimbursed in the
ordinary course of business and for payment of salary for services rendered
and for other standard employee benefits generally made available to all
employees. To the best of the Company's knowledge, none of the officers or
directors or significant employees or consultants of the Company, has,
individually or collectively, a material interest in any entity which is a
competitor, customer or supplier of (or has any existing contractual
relationship with) the Company except as set forth in this Agreement or the
Stockholders Agreement. The Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
2.8 AGREEMENTS; ACTION.
(a) There are no agreements, understandings,
instruments, contracts, proposed transactions, judgments, orders, writs, or
decrees, excluding trade payables, to which the Company is a party or by which
it is bound that may involve obligations (contingent or otherwise) of the
Company in excess of $100,000.
(b) 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, (iii) incurred any other liabilities individually in excess of
$100,000 or, in the case of liabilities individually less than $100,000, in
excess of $1,000,000 in the aggregate, (iv) made any loans or advances to any
person, other than ordinary advances for travel expenses, or (v) sold, exchanged
or otherwise disposed of any of its assets or rights, other than in the ordinary
course of business.
(c) There are no agreements, understandings,
instruments, contracts. or proposed transactions between the Company and any
officer, director, or affiliate thereof.
(d) For the purposes of subsections (a) and (b) above,
all indebtedness, liabilities, agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs, or decrees 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.
2.9 DISCLOSURE. The Company has provided the Investor with all
the information which such Investor has requested for deciding whether to
purchase the Stock and all information which the Company believes is reasonably
necessary to enable such Investor to make such decision. Neither this
Agreement, the Relationship 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.
2.10 CORPORATE DOCUMENTS. The Charter and Bylaws of the Company
are in the form previously provided to the Investor shall be amended and
restated in the form of Restated Certificate previously provided to the
Investor.
2.11 FINANCIAL STATEMENTS. The Company has delivered to
Investor its financial statements (balance sheet and profit and loss statement,
statement of stockholders' equity and
statement of cash flows, including notes thereto) at March 31, 1999 and for
the fiscal year then ended (the "Financial Statements"). The Company's
auditors will sign their audit opinion for the Financial Statements after the
two for one stock split is completed. The Financial Statements are in
accordance with the books and records of the Company, are complete and
accurate in all material respects, and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis. The
Financial Statements fairly present the financial condition and operating
results of the Company as of the date, and for the period, indicated therein.
The Financial Statements reflect a 2 for 1 stock split authorized by the
Board of Directors on May 4, 1999. 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 March 31, 1999 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.
2.12 CHANGES. Since March 31, 1999, there has not been:
(a) any material adverse change in the assets,
properties, liabilities, financial condition, operating results, or business of
the Company (as such business is currently conducted and as it is proposed to be
conducted) from that reflected in the Financial Statements;
(b) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the assets, properties,
liabilities, financial condition, operating results, prospects or business of
the Company (as such business is presently conducted and as it is proposed to be
conducted);
(c) any waiver by the Company of a valuable right or of
a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and which is not material to the assets, properties,
liabilities, financial condition, operating results, prospects, or business of
the Company (as such business is currently conducted and as it is proposed to be
conducted);
(e) any material change in any compensation arrangement
or agreement with any employee; or
(f) to the Company's knowledge, any other event or
condition of any character which might materially and adversely affect the
assets, properties, liabilities, financial condition, operating results or
business of the Company (as such business is presently conducted and as it is
proposed to be conducted).
