SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is
made as of the 17 day of March, 2000, by and among ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., a
Delaware corporation (the "Company"), and the investors listed on Schedule 1
hereto (each an "Investor," and collectively, the "Investors").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock
1.1 Authorization and Sale of Series A Preferred Stock
(a) The Company shall authorize the issuance and sale to the
Investors of an aggregate of up to $450,000 shares of the Company's Series A
Preferred Stock, par value $.01 per share (the "Shares"), having the rights,
restrictions, privileges and preferences set forth in its Amended and Restated
Certificate of Incorporation in the form attached hereto as Exhibit 1.1 (the
"Restated Certificate of Incorporation") on or before the Closing (as defined
below). The Company shall adopt and file the Restated Certificate of
Incorporation with the Secretary of State of Delaware on or before the Closing.
(b) 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 set forth opposite each such Investor's name on Schedule 1 for the
purchase price of $71.84 per Share (the "Purchase Price").
1.2 Closings. Except as contemplated by Section 1.3, the initial
closing of the purchases and sales of the Shares shall take place as soon as
practicable following satisfaction of the conditions of Closing set forth
elsewhere herein at the offices of Proskauer Rose LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other place as the Company and Investors mutually
agree upon orally or in writing (which time and place are designated as the
"Closing"). At the Closing the parties shall execute and deliver all other
agreements and documentation contemplated herein, and the Company shall deliver
certificates representing the Shares that the Investors are purchasing against
payment to the Company by such Investors of the purchase price therefor by
certified or bank cashier's check, wire transfer, or any combination thereof.
Provided the Company has notified Baring that additional investors other than
Baring Latin America Partners LLC and its affiliates representing an aggregate
investment of at least $5,000,000 are prepared to close at the Closing and
either have deposited funds representing the amount of their investment with the
Company or its representative or delivered executed subscription agreements to
the Company reflecting their investments, it is contemplated that the Closing
shall occur at or about seven (7) business days following the date of such
notification for Baring Latin America Partners LLC and at or about seven days
following the initial Closing date for Baring Asia Private Equity Investments
XIX Limited. If, for whatever reason, Baring Latin America Partners LLP has not
delivered payment to the Company for its investment within ten (10) business
days of such notification, this Agreement shall be deemed null and void and of
no further force or
1
effect and the Company shall be free to seek other funding.
1.3 Subsequent Sale of the Shares. The Company may sell up to the
balance of the Shares not sold at the Closing, at a price not less than $71.84
per Share, provided the closing of such additional sale occurs not later than 30
days after the initial Closing. Any investor purchasing any such Shares shall
become a party to this Agreement, shall be deemed an "Investor" for the purposes
of this Agreement and shall be added as such to Schedule 1 hereto, and shall
also become a party to that certain Investors' Rights Agreement dated of even
date herewith, by and among the Company and the Investors, the form of which is
attached hereto as Exhibit 1.3 (the "Investors' Rights Agreement") and shall
have the rights and obligations hereunder and thereunder. Schedule 1 hereto
shall be modified to reflect the number of Shares that such Investor is
purchasing set forth opposite such Investor's name thereon.
2. Representations and Warranties of the Company. As a material
inducement to the Investors to enter into this Agreement and purchase the Shares
hereunder, the Company hereby represents and warrants to the Investors that, as
of the date of this Agreement (except that with respect to Sections 2.1, 2.2
and 2.4 such representations shall be true only as of the Closing), except as
set forth on a Schedule of Exceptions (the "Schedule of Exceptions") furnished
to the Investors prior to execution hereof and attached hereto as Schedule 2:
2.1 Organization Good Standing and Qualification. The Company is a
corporation which was duly organized on December 27, 1999 and which is validly
existing and in good standing under the laws of the State of Delaware. The
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which such qualification is required. The Company has all
required power and authority necessary to own and operate its property, to carry
on its business as now conducted and presently proposed to be conducted and to
carry out the transactions contemplated by this Agreement.
2.2 Capitalization and Voting Rights. The authorized capital of the
Company consists, or will consist immediately prior to the Closing, of:
(a) Preferred Stock. 450,000 shares of Preferred Stock, par value
$.01 (the "Preferred Stock"), of which: 450,000 have been designated Series A
Preferred Stock (the "Series A Preferred Stock"), none of which shares are
issued and outstanding, which shares are convertible, subject to adjustment,
into 450,000 shares of Common Stock. The rights, restrictions, privileges and
preferences of the Series A Preferred Stock will be as stated in the Company's
Restated Certificate of Incorporation.
(b) Common Stock. 9,550,000 shares of common stock, par value $0.01
("Common Stock"), of which 1,000,000 shares are and shall be issued and
outstanding at Closing.
(c) The outstanding shares of Common Stock are owned by the
stockholders and in the numbers specified in Schedule 2 hereto.
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(d) The outstanding shares of Common Stock are all duly and validly
authorized and issued, fully paid and non-assessable and were issued in
compliance with all applicable state and federal laws concerning the issuance of
securities.
(e) Except for (i) the conversion privileges of the Series A
Preferred Stock as set forth in the Restated Certificate of Incorporation and
(ii) outstanding options (or options the Company is presently contemplating
granting) to purchase an aggregate of 44,000 shares of Common Stock, there are
not outstanding any options, warrants, rights (including conversion rights) or
agreements for the purchase or acquisition from the Company of any shares of its
capital stock. In addition to the aforementioned options, the Company has
reserved an additional _____ shares of its Common Stock for issuance pursuant to
incentive programs and for purchase upon exercise of options to be granted in
the future under Company option and incentive programs (the "Option Pool").
Schedule 2 accurately sets forth the following information with respect to all
outstanding options and rights to acquire the Company's capital stock (other
than pursuant to this Agreement: the optionholder, the number of shares
covered, the exercise price and the expiration date. 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 involving ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Jr. or ▇▇▇ ▇▇▇▇▇ and 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.
2.3 Subsidiaries. The Company does not presently own or control,
directly or indirectly, or hold any rights to acquire, any interest in any other
corporation, association or other business entity nor has the Company ever held
such interest. The Company is not a participant in any joint venture,
partnership or similar arrangement nor has the Company ever been a participant
in any such arrangement.
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, the Investors' Rights Agreement, the
stockholders agreement by and among the Company, the Investors and certain other
Stockholders of the Company (the "Stockholders Agreement"), and all other
agreements contemplated hereby to which the Company is a party, the performance
of all obligations of the Company hereunder and thereunder, the amendment and
restatement of the Certificate of Incorporation and the authorization, sale and
issuance (or reservation for issuance) of the Series A Preferred Stock being
sold hereunder and the Common Stock issuable upon conversion of the Series A
Preferred Stock has been taken or will be taken prior to the Closing. This
Agreement, the Investors' Rights Agreement, the Stockholders Agreement and all
other agreements contemplated hereby to which the Company is a party and the
Restated Certificate of Incorporation 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 relating to
the availability of specific performance, injunctive relief or other equitable
remedies, and (iii) to the extent the indemnification and contribution
provisions contained in this Agreement and the Investors' Rights Agreement may
be limited by applicable federal or state securities laws.
3
2.5 Valid Issuance of Preferred and Common Stock. The shares of
Series A Preferred Stock that are 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 non-assessable and will be free of restrictions on transfer, other than
restrictions on transfer under this Agreement and the Stockholders Agreement
(with respect only to those stockholders who are parties to such agreement) and
under applicable state and federal securities laws. The shares of Common Stock
issuable upon conversion of the Series A Preferred Stock purchased under this
Agreement have been duly and validly reserved for issuance and, upon issuance in
accordance with the terms of the Restated Certificate of Incorporation, will be
duly and validly issued, fully paid and non-assessable.
2.6 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 for: (i) the filing of a Form D in
accordance with the Securities Act of 1933, as amended (the "Act"), which
filing will be effected in the places and within the time prescribed by law, and
(ii) such other filings required pursuant to applicable federal and state
securities laws and blue sky laws, which filings will be effected within the
required statutory period.
2.7 Offering. Subject in part to the truth and accuracy of the
Investors' representations set forth in Section 3 of this Agreement, the offer,
sale and issuance of the Shares as contemplated by this Agreement are exempt
from the registration requirements of the Act, and the qualification or
registration requirements of applicable blue sky laws. Neither the Company nor
any authorized agent acting on its behalf will take any action hereafter that
would cause the loss of such exemptions.
2.8 Litigation. There is no action, suit, proceeding or investigation
pending or, to the best of the Company's knowledge, currently threatened against
the Company (or, to the best of the Company's knowledge, threatened against or
affecting any of the officers, directors or employees of the Company with
respect to the Company) that questions the validity of this Agreement or the
right of the Company to enter into such agreement or to consummate the
transactions contemplated hereby, or that might result, either individually or
in the aggregate, in any material adverse changes in the business, assets or
financial condition of the Company, or any change in the current equity
ownership of the Company. The foregoing includes, without limitation, actions,
suits, proceedings or investigations pending or, to the best of the Company's
knowledge, threatened 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.
4
2.9 Proprietary Information Agreements. Each officer and key employee
of the Company has executed a Proprietary Information and Inventions Agreement
in the form annexed hereto as Exhibit 2.9. To the best knowledge of the Company,
none of its officers are in violation thereof.
2.10 Patents and Trademarks. The Schedule of Exceptions contains a
complete and accurate list of all (a) patented or registered Intellectual
Property Rights (as defined below) owned or used by the Company, (b) pending
patent applications and applications for registrations of other Intellectual
Property Rights filed by the Company and (c) unregistered trade names and
corporate names owned or used by the Company. The Schedule of Exceptions also
contains a complete list of all licenses and other rights granted by the Company
to any third party with respect to any Intellectual Property Rights and all
licenses and other rights granted by any third party to the Company with respect
to any Intellectual Property Rights, in each case identifying the subject
Intellectual Property Rights. The Company owns all right, title and interest in
and to, or has the right to use pursuant to a valid license, all of the
Intellectual Property Rights listed on the Schedule of Exceptions free and clear
of all liens, encumbrances or claims of others. There have been no claims made
against the Company asserting the invalidity, misuse or unenforceability of any
of such Intellectual Property Rights. The Company has not received any written
notices of any infringement or misappropriation by, or conflict with, any third
party with respect to such Intellectual Property Rights (including, without
limitation, any demand or request that the Company license any rights from a
third party). To the best of the Company's knowledge, the conduct of the
Company's business has not infringed, misappropriated or conflicted with and
does not infringe, misappropriate or conflict with any Intellectual Property
rights of others. To the best of the Company's knowledge, the Intellectual
Property Rights owned by or licensed to the Company have not been infringed,
misappropriated or conflicted by others. The transactions contemplated by this
Agreement shall have no adverse effect on the Company's right, title and
interest in and to the Intellectual Property Rights listed on the Schedule of
Exceptions. To the best of the Company's knowledge, none 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 presently conducted and as presently proposed to
be conducted. To the Company's knowledge, neither the execution of this
Agreement nor the transactions contemplated by this Agreement nor the carrying
on of the Company's business by the employees of the Company, nor the conduct of
the Company's business as presently conducted, conflicts with or results in a
breach of the terms, conditions or provisions of, or constitutes a default
under, any contract, covenant or instrument under which any of such employees is
now obligated. The Company has received and reviewed the report dated February
5, 2000 prepared by Web Zeit, and, to the best of the Company's knowledge, no
event has occurred since the date of such report to make it untrue in any
material respect. For purposes of this Agreement, "Intellectual Property Rights"
means all (i) patents, patent applications, patent disclosures and inventions,
(ii) trademarks, service marks, trade dress, trade names, logos and corporate
names and registrations and applications for registration thereof together with
all of the goodwill associated therewith, (iii) copyrights (registered and
unregistered) and copyrightable works and registrations and applications for
registration thereof; (iv) computer software, data, data bases and documentation
5
thereof; (v) trade secrets and other confidential and proprietary information
(including, without limitation, ideas, formulas, compositions, inventions
(whether patentable or unpatentable and whether or not reduced to practice),
know-how, manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans, proposals,
technical data, financial and marketing plans and customer and supplier lists
and information) and (vi) other intellectual property rights.
2.11 Compliance with Other Instruments. The Company is not in
violation of or default under any provision of its Restated Certificate of
Incorporation 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 of any provision of
any federal or state statute, rule or regulation applicable to the Company,
except where such failure or violation would not have a material adverse effect
on the Company. The execution, delivery and performance of this Agreement and
all other agreements contemplated hereby to which the Company is a party and the
consummation of the transactions contemplated hereby 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 permit, license, authorization or approval applicable to the Company, its
business or operations or any of its assets or properties.
2.12 Agreements; Actions
(a) Except for agreements explicitly contemplated hereby, there are
no agreements, understandings or proposed transactions between the Company and
any of its officers, directors, affiliates or any affiliate thereof.
(b) There are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which the Company
is a party or by which it is bound that may involve (i) obligations (contingent
or otherwise) of, or payments to, the Company in excess of $30,000, (ii) the
license of any patent, copyright, trade secret or other proprietary right to or
from the Company, other than licenses arising from the purchase of "off the
shelf' or other standard products, (iii) provisions restricting or affecting the
development or distribution of the Company's services, (iv) a warranty with
respect to its services rendered, or (v) 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 $30,000 or, in the case of
indebtedness and/or liabilities individually less than $30,000, in excess of
$100,000 in the aggregate (other than indebtedness and/or liabilities incurred
in the ordinary course of business and legal fees payable to Proskauer Rose
LLP), (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 in the ordinary course of business.
6
(d) All of the contracts, agreements and instruments set forth in the
Schedule of Exceptions pursuant to this Section 2.12 are valid, binding and
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 relating to the availability of specific performance,
injunctive relief or other equitable remedies, and (iii) to the extent the
indemnification and contribution provisions contained in this Agreement and the
Investors' Rights Agreement may be limited by applicable federal or state
securities laws. The Company has performed all material obligations required to
be performed by it and is not in material default under or in breach of nor in
receipt of any claim of default or breach under any contract, agreement or
instrument. No event has occurred which with the passage of time or the giving
of notice or both would result in a material default, breach or event of
noncompliance by the Company under any contract, agreement or instrument. The
Company has no knowledge of any material breach or anticipated material breach
by the other parties to any such contract, agreement, instrument or commitment.
(e) Counsel to Baring has been supplied with a true and correct copy
of each of the written instruments, contracts and agreements and an accurate
description of each of the oral arrangements, contracts and agreements that are
referred to on the Schedule of Exceptions pursuant to this Section 2.12,
together with all amendments, waivers or other changes thereto.
(f) The Company is not a party to and is not bound by any contract,
agreement or instrument, or subject to any provision under its Restated
Certificate of Incorporation that adversely affects its business as now
conducted or as proposed to be conducted, its properties or its financial
condition.
2.13 Related-Party Transactions. No employee, stockholder, officer or
director of the Company or member of his or her immediate family is indebted for
money borrowed to the Company, nor is the Company indebted for money borrowed
(or committed to make loans or extend or guarantee credit) to any of them. To
the best of the Company's knowledge, no stockholder, officer or director of the
Company or member of his or her immediate family 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 they may own stock in
publicly traded companies that may compete with the Company. No officer or
director of the Company or member of the immediate family of any officer or
director of the Company is directly or indirectly interested in any contract
with the Company.
2.14 Financial Statements. The Company has delivered to the Investors
its unaudited financial statements (balance sheet and statement of operations,
statement of stockholders' equity and statement of cash flows, including notes
thereto) at December 31, 1999 and for the fiscal year then ended (the "Financial
Statements"), copies of each of which are annexed hereto as Exhibit 2.14. Each
of the foregoing Financial Statements is accurate and complete in all material
respects, is consistent with the books and records of the Company (which, in
turn, are accurate and complete in all material respects) and has been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis
7
throughout the periods indicated and with each other, except that unaudited
Financial Statements may not contain any or all footnotes required by generally
accepted accounting principles and except for the absence of normal, year-end
audit adjustments. The Financial Statements fairly present in all material
respects the financial condition and operating results of the Company as of the
dates, and for the periods, indicated therein, subject in the case of unaudited
Financial Statements to normal year-end audit adjustments and the absence of
footnotes. Except as set forth in the Financial Statements, the Company does not
have any liabilities (whether accrued, absolute, unliquidated, contingent or
otherwise, whether or not known to the Company, whether due or to become due and
regardless of when asserted) arising out of transactions entered into at or
prior to the Closing, or any action or inaction at or prior to the Closing or
any state of facts existing at or prior to the Closing other than (i)
liabilities and obligations that have arisen after December 31, 1999 in the
ordinary course of business, and (ii) obligations under contracts and
commitments incurred in the ordinary course of business that would not be
required to be reflected in financial statements prepared in accordance with
generally accepted accounting principles. 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 and the Company is not
aware of any proposed changes affecting the Company's financial reporting
practices.
2.15 Changes. To the best of the Company's knowledge, since December
31, 1999, there has not been:
(a) 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 material;
(b) any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the assets, properties, financial condition,
operating results or business of the Company;
(c) any waiver by the Company of a valuable right or of a 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 that is not material to the Company;
(e) any material change or amendment to a contract or arrangement by
which the Company or any of its assets or properties is bound or subject;
(f) any material change in any compensation arrangement or agreement
with any employee;
(g) any sale, assignment or transfer of any patents or patent
applications, trademarks or trademark applications, service marks, trade names,
corporate names, copyrights or
8
copyright registrations, trade secrets or other intangible assets, or, other
than in connection with this transaction or in the ordinary course of business,
disclosure of any proprietary confidential information to any person;
(h) any resignation or termination of employment of any key officer
of the Company; and the Company, to the best of its knowledge, does not know of
the impending resignation or termination of employment of any such officer;
(i) any declaration, payment, setting aside or other distribution of
cash or other property to its stockholders with respect to its capital stock or
other equity securities (including without limitation, any warrants, options or
other rights to acquire its capital stock or other equity securities);
(j) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its properties or assets,
except liens for taxes not yet due or payable;
(k) any charitable contributions or pledges by the Company;
(l) any capital expenditures or commitments by the Company that
aggregate in excess of $50,000;
(m) any loans or advances by the Company to, guarantees by the
Company for the benefit of, or any investments by the Company in, any person
(including but not limited to any of the Company's employees, officers or
directors, or any members of their immediate families), corporation,
partnership, joint venture or other entity;
(n) any materially adverse change in the Company's relationship or
arrangements with any of its suppliers or
(o) any agreement or commitment by the Company to do any of the
things described in this Section 2.15.
2.16 Tax Returns. The Company has not yet filed any tax returns.
Except as set forth on the Schedule of Exceptions, (a) the Company has paid or
withheld FICA, Social Security and other payroll related taxes as required by
law, (b) to the best of the Company's knowledge, all tax returns (federal, state
and local) required to be filed by it and all Taxes (as defined below),
assessments and other government charges imposed upon the Company, or upon any
of the assets, income or franchises of the Company, are adequately accrued on
the Company's books and records; (c) there are no actual or proposed Tax
deficiencies, assessments or adjustments with respect to the Company or any
assets or operations of the Company; (d) no consent has been given with respect
to the Company to extend the time in which any Tax may be assessed or collected
by any taxing authority and (e) there are no ongoing or pending Tax audits by
any taxing authority against the Company. "Tax" or "Taxes" means any federal,
state, local or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp,
9
occupation, premium, property, windfall, profits, environmental, customs,
capital stock, franchise, employees' income withholding, foreign or domestic
withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer, value added, alternative or add-on minimum or
other similar tax, governmental fee, governmental assessment or governmental
charge of any kind whatsoever, including any interest, penalties or additions to
Tax or additional amounts with respect to the foregoing.
2.17 Licenses and Permits. The Company has all governmental licenses
and permits necessary for the lawful conduct of its business and to operate its
properties and assets, and such licenses and permits are in full force and
effect. The Schedule of Exceptions sets forth all such licenses and permits. The
Company has no reasonable cause to believe that any material violations exist,
nor have any been recorded, with respect to any such licenses or permits and no
proceeding is pending or threatened which contemplates the revocation or
limitation of any such license or permit. The Company has complied in all
material respects with (x) all laws, rules, regulations, ordinances, codes and
orders relating to its properties and/or business and (y) all covenants, terms
and conditions upon or under which any of its licenses and permits are held.
2.18 Environmental and Safety Laws. The Company, the operation of its
business and any real property that the Company owns or has owned, leases or has
leased or otherwise occupies or uses or has occupied or used (the "Premises")
are, to the best of the Company's knowledge, in compliance with all applicable
Environmental and Safety Laws (as defined below) and orders or directives of any
governmental authorities having jurisdiction under such Environmental and Safety
Laws. The Company has not received any citation, directive, letter or other
written communication, or any written notice of any proceeding, claim or
lawsuit, from any person arising out of the ownership or occupation of the
Premises, or the conduct of its operations, and the Company is not aware of any
basis therefor. To the best of the Company's knowledge, no material expenditures
are or will be required in order to comply with any Environmental and Safety
Laws. For purposes of this Agreement, the term "Environmental and Safety Laws"
shall mean any Federal, state, local or foreign law, ordinance, rule,
regulation, permit and authorization pertaining to the protection of human
health or the environment.
2.19 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.
2.20 Corporate Documents; Minute Books. The Restated Certificate of
Incorporation and Bylaws of the Company are in the form previously provided to
counsel for Baring. The minute books 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.
2.21 Title to Property and Assets. The property and assets the Company
owns are owned by the Company free and clear of all mortgages, liens, loans and
encumbrances, except (i) as reflected in the Financial Statements, (ii) for
statutory liens for the payment of current taxes that are not yet delinquent,
arid (iii) for liens, encumbrances and security interests
10
that arise in the ordinary course of business and minor defects in title, none
of which, individually or in the aggregate, 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 in all material
respects and holds a valid leasehold interest free of any liens, claims or
encumbrances, subject to clauses (i)-(iii).
2.22 Insurance. The Company has in full force and effect general
liability, workers compensation and casualty insurance policies, with extended
coverage. Copies of all of such policies have been delivered to counsel to
Baring. The Company is not in default with respect to its obligations under any
insurance policy maintained by it, and the Company has not been denied insurance
coverage.