2.13 EMPLOYEES. To the best of the Company's knowledge and
belief, no employee of the Company is in violation of any term of any employment
contract, patent disclosure
agreement, non-competition agreement, or any restrictive covenant to a former
employer relating to the right of any such employee to be employed by the
Company because of the nature of the business conducted or presently proposed
to be conducted by the Company or to the use of trade secrets or proprietary
information of others. There is neither pending nor, to the Company's
knowledge and belief, threatened any actions, suits, proceedings or claims,
or to its knowledge any basis therefor or threat thereof with respect to any
contract, agreement, covenant or obligation referred to in the preceding
sentence. The Company does not have any collective bargaining agreement
covering any of its employees. Each employee, including Xxxxxxx X. Spain,
the Chairman and Chief Executive Officer of the Company, is an at-will
employee of the Company. No labor union or other collective bargaining unit
represents or claims to represent any of the Company's employees. To the
best of the Company's knowledge and belief, there is no union campaign
threatened or being conducted to solicit cards from employees to authorize a
union to request a National Labor Relations Board certification election with
respect to any Company employees. The Company has complied in all material
respects with all applicable laws, rules and regulations relating to the
employment of labor, including, without limitation, those related to wages,
hours, collective bargaining, occupational safety, discrimination, and the
payment of social security and other payroll-related taxes, and it has not
received any notice alleging that it has failed to comply in any material
respect with any of the foregoing. There are no controversies, disputes or
proceedings pending or, to the best of the Company's knowledge and belief,
threatened, between the Company and any of its employees.
2.14 EMPLOYEE BENEFIT PLANS. Neither the Company nor any trade
or business (whether or not incorporated) which is under control, or which is
treated as a single employer, with the Company under Section 414(b), (c), (m) or
(o) of the Internal Revenue Code of 1986, as amended, maintains, contributes to
or has or had an obligation to contribute to any employee benefit plan within
the meaning of Section 3(B) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), other than those plans which are set forth on the
Company Disclosure Statement. All such employee benefit plans are in compliance
in all material respects with ERISA and all other applicable laws. The Company
does not maintain any life or health benefits plan which provides for continuing
benefits or coverage for any individual or any dependent of any individual after
the termination of such individual's services to the Company, except as may be
required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, and at the sole expense of the individual or the individual's
dependent.
2.15 TAX RETURNS, PAYMENTS AND ELECTIONS. The Company has
timely filed all federal, state and local tax returns and reports as required by
law. These returns and reports are true and correct in all material respects
and were properly prepared. The Company has paid all taxes and other
assessments due, except those contested by it in good faith and for which
adequate reserves have been established, which are listed in the Company
Disclosure Statement. To the Company's knowledge, the provision for taxes of
the Company as reflected in the Financial Statements is adequate for taxes due
or accrued as of the date thereof. No deficiencies for any taxes for which the
Company may be liable have been asserted or assessed against the Company and
there are no liens for taxes upon any of the assets of the Company. The Company
has not been made a party to any pending action or proceeding by any
governmental authority for the assessment or collection of taxes, nor has any
claim for the assessment or collection of taxes
been proposed or asserted against the Company. No federal, state or local
tax audits or other administrative proceedings or court proceedings are
presently pending with regard to any taxes or returns for which the Company
may be liable.
2.16 PRIVATE PLACEMENT. Neither the Company, nor any person
acting on its behalf, has taken any action which would require registration of
the offering and sale of the Stock or which would violate applicable federal or
state securities laws or any rules, regulations or policies adopted thereunder.
The Company will not, and will not authorize anyone to, take any action which
would subject the issuance or sale of any of the Securities to Section 5 of the
Act. Subject to the accuracy of the Investor's representations in Section 3
hereof, no consent, approval, permit, order or authorization of, or any
qualification, registration, designation or filing with any federal or state
securities regulator is required, except for the filing of a Form D with the
United States Securities and Exchange Commission which will be made timely.
2.17 TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES. The Company
has good and marketable title to its properties and assets and has good title to
all its leasehold interests, in each case subject to no mortgage, pledge, lien,
security interest, conditional sale agreement, encumbrance or charge, except (i)
tax, materialmen's or like liens for obligations not yet due or payable or being
contested in good faith by appropriate proceedings, or (ii) possible minor liens
or encumbrances which do not in any case materially detract from the value of
the property subject thereto or materially impair the operations of the Company
and which have not arisen otherwise then in the ordinary course of business.