2.23 Employee Benefit Plans. The Company presently does not maintain
or contribute to, and has never maintained or contributed to, any "employee
benefit plan," as such term is defined in the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
2.24 Labor Agreements and Actions. No officer or key employee or any
group of employees of the Company has notified the Company of an intent 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. The Company is not a party to or bound by any currently effective
employment contract, deferred compensation agreement, option plan, bonus plan,
incentive plan, profit sharing plan, retirement agreement or any other employee
compensation agreement. The Company has complied in all material respects with
all applicable state and federal equal employment opportunity and other laws
related to employment (including without limitation, provisions thereof relating
to wages, hours, equal opportunity, collective bargaining and the payment of
social security and other taxes), and the Company has not received any written
notification that it has any labor relations problems (including without
limitation, any union organization activities, threatened or actual strikes or
work stoppages or material grievances). 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. All vacation and sick pay accrued and/or owed and bonuses to be paid with
respect to services rendered up to the date hereof are reflected on the
Company's books and records as of December 31,1999.
2.25 Illegal Payments. The Company has not, directly or indirectly,
paid or delivered any fee, commission or other sum of money or item or property,
however characterized, to any finder, agent, government official or other party,
in the United States or any other country, which is in any manner related to the
business or operations of the Company which the Company knows to have been
illegal under any federal, state or local laws of the United States or any other
country having jurisdiction; and the Company has not participated, directly or
indirectly, in any boycotts or other similar practices affecting any of its
actual or potential customers.
11
2.26 Background of Principals. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, Jr. do not have any reportable events under Item 401(f) of Regulation
S-K.
3. Representations and Warranties of the Investor. Each Investor
hereby represents, warrants and covenants that:
3.1 Authorization. Each such Investor has full power and authority to
enter into this Agreement, the Stockholders Agreement, the Investors' Rights
Agreement and any other documents contemplated thereby, 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 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.
3.2 Purchase Entirely for Own Account. This Agreement is made with
the Investors in reliance upon the Investors' representation to the Company,
which by the Investors' execution of this Agreement each of the Investors hereby
confirms, that the Shares to be purchased by each such Investor and the Common
Stock issuable upon conversion thereof (collectively, the "Securities") will be
acquired for investment for each 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 none of the Investors has any intention of selling, granting any
participation in or otherwise distributing the same. By executing this
Agreement, each 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.
3.3 Disclosure of Information. Each such Investor believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Shares. Each such Investor further 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 Shares 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 2 of this Agreement or the right of the Investors to
rely thereon.
3.4 Investment Experience. Each 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 and the total loss of its
investment, and has such knowledge, experience and sophistication in financial
or business matters that it is capable of evaluating the merits and risks of the
investment in the Shares. If other than an individual, each such Investor also
represents it has not been organized for the purpose of acquiring the Shares.
3.5 Accredited Investor. Each such Investor is an "accredited
investor" within the meaning of Rule 501 of Regulation D, as promulgated by the
Securities and Exchange
12
Commission ("SEC") and as presently in effect.
3.6 Restricted Securities. Each 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, including delivery by the
Investor to the Company of an opinion of counsel reasonably satisfactory to the
Company that the proposed transfer does not require registration under the Act.
In the absence of an effective registration statement covering the Securities
(or the Common Stock issued on conversion thereof) or an available exemption
from registration under the Act, the Shares (and any Common Stock issued on
conversion thereof) must be held indefinitely. In this connection, each 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.
3.7 Legends. It is understood that the certificates evidencing the
Shares may bear a legend in substantially the following form:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS, AND
MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR AN EXEMPTION FROM REGISTRATION
IS AVAILABLE. THE HOLDER OF THESE SHARES MAY BE REQUIRED TO DELIVER TO THE
COMPANY, IF THE COMPANY SO REQUESTS, AN OPINION OF COUNSEL (REASONABLY
SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY) TO THE EFFECT THAT AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (OR QUALIFICATION UNDER
STATE SECURITIES LAWS) IS AVAILABLE WITH RESPECT TO ANY TRANSFER OF THESE SHARES
THAT HAS NOT BEEN SO REGISTERED (OR QUALIFIED).
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN STOCKHOLDERS' AGREEMENT BETWEEN THE COMPANY AND ITS
RESPECTIVE STOCKHOLDERS, A COPY OF WHICH IS ON FILE IN THE OFFICE OF THE
COMPANY, REFERENCE TO ALL THE TERMS AND CONDITIONS THEREOF BEING MADE, AND NO
SALE OR TRANSFER OF THE SHARES EVIDENCED HEREBY MAY BE EFFECTED, EXCEPT PURSUANT
TO THE TERMS AND CONDITIONS OF SAID STOCKHOLDERS' AGREEMENT. THE COMPANY WILL
FURNISH TO THE RECORD HOLDER OF THE CERTIFICATE WITHOUT CHARGE UPON WRITTEN
REQUEST TO THE COMPANY AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS OR
REGISTERED OFFICE, A COPY OF THE STOCKHOLDERS' AGREEMENT."
4. Covenants of the Company
4.1 Options and Shares Granted to Employees, etc.
13
(a) All options or shares granted by the Company to key employees,
consultants, directors, and advisors of the Company shall vest in not fewer than
three equal annual installments, commencing on the first anniversary of the date
of grant. Notwithstanding the foregoing, the Company may grant future options or
shares, in the Company's sole discretion, according to any other vesting
schedule that does not at any time result in a vesting schedule more favorable
than that described in the preceding sentence.
(b) Other than with respect to shares issued pursuant to a registered
offering or with respect to transfers to be effected following the initial
public offering of the Company's Common Stock, all shares issued by the Company
pursuant to option and incentive programs and plans shall be issued subject to
the right of, first, the Company or, if the Company elects not to exercise such
right, the holders of Series A Preferred Stock and Common Stock, pro rata, to
purchase such stock at fair market value thereof, as determined by the Company's
Board of Directors (the "Right of First Offer"). In the event such holders
choose not to exercise such Right of First Offer, as described in this Section
4.1(b), such shares may be sold to any third party, for a period of six months,
on terms no more favorable than those of the Right of First Offer. Any stock
option agreements entered into by the Company shall contain substantially the
foregoing provision, and any certificates issued reflecting shares issued
pursuant to option and incentive plans and programs as contemplated herein shall
contain an appropriate legend reflecting the foregoing restriction.
(c) Notwithstanding the foregoing, the Company may sell non-Executive
Directors of the Company shares of the Company's Common Stock at a price per
share equal to the Purchase Price up to an aggregate purchase for all such
Directors of $1,000,000 and may grant such Directors full-recourse loans on
terms acceptable to the Board of Directors for up to the full amount of their
purchases.
4.2 Life Insurance. The Company shall obtain and maintain in effect
$15 million and $5 million face amount of term life insurance coverage on the
lives of each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Jr., respectively, of
which the beneficiaries shall be the holders of the Series A Preferred Shares.
Each of Messrs. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ shall cooperate with the Company as
necessary to obtain such insurance policies.
4.3 Officer Titles and Compensation. The titles of the Company's
officers shall be determined by the Board of Directors. The compensation levels,
including salaries and bonuses, of Messrs. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, which may be
increased but may not be decreased, shall be reviewed and approved by the
Compensation Committee of the Company's Board of Directors.
4.4 Delivery of Financial Statements. Provided that the Investors
continue to own, in the aggregate, Series A Preferred Shares having an original
purchase price of at least $2,000,000, the Company shall deliver to a
representative designated by the holder of Series A Preferred Shares:
14
(a) as soon as practicable, but in any event within ninety (90) days
after the end of each fiscal year of the Company, an income statement for such
fiscal year, a balance sheet of the Company and statement of stockholder's
equity as of the end of such year, and a schedule as to the sources and
applications of funds for such year, such year-end financial reports to be in
reasonable detail, prepared in accordance with generally accepted accounting
principles ("GAAP"), and audited and certified by independent public accountants
of nationally recognized standing selected by the Company;
(b) as soon as practicable, but in any event within forty-five (45)
days after the end of each of the first three (3) quarters of each fiscal year
of the Company, an unaudited profit or loss statement, schedule as to the
sources and application of funds for such fiscal quarter, and unaudited balance
sheet as of the end of such fiscal quarter;
(c) within forty-five (45) days of the end of each month, an
unaudited monthly income statement, schedule as to the sources and application
of funds and balance sheet for and as of the end of such month, in each case,
where appropriate, showing comparisons to budgeted items as reflected in the
prior year-end budget and business plan, in reasonable detail;
(d) as soon as practicable, but in any event thirty (30) days prior
to the end of each fiscal year, a budget and business plan for the next fiscal
year, prepared on a monthly basis, including balance sheets and sources and
applications of funds statements for such months and, as soon as prepared, any
other budgets or revised budgets prepared by the Company;
(e) with respect to the financial statements called for in
subsections (b) and (c) of this Section 4.4, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such
financials were prepared in accordance with GAAP consistently applied with prior
practice for earlier periods (with the exception of footnotes that may be
required by GAAP) and fairly present the financial condition of the Company and
its results of operation for the period specified, subject to year-end audit
adjustment; and
(f) such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as the Investor or any
assignee of the Investor may from time to time request, provided, however, that
the Company shall not be obligated under this subsection (f) or any other
subsection of Section 4.4 to provide information which it deems in good faith to
be a trade secret or similar confidential information.
4.5 Inspection. Without in any way limiting the rights of the
Investors under Delaware law, the Company shall permit the Investors, through
their designated representatives, to visit and inspect the Company's properties,
to examine its books of account and records and to discuss the Company's
affairs, finances and accounts with its officers, all at such reasonable times
as may be requested by the Investor; provided, however, that the Company shall
not be obligated pursuant to this Section 4.5 to provide access to any
information which it reasonably considers to be a trade secret or similar
confidential information.
4.6 Board of Directors: Indemnification and Expenses.
15
(a) The Company shall have a Board of Directors with ten seats. The
Common Stockholders shall have the right (acting by vote or consent of the
holders of at least a majority of the shares) to elect nine Directors and the
holders of at least a majority of the Series A Preferred Shares (the "Requisite
Series A Holders") shall have the right to elect one Director. The initial
composition of the Board of Directors shall be: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (Chairman),
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Jr., ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ or another designee of Baring Latin America Partners LLC and/or its
affiliates ("Baring") reasonably acceptable to the remaining members of the
Board (who shall be elected by the Requisite Series A Holders and shall remain a
Director so long as Baring is a holder of at least 33,333 Series A Preferred
Shares). A representative of Baring Asia Private Equity Investments XIX Limited
shall be invited to be present at and observe all of the Company's Board
meetings, subject to appropriate confidentiality restrictions.
(b) The Company shall indemnify all directors to the maximum extent
permitted by applicable law, shall obtain and maintain directors' and officers'
insurance in an amount reasonably acceptable to Baring, and shall reimburse
members of the Board of Directors for all usual and reasonable expenses for
travel and lodging for the attendance of Board of Directors meetings.
(c) For so long as Baring remains the holder of at least 33,333
Series A Preferred Shares, the Baring representative shall be entitled to serve
on the following Committees of the Board:
Compensation Committee: A compensation committee of the Board will be
formed consisting of three non-management Directors. The compensation committee
will approve all increases in executive compensation, annual executive bonuses
and all option grants.
Audit Committee: An audit committee of the Board will be formed
consisting of three non-management Directors. This committee will approve the
engagement of the Company's auditors and approve the audit prior to its issuance
each year.
Executive Committee: Baring also will be entitled to serve on any
Executive Committee of the Company so long as Baring is a holder of at least
33,333 Series A Preferred Shares.
4.7 Termination of Information and Inspection Covenants. The
covenants set forth in Sections 4.4 and 4.5 shall terminate and be of no further
force or effect upon the consummation of the sale of Common Stock of the Company
pursuant to a registration statement filed by the Company under the Act in
connection with an underwritten offering of its securities to the general
public.