2.18 FRANCHISES, LICENSES, TRADEMARKS, PATENTS AND OTHER RIGHTS.
The Company has all franchises, licenses and other similar authority necessary
for the conduct of its business, the lack of which could materially and
adversely affect the operations or condition, financial or otherwise, of the
Company, and it is not in default in any material respect under any of such
franchises, permits, licenses or other similar authority. To the best of the
Company's knowledge, the Company possesses all patents, patent rights,
trademarks, trademark rights, trade names, trade names rights, copyrights, trade
secrets, information and other proprietary rights and processes necessary to
conduct its business as now being conducted and as planned to be conducted
without conflict with or infringement upon any valid rights of others and the
lack of which could materially and adversely affect the operations or condition,
financial or otherwise, of the Company. The Company has not received any notice
of infringement upon or conflict with the asserted rights of others that has not
been resolved.
2.19 INTELLECTUAL PROPERTY. To the best of the Company's
knowledge, in the preparation of its books, software, online products and
offerings and other information products, the Company has not violated the
copyright or other intangible or intellectual rights of any third party. The
Company is not aware of any competitor of the Company that is, without
authorization, extracting substantial portions of a Company database in order to
compete with the Company. No third party has complained to the Company or filed
any legal action in connection with the Company's practice of linking to third
party sites on the World Wide Web or the Internet.
2.20 EMPLOYEE STOCK OPTIONS. All of the outstanding options
indicated in Section 2.2(ii) were issued under either the Company's 1990 Stock
Option Plan, 1992 Stock Option Plan, 1995 Stock Option Plan , 1996 Stock Option
Plan or 1999 Stock Incentive Plan (the "Option Plans"). Except as set forth in
the Company Disclosure Statement, no options to purchase shares of Common Stock
have been issued to any person for the performance of personal services for the
Company or any affiliate thereof other than under the Option Plans and the
Company does not sponsor or maintain any plan or arrangement to award, sell or
otherwise transfer equity interests in the Company to employees or independent
contractors other than the Option Plans. The Option Plans and the shares of
Common Stock reserved for issuance thereunder have been duly authorized and
approved by the Board of Directors of the Company and by the Company's
stockholders, and the terms of each Option Plan are set forth in a written
document. The terms of each outstanding option issued under the Option Plans
are consistent with the terms of the Option Plan under which the option is
issued.
2.21 INVESTMENT COMPANY. The Company is not an "Investment
Company" within the meaning of the Investment Company Act of 1940, as amended.
2.22 INSURANCE. There is in full force and effect one or more
policies of insurance issued by insurers of recognized responsibility, insuring
the Company and its properties and business against such losses and risks, and
in such amounts, as are customary in the case of companies of established
reputation engaged in the same or similar business and similarly situated.
3. REPRESENTATIONS AND WARRANTIES OF INVESTOR.
Investor hereby represents and warrants that:
3.1 AUTHORIZATION. This Agreement constitutes a valid and
legally binding obligation of the Investor, enforceable against the Investor in
accordance with its terms.
3.2 LITIGATION. There is no action, suit, proceeding or
investigation pending or, to Investor's knowledge, currently threatened against
Investor which questions the validity of this Agreement or the right of Investor
to enter into it, or to consummate the transactions contemplated hereby, nor, to
Investor's knowledge, is there any basis for the foregoing.
3.3 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in any violation or default of any
provisions of Investor's certificate of formation or any operating agreement
which may be adopted by Investor. The Investor is not required to obtain any
consents from third parties or governmental agencies in connection with the
performance of its obligations hereunder.
3.4 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made
with 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 Stock 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, Investor further represents that
Investor does not have any contract, undertaking, agreement or arrangement with
any person to sell, transfer or grant participation to such person or to any
third person, with respect to any of the Stock. Investor represents that it has
full power and authority to enter into this Agreement.
3.5 DISCLOSURE OF INFORMATION. Investor represents that it has
had an opportunity (a) to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Stock and (b) to
obtain additional information to verify the accuracy of the other information
provided by the Company. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 2 of this Agreement or
the right of the Investor to rely thereon.
3.6 INVESTMENT EXPERIENCE. Investor acknowledges that it 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 Stock. Investor also represents it has not been
organized for the purpose of acquiring the Stock.
3.7 ACCREDITED INVESTOR. Investor is an "accredited investor"
within the meaning of Rule 501 of Regulation D, as currently in effect,
promulgated by the Securities and Exchange Commission ("Commission") pursuant to
the Securities Act of 1933 (the "Act").
3.8 RESTRICTED SECURITIES. Investor understands (a) that the
Stock it is purchasing are characterized as "restricted securities" under the
federal securities laws inasmuch as it is being acquired from the Company in a
transaction not involving a public offering, (b) that under such laws and
applicable regulations such securities may be resold without registration under
the Act only in certain limited circumstances, and (c) that the Company may
require a legal opinion of Investor's counsel with respect to unregistered
transfers, except with respect to transfers to Affiliates (as hereinafter
defined).
3.9 LEGENDS. Investor understands that the certificates
evidencing the Stock may bear the following legend at the discretion of the
Company:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"), or under the
securities laws of any state, and may not be sold or transferred in the absence
of an effective registration statement under the Act or an opinion of counsel
reasonably satisfactory to Xxxxxx'x Inc. (the "Company") to the effect that an
exemption from registration thereunder is available."
4. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING.
The obligation of Investor under Section 1.1 of this Agreement is subject
to the fulfillment on or before the Closing of each of the following conditions,
the waiver of which shall not be effective against the Investor unless the
Investor consents in writing thereto:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of such
Closing.
4.2 PERFORMANCE. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing in
all material respects.
4.3 CONDUCT OF BUSINESS. Until Closing, the Company shall have
conducted its business in the ordinary course consistent with past practice
other than as required in connection with the Company's currently planned
initial public offering of Common Stock. For purposes of this Section 4.3, the
Company's (i) issuance of stock options and other securities to its employees,
directors and consultants and (ii) issuance of securities as contemplated in
Section 2.2(ii) shall be deemed by the parties to be in the ordinary course.
4.4 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to Investor at the Closing a certificate on behalf of the Company
certifying that the conditions specified in Sections 4.1 and 4.2 have been
fulfilled.
4.5 ISSUANCE OF STOCK. The Company shall have delivered to
Investor a certificate or certificates representing the Stock.
4.6 PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be satisfactory in form and substance to
Investor and Investor's counsel, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
4.7 STOCKHOLDER WAIVER. The Stockholders of the Company shall
have waived any preemptive rights with respect to the Stock.
4.8 ADDITION TO STOCKHOLDERS AGREEMENT. The Investor shall
have become a party to the Stockholders Agreement.
4.9 LEGAL OPINION. Investor shall have received from Xxxxxxx,
Xxxxxxx & Xxxxxxxx LLP, counsel to the Company, an opinion addressed to
Investor, dated the Closing Date, addressing the opinions set forth on EXHIBIT B
hereto.
4.10 STRATEGIC RELATIONSHIP AGREEMENT. The Company and the
Investor shall have executed the Strategic Relationship Agreement in the form
attached hereto as EXHIBIT C (the "Strategic Relationship Agreement").
4.11 SECRETARY'S CERTIFICATE. The Secretary of the Company
shall deliver to the Investor at the Closing a certificate on behalf of the
Company certifying (i) a true and correct copy of the Stockholders Agreement (as
executed by all stockholders) to be of continuing effect
as of the Closing Date, (ii) resolutions of the board of directors of the
Company to be duly adopted and in full force and effect on the Closing Date
authorizing the execution, delivery and performance of this Agreement and the
Stockholders Agreement, (iii) true and correct copies of the Charter and
bylaws of the Company to be of continuing effect as of the Closing Date, and
(iv) receipt of the stockholder waiver required by Section 4.7.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.
The obligations of the Company to the Investor under this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions by the Investor:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Investor contained in Section 3 shall be true on and as of the
Closing in all material respects with the same effect as though such
representations and warranties had been made on and as of the Closing.
5.2 PERFORMANCE. Investor 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 in
all material respects.
5.3 PAYMENT OF PURCHASE PRICE. Investor shall have delivered
the purchase price for the Stock specified in Section 1.1 hereof.