4.8 Authorized Shares.
16
(a) The Company hereby covenants and agrees that, while any Shares
remain outstanding, the Company shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock solely for the purpose
of effecting the conversion of such Shares, such number of shares of its Common
Stock as shall from time to time be sufficient to effect the conversion of such
Shares, and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient for such purposes, the Company shall take
such corporate action as may be necessary to increase its authorized but
unissued shares of Common Stock to such number as shall be sufficient for such
purposes. Furthermore, before taking any action which would cause any adjustment
to the shares of Common Stock, the Company will take any corporate action
(including, without limitation, the amendment of the Company's Certificate of
Corporation) which may be necessary in order that the Company may validly and
legally issue Common Stock upon conversion of outstanding Shares.
(b) All shares of Common Stock issued upon conversion of the Shares
shall be (i) duly authorized, fully paid and non-assessable, and (ii) free from
all taxes with respect to the issuance thereof and from all liens, charges,
security interests, pledges or other encumbrances other than those created by or
through the holders thereof.
4.9 Avoidance of Obligations. The Company will not, by amendment of
its Certificate of Incorporation or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be performed or observed hereunder by the Company.
5. Conditions of Investors' Obligations at Closing. The
obligations of each Investor to purchase and pay for the Shares which the
Investors have agreed to purchase on the Closing 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 in
writing thereto:
5.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true in all material
respects 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 in all
material aspects 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 Closing Documents. The Company shall have delivered to the
Investors all of the following documents:
(a) A Compliance Certificate, dated the date of the Closing, stating
that the conditions specified in Sections 5.1 and 5.2 have been fulfilled and
stating that there has been no adverse change in the business, affairs,
operations, properties, assets or financial condition of the
17
Company since the date of the Financial Statements.
(b) Certified copies of the resolutions duly adopted by the Company's
Board of Directors authorizing the execution, delivery and performance of this
Agreement, the Investors' Rights Agreement, the Stockholders Agreement, and each
of the other agreements contemplated hereby, the filing of the Restated
Certificate of Incorporation, the issuance and sale of the Series A Preferred
Stock, and the consummation of all other transactions contemplated by this
Agreement;
(c) Certified copies of the Restated Certificate of Incorporation and
the Company's Bylaws, each as in effect at the Closing; and
(d) Certificates of good standing issued by the secretary of state
for each state where the Company is authorized to do business.
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
counsel to Baring, and they shall have received such counterpart original and
certified or other copies of such documents as they may reasonably request.
5.6 Proprietary Information Agreements. N-Vision Limited and each
officer, and key employee of the Company shall have entered into a Proprietary
Information and Inventions Agreement in the forms annexed hereto as Exhibit 2.9.
5.7 Bylaws. The Bylaws of the Company shall have been amended to
provide that the Board of Directors of the Company shall consist of a minimum
number of ten (10) persons, which number shall not be changed by an amendment
to the Restated Certificate of Incorporation or the Bylaws without consent of
the holders of a majority of the Series A Preferred Stock.
5.8 Board of Directors. The Company shall have taken all necessary
corporate action such that immediately following the Closing, the directors of
the Company shall be: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (Chairman), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Jr., ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (who shall be
elected by the Requisite Series A Holders and shall remain a Director so long as
Baring is a holder of at least 33,333 Series A Preferred Shares).
5.9 Opinion of Company Counsel. The Investors shall have received
from Proskauer Rose LLP, counsel for the Company, an opinion, dated as of the
Closing, the form and
18
content of which shall be reasonably satisfactory to counsel for Baring.
5.10 Investors' Rights Agreement. The Company and the Investors shall
have entered into the Investors' Rights Agreement in the form attached as
Exhibit 1.3.
5.11 Stockholders Agreement. The Company, the Investors and Messrs.
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ shall have entered into the Stockholders Agreement, in the
form attached as Exhibit 5.11.
5.12 Employment Agreements. The Company and each of and Messrs. ▇▇▇▇▇▇
and ▇▇▇▇▇▇▇▇ shall have entered into employment agreements, in the forms
attached as Exhibits 5.12(a) and 5.12(b), respectively.
5.13 Sale of Preferred Stock to Each Investor. The Company shall have
received either payment or commitments for payment for a minimum of 208,797
shares of the Series A Preferred Stock to Investors hereunder at the Closing and
Investors other than Baring shall have purchased and paid for shares having a
value of at least $5,000,000.
5.14 Consents. Approvals and Waivers. Prior to the closing, all
corporate action, including but not limited to stockholder approval, and all
necessary third party consents, approvals and waivers necessary to the execution
and delivery by the Company of this Agreement or any action or agreement
contemplated hereby, or for the Company to carry out the transactions at the
Closing contemplated hereby or thereby shall have been made, taken or obtained.
6. Conditions of the Company's Obligations at Closing. The
obligations of the Company to the Investors under this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions by
the Investors:
6.1 Representations and Warranties. The representations and
warranties of the Investors contained in Section 3 shall be true in all material
respects 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.
6.3 Investors' Rights Agreement. The Company and the Investors shall
have entered into the Investors' Rights Agreement in the form attached as
Exhibit 1.3.
6.4 Stockholders Agreement. The Company, the Investors and Messrs.
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ shall have entered into the Stockholders Agreement, in the
forms attached as Exhibit 5.11.
19
6.5 Sale of Preferred Stock to Each Investor. The Company shall have
received either payment or commitments for payment fees a minimum of 208,797
shares of the Series A Preferred Stock to Investors hereunder at the Closing and
Baring shall have purchased shares with a value of at least $10,000,000 in the
aggregate.
7. Miscellaneous.
7.1 To the Best Knowledge of the Company. For purposes of this
Agreement, "to the best knowledge of the Company," "to the best of the Company's
knowledge," "to the Company's knowledge" and any similar phrasing regarding the
knowledge of the Company shall mean the actual knowledge of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
(Chairman), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Jr..
7.2 Survival. 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 for a
period of one year from the date of 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.
7.3 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.
7.4 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York as applied to agreements among
[Delaware] residents entered into and to be performed entirely within New York.
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. All notices and other communications provided for
hereunder shall, unless otherwise stated herein, be in writing (including by
telex or facsimile transmission) and mailed or sent or delivered at the
addresses specified below. All such notices and communications shall be given by
hand, telex or facsimile transmission; provided that, in the event that telex
and facsimile transmission facsimiles are not operational, such notices and
communications may be given by mail, but the sender shall use reasonable efforts
to confirm facsimile transmission facilities shall become operational. All such
notices and communications shall be effective when delivered by hand, or, in the
case of mail, upon the earlier of receipt and confirmation by telex or facsimile
transmission as provided below, or, in the case of facsimile
20
transmission, when sent as addressed as set forth herein and confirmation of
delivery is received, or, in the case of telex, when the telex is sent and the
appropriate answer back is received. The address for each of the Investors is as
set forth on the signature blocks below. The address for the Company is as
follows.
▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with copies to:
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Copies of all notices to Baring shall be
delivered to:
▇▇▇▇▇▇ ▇▇▇▇
Baring Private Equity Partners (Hong Kong) Ltd.
39/F, One International Finance Tower
▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
Telecopy No.: 852 2843 9372
and
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Syracuse & Hirschtritt LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
Each party to this letter may, from time to time, change its notice address or
copy address or add or substitute a copy party and a copy address, by giving
notice to the other party in the manner provided in this paragraph.
21
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 except as set forth in Section 2.30. 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 the Investors
or any of its officers, partners, employees or representatives is responsible
other than the finder's fee set forth in Section 2.30. The Company agrees to
indemnify and hold harmless the Investors 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 other than the
finder's fee set forth in Section 2.30.
7.8 Expenses. The Company will reimburse Baring for $17,700 of fees
paid to Web Zeit for their review of the Company's technology. Legal fees for
Baring's counsel in connection with this transaction will be paid by the Company
up to a maximum of $85,000. Baring notified the Company when such costs and
expenses exceeded $25,000 and when such fees and expenses reached $50,000. 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 of
Incorporation, 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 Waivers and Remedies. 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 that is issued or issuable upon conversion of the
Series A Preferred Stock sold pursuant to this Agreement. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
stockholder of any securities purchased under this Agreement at the time
outstanding (including securities into which such securities are convertible),
and each future holder of all such securities and the Company. Any waiver or
consent may be given subject to satisfaction of conditions stated therein and
any waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. No failure or delay on the part of the
Corporation, the Investors or any other holder of securities of the Company, in
exercising any right, power or remedy hereunder with respect to such capacity
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy hereunder. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law, except as may be expressly so provided.
7.10 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision(s) shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms and the Agreement should be interpreted as nearly as
possible to reflect the intent of such excluded provision(s).
22
7.11 Aggregation of Stock. All shares of the Series A Preferred Stock
or Common Stock issued upon conversion thereof 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.
7.12 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or therein.
7.13 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.
7.14 Further Assurances. From and after the date of this Agreement,
upon the request of a majority in interest of the Investors or the Company, the
Company or the Investors, as the case may be, shall execute and deliver to the
requesting person at Company's expense, such instruments, documents and other
writings as may be reasonably necessary to confirm and
[Remainder of Page Intentionally Left Blank]
23
carry out and to effectuate fully the intent and purposes of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
▇▇▇▇▇▇▇▇▇▇.▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Its:
Address:
---------------------------------------
---------------------------------------
INVESTORS:
BARING LATIN AMERICA PRIVATE EQUITY
FUND, L.P.
By: Baring Latin America Partners, LLC,
its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Managing Member
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Baring Asia Private Equity
Investments XIX Limited, its
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, Director
Address: ▇.▇. ▇▇▇ ▇▇▇
13-15 Victoria Road
St. ▇▇▇▇▇ Port
Guernsey Channel Islands
▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Name:
-----------------------------------
Address:
--------------------------------
24
Schedules and Exhibits
----------------------
Schedule 1 Investor List
Schedule 2 Schedule of Exceptions
Exhibit 1.1 Amended and Restated Certificate of Incorporation
Exhibit 1.3 Investor Rights Agreement
Exhibit 2.9 Proprietary Information and Inventions Agreement
Exhibit 2.14 Financial Statements
Exhibit 5.11 Stockholder's Agreement
Exhibit 5.12(a) Employment Agreement - ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Exhibit 5.12(b) Employment Agreement - ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Jr.
25
SCHEDULE 1
INVESTORS
No. of Shares of Series A
Name and Address Preferred Stock Being Purchased
---------------- -------------------------------
Baring Latin America Private
Equity Fund L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: 212.309.1794
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 69,599
--------------------------------------------------------------------------------
The Baring Asia Private Equity
Fund L.P.
39/F One International Finance Centre
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
Facsimile: _________________
Attention: _________________ 69,599
--------------------------------------------------------------------------------
SCHEDULE 2
SCHEDULE OF EXCEPTIONS
The following are exceptions to the representations and warranties made
by ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. (the "Company") in the Series A Preferred Stock Purchase
Agreement dated , 2000 (the "Agreement") among the Company and the
Investors listed on Schedule 1 thereto, which exceptions shall be deemed to be
representations and warranties as if made under the Agreement. To the extent any
exception is disclosed pursuant to any specific section of the Agreement
designated below, it shall be deemed to be disclosed under any other section of
the Agreement and for any and all purposes required pursuant to the Agreement.