5.4 COMPLIANCE CERTIFICATE. A duly authorized officer of the
Investor shall deliver to the Company at the Closing a certificate on behalf of
the Investor certifying that the conditions specified in Sections 5.1, 5.2 and
5.3 have been fulfilled.
5.5 STOCKHOLDER WAIVER. The Stockholders of the Company shall
have waived any preemptive rights with respect to the Stock.
5.6 ADDITION TO STOCKHOLDERS AGREEMENT. The Investor shall
have become a party to the Stockholders Agreement.
5.7 STRATEGIC RELATIONSHIP AGREEMENT. The Company and the
Investor shall have executed the Strategic Relationship Agreement.
5.8 GUARANTEE. Knowledge Enterprises, Inc., a Delaware
corporation, the parent of the Investor, shall have executed and delivered to
the Company a Guaranty in favor of the Company guaranteeing the obligations of
the Investor under this Agreement and the Strategic Relationship Agreement in
the form attached hereto as EXHIBIT D.
6. ADDITIONAL COVENANTS.
6.1 DELIVERY OF FINANCIAL STATEMENTS. For so long as the
Investor is a stockholder of the Company and until such time as the Company
shall have a class of securities registered under the Securities Exchange Act of
1934, the Company shall deliver to Investor:
(a) as soon as practicable, but in any event within 90
days after the end of each fiscal year of the Company, the consolidated balance
sheet and statements of income and cash flow for such fiscal year, prepared in
accordance with generally accepted accounting principles, consistently applied;
and audited by a nationally recognized firm of independent certified public
accountants;
(b) within 45 days of the end of each quarter, (i) the
consolidated balance sheets of the Company and its subsidiaries and statements
of income and cash flow for such quarter certified by the Company's Chief
Financial Officer as presenting fairly the consolidated financial position and
results of operations of the Company and its consolidated subsidiaries in
accordance with generally accepted accounting principles, consistently applied
(with the exception of supporting footnotes) and (ii) comparisons of such
statements to budget for and as of the end of such quarter in reasonable detail;
and
(c) such other information relating to the financial
conditions, business prospects or corporate affairs of the Company as Investor
may from time to time reasonably request to comply with applicable Securities
and Exchange Commission and other governmental filing requirements and such
other information as Investor may reasonably request, including, but not limited
to, any reports or information furnished to the Company's lenders or reports or
other filings made to or filed with governmental authorities and internally
generated periodic financial reports; PROVIDED, HOWEVER, that the Company shall
not be obligated under this Section 6.1(c) to provide information which it deems
in good faith to be a trade secret or similar confidential information.
6.2 BOARD REPRESENTATION. Prior to a firm commitment,
underwritten public offering of the Company's Common Stock (a "Qualified
Offering"), the Investor shall be entitled to designate a board member,
reasonably satisfactory to the Company, to the Company's Board of Directors, to
serve until the next annual meeting of the Company's stockholders, and the
Company agrees not to maintain a Board of Directors that exceeds ten directors.
Subsequent to a Qualified Offering, the Company shall have no further
obligations pursuant to this Section 6.2.
6.3 STANDSTILL AGREEMENT. For a period of three years
subsequent to the Closing, unless otherwise approved by a majority of the
disinterested members of the Company's Board of Directors, Investor and its
Affiliates shall not, directly or indirectly, acquire beneficial ownership of or
voting control over any shares of Common Stock if the effect of such acquisition
would be to increase the aggregate number of shares of Common Stock then
beneficially owned, directly or indirectly, or over which there is voting
control by Investor and its Affiliates to greater than forty-nine percent (49%)
of shares of Common Stock outstanding. For purposes of this Agreement,
"Affiliate" of Investor shall mean any person directly or indirectly
controlling, controlled by, or under common control with Investor, including
officers and directors. For purposes of this Section 6.3, "voting control"
shall mean the power to vote or to direct the voting, whether directly or
indirectly, through an Affiliate, contractual right, verbal understanding, or
otherwise. For purposes of this Section 6.3, "beneficial ownership" shall have
the same meaning as in Rule 13d-3(d)(1) promulgated under the Securities
Exchange Act of 1934.