Unless otherwise stated, counsel to Baring has been provided with all
agreements, plans, and documents mentioned herein. Capitalized terms herein
shall have the same meanings as in the Agreement, unless otherwise defined.
General
Immediately prior to the Closing, ▇▇▇▇▇▇▇▇▇▇.▇▇▇ Inc., a New York corporation
(a/k/a MHering, Inc.) ("Sky-NY"), will have merged with and into the Company.
Prior to such merger, the operations of the Company were conducted by Sky-NY. As
a result, issues concerning capitalization and qualification of the Company and
any agreements and claims related to such issues are subject to change prior to
the closing.
2.2(c) Ownership of Stock
--------------------------------------------------------------------------------
Name Number of Shares
---- ----------------
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 636,850
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Irrevocable Trust 82,170
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Irrevocable G Trust 54,780
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 116,000
--------------------------------------------------------------------------------
▇▇▇ ▇▇▇▇▇ 23,200
--------------------------------------------------------------------------------
Venture Marketing Group LLC 87,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Additional investors (the "Additional Investors")
investing at least $5,000,000, as disclosed to
Baring, who shall receive shares of Common Stock
or Series A Preferred Stock (at their choice) for
$71.84 per share. Some such investors have
executed subscription agreements as follows:
▇▇▇▇▇ ▇. ▇▇▇▇ $1,400,000
▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ $330,000
▇▇▇▇▇ & ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ JTROS $250,000
June ▇. ▇▇▇▇▇▇▇▇ $450,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇. $450,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇. $150,000
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ $71,840
I-Hatch Ventures, L.P. $4,854,803.52
I-Hatch Advisors, L.P. $145,188.64
Seaview Global Fund L.P. $71,840
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ $21,552
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ $50,288
▇▇▇▇▇▇▇▇ ▇▇▇ & ▇▇▇▇ ▇.
▇▇▇▇▇▇ JTROS $50,288
GSIS Fund, Inc. $251,440
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ $125,000
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ [$150,000]
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ [$50,000]
▇▇▇▇ ▇▇▇▇▇ $75,000
--------------------------------------------------------------------------------
Subscription Agreement between ▇▇▇▇▇ ▇. ▇▇▇▇ and the Company, dated
January 11, 2000.
Subscription Agreement between ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ and the Company,
dated January 14, 2000.
Subscription Agreement between ▇▇▇▇▇ & ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ JTROS
and the Company, dated March 8, 2000.
Subscription Agreement between June ▇. ▇▇▇▇▇▇▇▇ and the Company, dated
March 8, 2000.
Subscription Agreement between ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇. and the Company,
dated March 17, 2000.
Subscription Agreement between ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇. and the Company,
dated March 17, 2000.
Subscription Agreement between ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ and the Company, dated
March 22, 2000.
Subscription Agreement among I-Hatch Ventures, L.P., I-Hatch Advisors
Fund, L.P. and the Company, dated March 21, 2000.
Subscription Agreement between Seaview Global Fund L.P. and the
Company, dated March 23, 2000.
Subscription Agreement between ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and the Company, dated
March 23, 2000.
Subscription Agreement between GSIS Fund, Inc. and the Company, dated
March 23, 2000.
Subscription Agreement between ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and the Company, dated
March 24, 2000.
Subscription Agreement between ▇▇▇▇▇▇▇▇ ▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇ JTROS
and the Company, dated March 24, 2000.
Subscription Agreement between ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and the Company
(undated).
Subscription Agreement between ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and the Company, dated
March 24, 2000.
Subscription Agreement between ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and the Company, dated
March 24, 2000.
Subscription Agreement between ▇▇▇▇ ▇▇▇▇▇ and the Company (undated).
Call Option Agreement(s) between ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and certain individuals
for the purchase of a certain number of shares of the Company owned by
▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
Possible obligation to issue securities as finders fee for transaction
contemplated by the Agreement.
2.2(e) Option Plan
▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. 2000 Omnibus Plan in draft form.
On March 23, 2000 the Company granted a total of 43,910 options to
certain executives and the Chairman of the Board of the Company. In
addition, immediately after the Closing the Company plans to grant
stock options and shares of restricted stock to certain members of the
Board of Directors of the Company.
2.10 Patents and Trademarks
(b) The Company has filed the following trademark applications:
On October 27, 1999 the Company filed an application to register
the ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇.▇▇▇.
On October 27, 1999 the Company filed an application to register
the ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇.▇▇▇.
On October 27, 1999 the Company filed an application to register
the ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇.▇▇▇ and a design thereof.
The Company plans to file trademark applications for "Now you
are going somewhere" and "SkyCash".
(c) Trade names.
The Company uses the names ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. and ▇▇▇▇▇▇▇▇▇▇.▇▇▇ in
the ordinary course of business.
Letter, dated January 31, 2000 from NVision Limited to the Company
concerning SOFIA.
The Company is using the Tech 7 system of Logibro, Inc. licensed to
Magical Holidays, Inc. ("Magical"), for accounting purposes.
The Company is currently using WorldSpan, an airline reservation
system, which is licensed to Magical pursuant to a WorldSpan Subscriber
Agreement, dated August 28, 1998.
2.12 Agreements; Actions
(a) The Company is using facilities and resources (including,
without limitation, employees) of Magical on a cost basis. The
Company also receives certain other services from Magical free
of charge. Magical also provides certain facilities (such as
American Express cards, purchase of tickets, etc.) for which the
Company reimburses Magical.
Subscription Letters with Additional Investors who are family
members of officers and directors of the Company.
Employment Agreement between the Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
dated as of January l, 2000.
Employment Agreement between the Company and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
Jr. dated as of January l, 2000.
Letter Agreements between the Company and Venture Marketing
Group ("VMG") dated April 3, 1999, July 13, 1999 and March 16,
2000.
Call Option Agreement between ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and each of VMG,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ dated March 16,
2000, and releases from VMG and each of the above named persons
for the benefit of the Company.
Contemplated loans to certain directors of the Company for the
purchase of the Company's shares in the amount of up to
$1,000,000.
The Company pays Magical a fulfillment fee of $25 for each
ticket issued which has been a customary fee for such services.
(b) (i) Agreements involving obligations of, or payments to, the
Company in excess of $30,000 individually, or $100,000
in the aggregate.
Agreement between the Company and Resort Condominiums
International, LLC ("RCI"), dated September 9, 1999 (the
"RCI Agreement"), including addenda one through three.
Letter Agreement between the Company and [B-12], dated
February 28, 2000, and four Insertion Orders dated March
16, 2000.
Two lease agreements (undated and unsigned) covering
certain premises at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
Letter Agreement between the Company and [Active
International], dated December 8, 1999.
Letter Agreement between the Company and [Grand Bahamas
Island Tourism Board], dated December 13, 1999.
The Company purchases products according to numerous
rate tables and pricing information sheets which arrive
each day and the
details of which change on a daily basis. The material
rate tables received by the Company as of the date
hereof and in effect are attached hereto.
Service Order between Magical and digitalNation, dated
April 8, 1999, pursuant to which the Company is acting.
Service Order between the Company and digitalNation,
dated March 16, 2000.
Rate tables from Marc Resorts Hawaii, dated January 5,
2000 and February 22, 2000.
Insertion Orders with Adsmart Network, dated January 28,
2000 and March 3, 2000.
Insertion Order Properties with Double Click, dated
January 28, 2000.
Insertion Orders/Advertising Agreements with TravelZoo,
dated January 5, 2000, January 20, 2000, March l, 2000
and March 10, 2000.
Advertising Insertion Orders with Smarter Living, Inc.,
dated January 31, 2000 and February 9, 2000.
Additional Insertion Orders/Advertising Agreements with
[Mamma], [Go-to].
[Agreement] dated ______ between the Company and [Active
International] and correspondence dated ______
concerning the purchase of up to 5,000 RCI rooms.
Engagement Letter with Deloitte & Touche LLP, dated
November 23, 1999.
Possible obligation to pay a finders fee for transaction
contemplated by the Agreement.
(ii) Licenses of Intellectual Property.
See 2.10 herein.
(c) (ii) See 2.12(b) above.
(iii) Contemplated loans to certain directors of the Company
for the purchase of the Company's shares in the amount
of up to $1,000,000, subject to board approval.
2.13 Related Party Transactions.
See 2.12(a).
2.15 Changes since January 31, 2000
Over the last few months the Company has been increasing its
expenditures on advertisement and its technology and has been taking
actions to increase its sales and revenues. The Company does not know
how these actions will affect its financial results in the future
including, without limitation, its profitability and gross margin.
(a) Prior to the Closing, ▇▇▇▇▇▇▇▇▇▇.▇▇▇ Inc. (a/k/a/ MHering,
Inc.), a New York corporation, merged with and into the Company.
(e) Executed Addendum 3 to the RCI Agreement.
(f) ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇'▇ annual salary was increased from $100,000
to $180,000.
(l) Charitable contribution of $3,015.00 to the "Hunger Site".
(n) Club Med is in the process of re-evaluating its arrangement with
the Company.
2.16 Tax Returns
The Company has only filed FICA returns.
2.17 Licenses and PermitS
As of the Closing, the Company shall have a pending application for
authority to do business in New York.
2.20 Minute Books
On March 23, 2000 the Company held a Board of Directors Meeting in
which certain resolutions were adopted concerning the ratification of
the transactions contemplated by the Agreement and other matters,
including, the issuance of options to ▇▇▇ ▇▇▇▇▇▇▇▇▇ (26,874), ▇▇▇▇▇
▇▇▇▇▇▇▇▇ (13,005) and a prospective employee (4,031).
2.21 Title to Property and Assets.
The Company's principal office at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ is owned by Silk & ▇▇▇▇▇▇▇ Realty Associates, Inc. The
Company currently operates from the offices of Magical on the 14th
Floor. During March 2000 the Company entered into two leases pursuant
to which the Company leases certain premises on the 10th and 25th
floors of the same building.
2.22 Insurance
As of the signing, the Company has in effect only the following
insurance policies:
Workers Compensation and Employers Liability Insurance Policy for the
period commencing on July 21, 1999 and ending on July 21, 2000.
General Accident Business Elite Policy, for the period commencing on
July 21, 1999 and ending on July 21, 2000.
New York Disability Benefits Law Policy, effective May 16, 1999.
2.23 Employee Benefit Plans
See 2.2(e) above
The Company purchases health insurance for all of its employees.
Exhibit 1.1 Amended and Restated Certificate of Incorporation
28
RESTATED
CERTIFICATE OF INCORPORATION
of
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
The undersigned, having filed its original Certificate of Incorporation with the
Secretary of State of the State of Delaware on December 27, 1999, does hereby
amend and restate its Certificate of Incorporation and certify as follows:
ARTICLE I
The name of the corporation is ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. (hereinafter referred to as
the "Corporation").
ARTICLE II
The address of the registered office of the Corporation in the State of Delaware
is 1013 Centre Road, in the City of Wilmington, County of New Castle. The name
of its registered agent at that address is Corporation Service Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity for
which a corporation may be organized under the General Corporation Law of the
State of Delaware (the "GCL").
ARTICLE IV
(A) Classes of Stock. The Corporation is authorized to issue two classes of
stock to be designated, respectively, "Common Stock" and "Preferred Stock". The
total number of shares of capital stock that the Corporation is authorized to
issue is 10,000,000 shares, of which [9,350,000] shares shall be Common Stock
(the "Common
Stock") and of which [450,000] shares shall be Preferred Stock (the "Preferred
Stock"). All Common Stock and Preferred Stock shall have a par value of $0.01
per share.