6.4 REGISTRATION: LISTING ON SECURITIES EXCHANGES. If at any
time the Company proposes or determines to register any Common Stock held by a
stockholder of the Company (other than pursuant to registration on Form S-8 or
any successor form) in a secondary underwritten offering to the public for cash,
the Company will (a) promptly give written notice thereof to the Investor and
(b) include in such registration (and any related qualification under blue sky
laws or other state securities laws), and in the underwriting involved therein,
all the Common Stock specified by the Investor in a written request, received by
the Company within thirty (30) days after the mailing of such written notice by
the Company; provided, that if the managing underwriters advise the Company in
writing that in their opinion marketing factors require a limitation in the
number of securities to be included, the Company will include in such
registration (i) first, any Common Stock offered by the Company, and (ii)
second, if all the Company's Common Stock is included in the registration, the
number of shares of Common Stock requested to be included that, in the opinion
of such underwriters, can be sold, PRO RATA among the respective stockholders of
the Company on the basis of the amount of Common Stock owned by each such
stockholder assuming exercise of all outstanding warrants and options to
purchase shares of Common Stock. The Company shall not grant any registration
rights inconsistent with the rights granted to Investor herein. The price at
which the Investor's Common Stock being registered in such offering are offered
to the public shall be equal to the price at which the Company's Common Stock is
offered to the public in such registration. No securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. The Investor shall be required to pay
underwriter discounts and commissions, pay incremental expenses of the offering
attributable to the registration of Investor's stock, provide indemnification to
the Company and the underwriters, provide a lockup agreement, and comply with
such other terms and conditions, in each case, only to the extent required of
the other stockholders selling Common Stock pursuant to such offering. The
Company will indemnify Investor against any damages incurred by Investor as a
result of any untrue statement or alleged untrue statement of a material fact
contained in a registration statement except to the extent such damages result
from information provided to Company by Investor for inclusion in such
registration statement.
6.5 EXCLUSIVITY. Neither the Company nor any of the officers,
directors or representatives of the Company shall, directly or indirectly,
solicit, initiate or otherwise participate with respect to any inquiries or
proposals concerning any substantial equity investment in the Company, other
than with respect to investments by up to two other strategic partners of up to
$2.0 million each and the contemplated initial public offering of the Company's
Common Stock, until the earlier of the Closing or the termination of this
Agreement in accordance with Section 7.1. If the Company shall fail to comply
with the requirements of this Section 6.5, the Company shall reimburse Investor
for Investor's out-of-pocket expenses incurred in connection with this
transaction.
6.6 NONEXCLUSIVE REMEDIES. If
(a) the Company shall be in default of this Agreement as
a result of the occurrence of a material failure to comply with the requirements
of Sections 6.1, 6.2 and 6.4 hereof; or
(b) the Investor shall be in default of this Agreement
as a result of the occurrence of a material failure to comply with the
requirements of Section 6.3 hereof;
then the Company and Investor agree that monetary remedies are
inadequate as relief for each of the defaults set forth above and that it is not
possible to measure the economic loss as a result of any such default.
Therefore, in the event of a default by the Company of any items set forth in
subsection (a) hereof, and in the event of a default by Investor of any items
set forth in subsection (b) hereof, Investor and the Company, as the case may
be, at its sole option, may enforce specific performance of the provisions
referenced in subsections (a) or (b), respectively, each against the other. In
addition to and not to the exclusion of any other remedy at law or in equity,
Investor and the Company, as the case may be, may pursue any other available
remedy for such default, including the recovery of monetary damages.
7. TERMINATION.
7.1 This Agreement may be terminated at any time prior to the
Closing Date:
(a) by mutual consent of the Company and the Investor;
or
(b) by either the Company or the Investor on or after
June 30, 1999, upon written notice to the other if the Closing has not occurred;
or
(c) by Investor if any of the conditions in Section 4
shall have become incapable of fulfillment and shall not have been waived by
Investor; or
(d) by the Company if any of the conditions in Section 5
shall have become incapable of fulfillment and shall not have been waived by the
Company; or
(e) by either the Company or the Investor if any
representation and warranty of the other party set forth in this Agreement are
then materially incorrect.