(B) Preferred Stock. Subject to the limitations and restrictions contained
in this Certificate of Incorporation and in any designation relating to any
series of Preferred Stock in existence from time to time, the board of directors
of the Corporation (the "Board of Directors") may designate for issuance from
time to time one or more series of Preferred Stock, with such privileges,
preferences, restrictions and rights (including rights relating to dividends,
conversion, voting, redemption, and liquidation) as the Board of Directors may
specify, and the number of shares constituting any such series and the
designation thereof; and increase or decrease the number of shares of any series
subsequent to the issue of shares of that series, but not decrease such number
of shares below the number of shares of such series then outstanding. In case
the number of shares of any series shall be so decreased, the shares
constituting such decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
(C) Designation of Series A Convertible Preferred Stock.
1. Designation. Of the Preferred Stock, [450,000] are hereby
designated "Series A Convertible Preferred Stock" (the "Series A Stock"), with
the rights, preferences, privileges and restrictions set forth herein.
2. Dividend Provisions.
(a) The holders of shares of Series A Stock shall be entitled to
receive, prior and in preference to the declaration or payment of any dividend
or distribution to the holders of Common Stock or any other shares or securities
of the Corporation ranking junior to the Series A Stock with respect to the
payment of dividends or the distribution of assets on liquidation ("Junior
Securities"), cumulative dividends on each share of Series A Stock at the rate
of $[5.75] per share (as adjusted for any stock splits, stock dividends,
combinations, recapitalizations and similar events with respect to such shares)
per annum, payable out of funds legally available therefor.
(b) In the event of any liquidation, dissolution or winding up of the
Corporation or the bankruptcy of the Corporation, all declared and unpaid
dividends, if any, on a share of Series A Stock shall be added to the
liquidation preference of such share on the payment date under subsection
(C)3(a) below, or upon the bankruptcy of the Corporation.
(c) Upon payment of the amounts described in Section 2(a) herein, the
Corporation may declare dividends or make distributions to the holders of
the Common Stock or any other Junior Securities, provided, however, that no
dividend or other distribution (other than a dividend or distribution payable
solely in shares of Common Stock) shall be paid on or set apart for payment on
the Common Stock or any other Junior Securities, unless all accrued and unpaid
dividends, if any, on the Series A Stock have been or contemporaneously are paid
or set apart for payment in accordance herewith. In the event that the
Corporation fails to pay the full dividends declared on all outstanding shares
of Series A Stock, any partial amounts which are paid as dividends by the
Corporation with respect to the Series A Stock shall be paid to the holders of
such shares of Series A Stock in proportion (as nearly as practicable) to the
amount such holders would be entitled to receive if they were to be paid the
full declared and unpaid dividends on the Series A Stock.
3. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, the holders of Series A Stock
shall be entitled to receive, prior and in preference to any distribution of any
of the assets or surplus funds of the Corporation to the holders of Common Stock
or any other Junior Securities by reason of their ownership thereof, an amount
per share in cash equal to $[71.84] (as adjusted for any stock splits, stock
dividends, combinations, recapitalizations and similar events with respect to
such shares) for each outstanding share of Series A Stock, plus all accrued but
unpaid dividends, if any, on such share of Series A Stock as of the date of such
event. If upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Series A Stock shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amounts,
then the entire assets and funds of the Corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Stock in proportion to the number of such shares owned by each such holder.
(b) Following completion of the distribution required by the first
sentence of paragraph (a) of this Section (C)3, if assets remain in the
Corporation, the holders of the Common Stock shall share ratably in all
remaining assets of the Corporation.
(c) For purposes of this Section (C)3, unless the holders of a
majority of the outstanding shares of Series A Stock otherwise agree, (i) any
consolidation or merger of the Corporation with or into any other corporation or
other entity or person, or any other corporate reorganization, in which either
(A) the outstanding shares of Common Stock are exchanged for cash, securities or
other consideration or (B) the Corporation shall not be the continuing or
surviving entity of such consolidation, merger or reorganization (except, in
each case, if the stockholders of the Corporation immediately prior to such
acquisition, consolidation, merger or reorganization shall, immediately after
such acquisition, consolidation, merger or
3
reorganization hold 50% or more of the securities or voting power of such
surviving or acquiring entity), and (ii) any sale or transfer in any transaction
or series of related transactions of all or substantially all of the assets of
the Corporation, shall be deemed to be a liquidation, dissolution or winding up
within the meaning of this Section (C)3.
4. Conversion. The holders of Series A Stock shall have conversion
rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock shall be
convertible, at the option of the holder thereof at any time after the date of
issuance of such share, in each case at the office of the Corporation or any
transfer agent for the Preferred Stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the Original
Series A Issue Price by the Series A Conversion Price at the time in effect for
such share. The Original Series A Issue Price for shares of Series A Stock shall
be $[71.84] (as adjusted for any stock splits, stock dividends, combinations,
recapitalizations and similar events with respect to such shares). The initial
Conversion Price per share for Series A Stock (the "Series A Conversion Price")
shall be $[71.84] (as adjusted for any stock splits, stock dividends,
combinations, recapitalizations and similar events with respect to such shares),
provided, however, that the Series A Conversion Price shall be subject to
adjustment as provided hereinafter.
(b) Automatic Conversion. Each share of Series A Stock shall
automatically convert into one share of Common Stock (subject to adjustment as
provided in subsections (C)4(d) through (C)(4)(m)) immediately upon the
consummation of the Corporation's sale of its Common Stock in an underwritten
public offering pursuant to a registration statement on Form S-1 (or a successor
form) under the Securities Act of 1933, as amended, which results in aggregate
cash proceeds to the Corporation of not less than $50,000,000 at an implied
pre-offering valuation of the Corporation of not less than $200,000,000.
(c) Mechanics of Conversion.
(i) Each conversion of shares of Preferred Stock into shares of Common
Stock shall be effected by the surrender of the certificate(s) evidencing the
shares of Preferred Stock to be converted (the "Converting Shares") at the
principal office of the Corporation (or such other office or agency of the
Corporation as the Corporation may designate by notice in writing to the holders
of Preferred Stock) at any time during its usual business hours, together with
written notice by the holder of such Converting Shares, (i) stating that the
holder desires to convert the Converting Shares, or a specified number of such
Converting Shares, evidenced by such certificate(s) into shares of Common Stock
(the "Converted Shares"), and (ii) giving the name(s) (with addresses) and
denominations in which the certificate(s) evidencing the Converted
4
Shares shall be issued, and instructions for the delivery thereof. Upon receipt
of the notice described in the first sentence of this subsection (C)4(c)(i),
together with the certificate(s) evidencing the Converting Shares, the
Corporation shall be obligated to, and shall, issue and deliver in accordance
with such instructions the certificate(s) evidencing the Converted Shares
issuable upon such conversion and a certificate (which shall contain such
legends, if any, as were set forth on the surrendered certificate(s))
representing any shares which were represented by the certificate(s) surrendered
to the Corporation in connection with such conversion but which were not
Converting Shares and, therefore, were not converted. Such conversion, to the
extent permitted by law, shall be deemed to have been effected as of the close
of business on the date on which such certificate(s) shall have been surrendered
and such written notice shall have been received by the Corporation, and at such
time the rights of the holder of such Converting Shares as such holder shall
cease, and the person(s) in whose name or names any certificate(s) evidencing
the Converted Shares are to be issued upon such conversion shall be deemed to
have become the holder(s) of record of the Converted Shares.
(ii) Upon the issuance of the Converted Shares in accordance with this
section (C)4, such shares shall be deemed to be duly authorized, validly issued,
fully paid and non-assessable.
(iii) If the conversion is in connection with an underwritten offering
of securities registered pursuant to the Securities Act of 1933, as amended, the
conversion may, at the option of any holder tendering Preferred Stock for
conversion as permitted herein, be conditioned upon the closing of such
underwritten sale of securities pursuant to such offering in which event the
person(s) entitled to receive the shares issuable upon such conversion shall not
be deemed to have converted such shares until immediately prior to the closing
of such sale of securities.
(d) Adjustments to Conversion Price of Preferred Stock for Certain
Diluting Issues.
(i) Special Definitions. For purposes of this Section (C)4, the
following definitions shall apply:
(A) "Options" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire either Common Stock or "Convertible
Securities" (as defined below).
(B) "Original Issue Date" shall mean the date on which a share of
Series A Stock is first issued.
5
(C) "Convertible Securities" shall mean any evidence of
indebtedness, shares or other securities directly or indirectly convertible into
or exchangeable for Common Stock.
(D) "Additional Common Stock" shall mean all Common Stock issued
(or, pursuant to subsection (C)4(d)(iii), deemed to be issued) by the
Corporation after the Original Issue Date, other than Common Stock issued or
issuable:
(1) upon conversion of the Series A Stock, exercise of currently
outstanding Options for Common Stock or exercise of Options for Common Stock
that are issuable pursuant to an agreement or other commitments existing on the
Original Issue Date;
(2) to an entity that owns, directly or indirectly, 100% of the
equity of the Corporation or to any wholly owned direct or indirect subsidiary
of the Corporation;
(3) in connection with any pledge by the Corporation of shares
of Common Stock owned by it to any lender or trustee under any credit agreements
or indentures with respect to borrowed money or the Corporation;
(4) in connection with the payment of finder's fees, placement
agent fees, or compensation related to any financing or financial advisory
services;
(5) in connection with an acquisition of another entity by the
Corporation or a subsidiary of the Corporation or as payment to any suppliers or
any strategic partners;
(6) as a dividend or distribution on Preferred Stock;
(7) to officers, directors or employees of, or consultants or
advisors to, the Corporation pursuant to Options or Convertible Securities
outstanding on the Original Issue Date or pursuant to Options granted, or
Convertible Securities issued, after the Original Issue Date pursuant to stock
option plans, management incentive plans, or employment or consulting
agreements, up to an aggregate maximum of 11% of the Corporation's fully diluted
number of shares at any given time;
(8) for which adjustment of the Conversion Price of the
Preferred Stock is made pursuant to subsections (C)4(e); or
6
(9) as an adjustment of the Conversion Price of any shares of
Preferred Stock, as provided herein.
(ii) No Adjustment of Conversion Price. No adjustment in the
Conversion Price of a share of Preferred Stock shall be made in respect of the
issuance of Additional Common Stock unless the consideration per share
(determined pursuant to subsection (C)4(d)(v) hereof) for Additional Common
Stock issued or deemed to be issued (pursuant to subsection (C)4(d)(iii)) by the
Corporation is less than the Conversion Price for such share of Preferred Stock
in effect on the date of, and immediately prior to, such issue.