7.2 In the event of termination of this Agreement as provided
above, all provisions of this Agreement except Sections 8.1, 8.8, 8.9, and 8.10
shall become null and void and of no further force and effect, and there shall
be no liability under such void sections on the part of either the Company or
the Investor or their respective officers and directors; provided, however, that
nothing herein shall relieve any party for liability for a breach of this
agreement prior to termination.
8. MISCELLANEOUS.
8.1 ENTIRE AGREEMENT. This Agreement contains the entire
agreement among the parties with respect to the transactions contemplated
hereby.
8.2 SUCCESSORS AND ASSIGNS. Investor may assign this Agreement
only to an Affiliate in conjunction with the assignment of the Stock pursuant to
the terms of the Stockholders Agreement, as amended. 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. 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.
8.3 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Delaware, without reference to such
state's principles of conflicts of laws.
8.4 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.
8.5 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 until
termination of this Agreement in accordance with Section 7, or for the period
ending 18 months following the Closing Date and shall in no way be affected by
any investigation of the subject matter thereof made by or on behalf of the
Investor or the Company provided that the representations regarding the
capitalization of the Company in Section 2.2 of this Agreement shall survive for
the period ending 30 days after the expiration of any applicable statute of
limitations. All covenants and agreements set forth in this Agreement,
including without limitation Sections 6.1, 6.2, 6.3, 6.4, 6.5 and 8.6, shall
survive the Closing until fully discharged and performed or terminated in
accordance with the terms hereof.
8.6 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon (i) personal delivery or delivery by nationally
recognized overnight courier to the party to be notified, (ii) deposit with the
United States Post Office, by registered or certified mail, postage prepaid, or
(iii) delivery by facsimile transmission for such party, at such address or
facsimile telephone number, as the case may be, as is set forth on the signature
pages hereof, or at such other address or number as such party may designate by
10 days advance written notice to the other party in accordance herewith.
8.7 FINDER'S FEE. Each party represents that it neither is nor
will be obligated for any finder's fee or commission in connection with this
transaction. Investor agrees to indemnify and to hold harmless the Company from
any liability for any commission or compensation in the nature of a finder's fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Investor or any of its officers, partners, employees,
or representatives is responsible. The Company agrees to indemnify and hold
harmless Investor from any liability for any commission or compensation in the
nature of a finder's 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.
8.8 EXPENSES. Subject to Section 6.5, irrespective of whether
the Closing is effected, the Company and the Investor shall each pay all costs
and expenses that they each incur with respect to the negotiation, execution,
delivery and performance of this Agreement. If any action at law or in equity
is necessary to enforce or interpret the terms of this Agreement, 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.
8.9 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 Investor.
8.10 SEVERABILITY. The invalidity of any portion hereof shall
not affect the validity, force, or effect of the remaining portions hereof. If
it is ever held that any restriction hereunder is too broad to permit
enforcement of such restriction to its fullest extent, the parties agree that a
court of competent jurisdiction may enforce such restriction to the maximum
extent permitted by law against those for whom it may be enforceable, and each
party hereby consents and agrees that such scope may be judicially modified
accordingly in any proceeding brought to enforce such restriction.
8.11 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.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
XXXXXX'X, INC.
By: /s/ Xxxxxxx X. Spain
-----------------------------
Xxxxxxx X. Spain, President
Address: 0000 Xx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Telephone: 512/000-0000
Facsimile: 512/374-4600
With a copy to:
Xxxxxx X. Xxxxxx
Xxxxxxx, Phleger & Xxxxxxxx, LLP
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telephone: 512/000-0000
Facsimile: 512/477-5813
INVESTOR
KNOWLEDGE NET HOLDINGS, L.L.C.
By: /s/ Xxxxxx X. Xxxx
-----------------------------
Xxxxxx X. Xxxx, President
Address: 000 Xxxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: 310/000-0000
Facsimile: 310/440-3676
With a copy to:
Maron & Sandler
000 Xxxxxx Xxxxx
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: 310/000-0000
Facsimile: 310/440-3690