(iii) Deemed Issue of Additional Common Stock. In the event the
Corporation at any time or from time to time after the Original Issue Date shall
issue any Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities then entitled to receive any
such Options or Convertible Securities, then the maximum number of shares of
Common Stock (as set forth in the instrument relating thereto without regard to
any provisions contained therein designed to protect against dilution) issuable
upon the exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Common Stock (unless the Common Stock issuable
pursuant to such Options or Convertible Securities are excluded from the
definition of Additional Common Stock by any subpart of subsection
(C)4(d)(i)(D)), issued as of the time of such issue or, in case such a record
date shall have been fixed, as of the close of business on such record date,
provided that Additional Common Stock shall not be deemed to have been issued
unless the consideration per share (determined pursuant to subsection (C)4(d)(v)
hereof) of such Additional Common Stock would be less than a Preferred Stock
Conversion Price in effect on the date of and immediately prior to such issue,
or such record date, as the case may be, and provided further that in any such
case in which Additional Common Stock are deemed to be issued:
(A) no further adjustments in a Preferred Stock Conversion Price
shall be made upon the subsequent issue of Convertible Securities or Common
Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
(B) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase or decrease in
the consideration payable to the Corporation, or decrease or increase in the
number of shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof (including any such increase or decrease under or by reason of
provisions designed to protect against dilution), the applicable Preferred Stock
Conversion Price computed upon the original issue thereof (or upon the
occurrence of a record date with
7
respect thereto), and any subsequent adjustments based thereon, shall, upon any
such increase or decrease becoming effective, be recomputed to reflect such
increase or decrease insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities (provided, however,
that no such adjustment of a Preferred Stock Conversion Price shall affect
Common Stock previously issued upon conversion of any shares of the Preferred
Stock);
(C) upon the expiration of any such Options or any rights of
conversion or exchange under such Convertible Securities which shall not have
been exercised, the applicable Preferred Stock Conversion Price computed upon
the original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if:
(1) in the case of Convertible Securities or Options for Common
Stock, the only Additional Common Stock issued were the Common Stock, if any,
actually issued upon the exercise of such Options or the conversion or exchange
of such Convertible Securities and the consideration received therefor was the
consideration actually received by the Corporation for the issue of all such
Options, whether or not exercised, plus the consideration actually received by
the Corporation upon such exercise, or for the issue of all such Convertible
Securities which were actually converted or exchanged, plus the additional
consideration, if any, actually received by the Corporation upon such conversion
or exchange (provided, however, that no such adjustment of the Preferred Stock
Conversion Price shall affect Common Stock previously issued upon conversion of
any shares of the Preferred Stock); and
(2) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued upon the exercise thereof were
issued at the time of issue of such Options, and the consideration received by
the Corporation for the Additional Common Stock deemed to have been then issued
was the consideration actually received by the Corporation for the issue of all
such Options, whether or not exercised, plus the consideration deemed to have
been received by the Corporation (determined pursuant to subsection
(C)4(d)(v)(2)) upon the issue of the Convertible Securities with respect to
which such Options were actually exercised (provided, however, that no such
adjustment of a Preferred Stock Conversion Price shall affect Common Stock
previously issued upon conversion of any shares of the Preferred Stock);
(D) no readjustment pursuant to clause (B) or (C) above shall have
the effect of increasing a Preferred Stock Conversion Price to an amount which
exceeds the lower of (a) the applicable Preferred Stock Conversion Price on the
original adjustment date, or (b) the applicable Preferred Stock Conversion Price
8
that would have resulted from any issuance of Additional Common Stock between
the original adjustment date and such readjustment date; and
(E) in the case of any Options which expire by their terms not more
than 90 days after the date of issue thereof, no adjustment of the Preferred
Stock Conversion Price shall be made until the expiration or exercise of all
such Options, whereupon such adjustment shall be made in the same manner
provided in clause (3) above.
(iv) Adjustment of Preferred Stock Conversion Prices Upon Issuance of
Additional Common Stock. In the event the Corporation at any time after the
Original Issue Date shall issue Additional Common Stock (including Additional
Common Stock deemed to be issued pursuant to subsection (C)4(d)(iii) but, in
each case, subject to the exclusions of subsection (C)4(d)(i)(D)) without
consideration or for a consideration per share less than the Conversion Price in
effect on the date of and immediately prior to such issue for a series of
Preferred Stock, then and in such event the Conversion Price of such series of
Preferred Stock shall be reduced, concurrently with such issue, to a Conversion
Price (calculated to the nearest cent) determined by multiplying such Conversion
Price by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issue plus the number of
shares of Common Stock which the aggregate consideration received by the
Corporation for the total number of shares of Additional Common Stock so issued
would purchase at such Conversion Price; and the denominator of which shall be
the number of shares of Common Stock outstanding immediately prior to such issue
plus the number of shares of Additional Common Stock so issued; provided that,
for the purposes of this subsection (C)4(d)(iv), the number of shares of Common
Stock outstanding immediately prior to such issue shall be calculated on a fully
diluted basis, as if all outstanding shares of Preferred Stock and all
Convertible Securities had been fully converted into shares of Common Stock and
any outstanding warrants, options or other rights for the purchase of shares of
stock or convertible securities had been fully exercised (and the resulting
securities fully converted into shares of Common Stock, if so convertible) as of
such date. Notwithstanding the foregoing, the Conversion Price for a series of
Preferred Stock shall not be so reduced at such time if the amount of such
reduction would be an amount less than $0.01, but any such amount shall be
carried forward and deduction with respect thereto made at the time of and
together with any subsequent reduction that, together with such amount and any
other amount or amounts so carried forward, shall aggregate $0.01 or more.
(v) Determination of Consideration. For purposes of this subsection
(C)4(d), the consideration received by the Corporation for the issue of any
Additional Common Stock shall be computed as follows:
(A) Cash and Property. Such consideration shall:
9
(1) insofar as it consists of cash, be computed at the aggregate
amount of cash received by the Corporation excluding amounts paid or payable for
accrued interest or accrued dividends;
(2) insofar as it consists of property other than cash, be
computed at the fair market value thereof at the time of such issue, as
reasonably determined in good faith by the Board of Directors; and
(3) in the event shares of Additional Common Stock are issued
together with other shares or securities or other assets of the Corporation for
consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (1) and (2) above, as reasonably
determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration per share
received by the Corporation for Additional Common Stock deemed to have been
issued pursuant to subsection (C)4(d)(iii), relating to Options and Convertible
Securities, shall be determined by dividing:
(1) the total amount, if any, received or receivable by the
Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein designed to protect against dilution) payable to the
Corporation upon the exercise in full of such Options or the conversion or
exchange of all such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise in full of such Options for Convertible
Securities and the conversion or exchange of all such Convertible Securities, by
(2) the maximum number of shares Common Stock (as set forth in
the instruments relating thereto, without regard to any provision contained
therein designed to protect against dilution) issuable upon the exercise of such
Options or conversion or exchange of such Convertible Securities.
(e) Conversion Price Adjustments for Subdivisions, Combinations or
Consolidations of Common Stock.
(i) In the event the Corporation should at any time or from time to
time after the date hereof fix a record date for the effectuation of a split or
subdivision of the outstanding shares of Common Stock or the determination of
holders of shares of Common Stock entitled to receive a dividend or other
distribution payable in additional Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive directly or
indirectly, additional Common Stock (hereinafter
10
referred to as "Common Share Equivalents"), without payment of any consideration
by such holder for the additional Common Stock or the Common Share Equivalents
(including the additional Common Stock issuable upon conversion or exercise
thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of each series of Preferred Stock shall be appropriately decreased so that
the number of shares of Common Stock issuable on conversion of each share of
such series of Preferred Stock shall be increased in proportion to such increase
of outstanding shares of Common Stock and shares issuable with respect to Common
Share Equivalents.
(ii) If the number of shares of Common Stock outstanding at any time
after the date hereof is decreased by a combination of the outstanding shares of
Common Stock, then, following the record date of such combination, the
Conversion Price of each series of Preferred Stock shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion of
each share of such series of Preferred Stock shall be decreased in proportion to
such decrease in outstanding shares of Common Stock.
(f) Other Distributions. In the event the Corporation shall declare a
distribution payable in securities of other entities or persons, evidences of
indebtedness issued by the Corporation or other entities or persons, assets
(excluding cash dividends) or options or rights not referred to in subsection
(C)4(e)(i), the holders of the Preferred Stock shall be entitled to a
proportionate share of any such distribution as though they were the holders of
the number of shares of Common Stock of the Corporation into which their shares
of Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of the Corporation entitled to
receive such distribution or, if no such record date is fixed, as of the date
such distribution is made.
(g) Recapitalizations. If at any time or from time to time there shall
be a recapitalization of the Common Stock (other than a subdivision,
combination, merger or sale of assets transaction provided for elsewhere in this
Section (C)4 ), provision shall be made so that the holders of Preferred Stock
shall thereafter be entitled to receive upon conversion of the Preferred Stock
the number of shares of stock or other securities or property of the Corporation
to which a holder of Common Stock would have been entitled on recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section (C)4 with respect to the rights of the holders of the
Preferred Stock after the recapitalization to the end that the provisions of
this Section (C)4 (including adjustment of the Conversion Price then in effect
and the number of shares issuable upon conversion of the Preferred Stock) shall
be applicable after that event as nearly equivalent as may be practicable.
11
(h) No Impairment. The Corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section (C)4 and in the taking of all such actions as
may be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Preferred Stock against impairment.
(ii) No Fractional Shares and Certificate as to Adjustments.
(i) In lieu of any fractional shares to which a holder of Preferred
Stock would otherwise be entitled upon conversion, the Corporation shall pay
cash equal to such fraction multiplied by the fair market value of one share of
Common Stock, as determined in good faith by the Board of Directors of the
Corporation. Whether or not fractional shares are issuable upon such conversion
shall be determined on the basis of the total number of shares of Preferred
Stock of each holder at the time converting into Common Stock and the number of
shares of Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of the
Conversion Price of any series of the Preferred Stock pursuant to this Section
(C)4, the Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of such series of Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (A) such adjustment
and readjustment, (B) the Conversion Price of the applicable series of Preferred
Stock at the time in effect, and (C) the number of shares of Common Stock and
the amount, if any, of other property which at the time would be received upon
the conversion of such holder's shares of Preferred Stock.
(j) Notices of Record Date. In the event that the Corporation shall
propose at any time: (1) to declare any dividend or distribution upon any class
or series of capital stock, whether in cash, property, stock or other
securities; (2) to effect any reclassification or recapitalization of its Common
Stock outstanding involving a change in the Common Stock; or (3) to merge or
consolidate with or into any other corporation, or to sell, lease or convey all
or substantially all of its property or business, or to liquidate, dissolve or
wind up; then, in connection with each such event, the Corporation shall mail to
each holder of Preferred Stock:
12
(i) at least 20 days' prior written notice of the date on which
a record shall be taken for such dividend or distribution (and specifying the
date on which the holders of the affected class or series of capital stock shall
be entitled thereto) or for determining the rights to vote, if any, in respect
of the matters referred to in clauses (2) and (3) above; and
(ii) in the case of the matters referred to in (2) and (3)
above, written notice of such impending transaction not later than 20 days prior
to the stockholders' meeting called to approve such transaction, or 20 days
prior to the closing of such transaction, whichever is earlier, and shall also
notify such holder in writing of the final approval of such transaction. The
first of such notices shall describe the material terms and conditions of the
impending transaction (and specify the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon the occurrence of such event) and the Corporation
shall thereafter give such holders prompt notice of any material changes. The
transaction shall in no event take place sooner than 20 days after the
Corporation has given the first notice provided for herein or sooner than 10
days after the Corporation has given notice of any material changes provided for
herein.
(k) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
Common Stock, solely for the purpose of effecting the conversion of the shares
of the Preferred Stock, such number of its Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares of the
Preferred Stock; and if at any time the number of authorized but unissued Common
Stock shall not be sufficient to effect the conversion of all then outstanding
shares of the Preferred Stock, in addition to such other remedies as shall be
available to the holders of such Preferred Stock, the Corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued Common Stock to such number of shares as shall be
sufficient for such purposes.
(l) Notices. Any notice required by the provisions of this Section
(C)4 to be given to the holders of shares of Preferred Stock shall be deemed
given if deposited in the United States mail, first class postage prepaid, and
addressed to each holder of record at his, her or its address appearing on the
books of the Corporation.
(m) Taxes and Costs. The issue of certificates evidencing Common
Stock upon conversion of Preferred Stock in accordance with the terms provided
herein shall be made without charge to the holders of such shares for any issue
tax in respect thereof or other cost incurred by the Corporation in connection
with such conversion; provided, however, that the Corporation shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and
13
delivery of any certificate in a name other than that of the holder of the
Preferred Stock so converted.
(n) In the event that prior to an initial public offering of the
Company's shares: (1) an agreement is executed between the Corporation's
stockholders and any third party or parties pursuant to which all of the issued
and outstanding shares of the Corporation are sold to such third party for less
than $325,000,000 if such agreement is executed prior to [SECOND ANNIVERSARY OF
THE STOCK PURCHASE AGREEMENT] or less than 650,000,000 thereafter; (2) the
Corporation merges with or into any other corporation and pursuant to such
transaction its stockholders are paid solely cash or securities of another
corporation in exchange for their shares in the Corporation in an amount
reflecting an implied valuation of the Corporation of less than $325,000,000 if
such merger occurs prior to [SECOND ANNIVERSARY OF THE STOCK PURCHASE AGREEMENT]
or less than $650,000,000 thereafter; or (3) if one or more of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
or ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Jr. (the "Founders") executes any agreement (other than
an agreement pursuant to which the Corporation shall issue additional
securities) pursuant to which, (i) immediately after the consummation of the
transactions involved in such agreement, the Founders' combined equity interest
in the Corporation is reduced (x) to below 25%; or (y) to an amount which does
not exceed the equity interest of any other stockholder in the Corporation; and
(ii) the implied valuation of the Corporation in such transaction is less than
$325,000,000 if such agreement is executed prior to [SECOND ANNIVERSARY OF THE
STOCK PURCHASE AGREEMENT] or less than 650,000,000 thereafter, then, in each of
(1), (2) and (3), the Series A Conversion Price shall be adjusted to a number
derived by dividing the relevant pre-transaction implied valuation of the
Corporation for such transaction by $325,000,000 if such transaction occurs
prior to [SECOND ANNIVERSARY OF THE STOCK PURCHASE AGREEMENT] or $650,000,000 if
such transaction occurs thereafter. If any adjustment required under this
subparagraph (C)4(n) is not permitted under applicable law, the Founder or
Founders participating in any relevant transaction shall deliver to holders of
the Series A Stock such number of shares of Common Stock held by him or them, as
the case may be, as equals the number of additional shares of Common Stock that
the holders of Series A Stock would have received as a result of such adjustment
had it been permitted under applicable law.
(o) In the event that the Corporation shall propose to effect the
transaction described in paragraph (2) of Section (C)4(n) above, the Corporation
shall mail to each holder of Preferred Stock notice of such impending
transaction not later than 20 days prior to the stockholders' meeting called to
approve such transaction or 20 days prior to the closing of such transaction,
whichever is earlier, and shall also notify such holder in writing of the final
approval of such transaction.
14
(p) No adjustments to the Series A Conversion Price or transfer of
any Common Stock from the Founders shall be made pursuant to Section (C)4(n)
until the relevant transaction shall have been consummated. Such adjustment or
transfer shall be made simultaneous to the consummation of such transaction. To
the extent any adjustments were made or any transfer of Common Stock was
completed prior to such consummation, such adjustments or transfers shall be
contingent upon the consummation of the relevant transaction and shall be void
and of no effect if such transaction was not consummated.
5. Voting Rights: Directors. The holders of Series A Stock shall have
the following voting rights:
(a) Each holder of Series A Stock shall have the right to one vote
for each share of Common Stock into which such holder's shares of Series A Stock
could then be converted, and, with respect to such vote, such holder shall have
full voting rights and powers equal to the voting rights and powers of the
holders of Common Stock, except as required by law, and shall be entitled,
notwithstanding any provision hereof, to notice of any stockholders' meeting in
accordance with the bylaws of the Corporation, and shall be entitled to vote,
together with holders of Common Stock, with respect to any question upon which
holders of Common Stock have the right to vote. Fractional votes shall not,
however, be permitted and any fractional voting rights available on an
as-converted basis (after aggregating all shares into which shares of Series A
Stock held by each holder could be converted) shall be rounded to the nearest
whole number (with one-half being rounded upward).
(b) So long as Baring Latin America Private Equity Fund, L.P.
("Baring") and its affiliates collectively hold at least [34,800] shares of
Series A Stock (as adjusted for any stock splits, stock dividends, combinations,
recapitalizations and similar events with respect to such shares), a vote or
consent of Baring will be required to approve: (i) the sale by the Corporation
of a substantial portion of its assets (other than in the ordinary course of
business); (ii) the purchase by the Corporation of all or substantially all the
assets of another entity; (iii) the merger of the Corporation with another
entity; (iv) the liquidation or dissolution of the Corporation; (v) filing by
the Corporation for bankruptcy; (vi) entry of the Corporation into entirely new
lines of business that have no relation to Internet-based travel auctions; (vii)
alterations or changes to the rights, preferences or privileges of the Series A
Stock; (viii) increases or decreases in the authorized number of the Series A
Stock; (ix) creation (by reclassification or otherwise) of any new class or
series or any other security convertible into equity securities having a
preference over the Series A Stock (except for securities issued at a price
reflecting an implied pre-investment valuation of the Corporation of
$150,000,000 or more); (x) any declaration or payment of dividends; (xii) the
repurchase or redemption of any shares of Common Stock (other than pursuant to
employee agreements or any incentive plan or program approved by the Board of
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Directors); (xii) amendments to the Corporation's Certificate of Incorporation
and By-Laws (except to effectuate any action otherwise contemplated under and
permitted in connection with the Series A Stock issuance); (xiii) increasing
the number of shares reserved under the Corporation's option and incentive
plans; or (xiv) any borrowing by the Corporation of amounts exceeding
$10,000,000 in any given year.
(c) The Board of Directors shall consist of a maximum of ten
members. The holders of the Series A Stock, voting as a separate class, shall be
entitled to designate one member of the Board of Directors. The remaining
directors shall be elected by vote of the holders of the issued and outstanding
Common Stock. In the case of any vacancy in the office of a director elected by
the holders entitled to elect such director pursuant to this subsection (C)5,
such holders may, by affirmative vote of a majority of the shares of stock held
thereby and entitled to vote thereon on an as-converted basis, elect a successor
or successors to hold the office for the unexpired term of such director or
directors whose place or places shall be vacant. Any director who shall have
been elected by the holders entitled to elect such director pursuant to this
subsection (C)5(c) may be removed during the aforesaid term of office, whether
with or without cause, only by the affirmative vote of a majority of the shares
of stock held by such holders on an as-converted basis.
6. Status of Converted Stock. In the event any shares of Series A
Stock shall be converted pursuant to Section 4 hereof, the shares so converted
shall be canceled and shall not be issuable by the Corporation. The Certificate
of Incorporation of the Corporation shall be appropriately amended to effect the
corresponding reduction in the Corporation's authorized capital stock.
(D) Rights, Preferences, Privileges and Restrictions of Common Stock. The
rights, preferences, privileges and restrictions granted to and imposed on the
Common Stock are as follows:
(a) Dividend Rights. Subject to the prior rights of holders of
all classes of stock at the time outstanding having prior rights as to
dividends, the holders of shares of Common Stock shall be entitled to receive,
when and as declared by the Board of Directors, out of any assets of the
Corporation legally available therefor, such dividends or other distributions as
may be declared from time to time by the Board of Directors. When and as
dividends or other distributions are declared, whether payable in cash, in
property or in shares of stock of the Corporation, other than in shares of
Common Stock, the holders of Common Stock shall be entitled to share equally,
share for share, in such dividends or other distributions.
2. Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the Corporation, either voluntarily or involuntarily, the assets
of the Corporation shall be distributed as provided in Section (C)3 of this
Article IV.
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3. Voting Rights. Except as otherwise provided in this Certificate of
Incorporation or required by applicable law, the holder of each share of Common
Stock shall have the right to one vote for each such share, and shall be
entitled to notice of any stockholders' meeting in accordance with the bylaws of
the Corporation, and shall be entitled to vote upon such matters and in such
manner as may be provided by law.
ARTICLE V
The following provisions are inserted for the management of the business and for
the conduct of the affairs of the Corporation and for further definition,
limitation and regulation of the powers of the Corporation and its directors and
stockholders:
(A) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors.
(B) Subject to the provisions of this Certificate of Incorporation, the
directors shall have concurrent power with the stockholders to make, alter,
amend, change, add to or repeal the by-laws of the Corporation.
(C) Election of directors need not be by written ballot unless the by-laws
so provide.
(D) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, subject, nevertheless, to the provisions of the GCL, this
Certificate of Incorporation, and any by-laws adopted by the stockholders;
provided, however, that no by-laws hereafter adopted by the stockholders shall
invalidate any prior act of the directors which would have been valid if such
by-laws had not been adopted.
ARTICLE VI
Meetings of stockholders may be held within or without the State of Delaware, as
the by-laws may provide. The books of the Corporation may be kept (subject to
any provision contained in the GCL) outside the State of Delaware at such place
or places as may be designated from time to time by the Board of Directors or in
the by-laws of the Corporation.
ARTICLE VII
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(A) Personal Liability. No director shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that to the extent required by the
provisions of Section 102(b)(7) of the GCL or any successor statute, this
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the GCL or
(iv) for any transaction from which the director derived an improper personal
benefit. If the GCL hereafter is amended to authorize the further elimination of
or limitation on personal liability of directors, then the liability of a
director of the Corporation, in addition to the limitation on personal liability
provided herein, shall be limited to the fullest extent permitted by the amended
GCL. Any repeal or modification of this Article VII by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.
(8) Indemnification and Advancement of Expenses
1. The Corporation shall have the power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that the
person's conduct was unlawful.
2. The Corporation shall have the power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a
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director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the Corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery of the State of Delaware (the "Court of Chancery") or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
3. To the extent that a present or former director or officer of a
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections 1 and 2 of this section
(B), or in defense of any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection therewith.
4. Any indemnification under subsections 1 and 2 of this section (B)
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the present or
former director, officer, employee or agent is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
subsections 1 and 2 of this section (B). Such determination shall be made, with
respect to a person who is a director or officer at the time of such
determination, (a) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (b) by a
committee of such directors designated by majority vote of such directors, even
though less than a quorum, or (c) if there are not such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (d)
by the stockholders.
5. Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation in advance or the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the Corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by former directors and officers or other
employees and agents may be so paid upon such terms and conditions, if any, as
the Corporation deems appropriate.
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6. The Corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power to
indemnify such person against any such liability under this section.
7. The indemnification, advancement of expenses and insurance provided
by, or granted pursuant to, or authorized by the other subsections of this
section shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in such person's official capacity and as to action in another
capacity while holding such office. To the extent the GCL or any other relevant
statute or law with respect to such issues shall change in a manner that shall
increase the extent or the ability of the Corporation to grant indemnification,
advancement of expenses, or purchase and maintain insurance then the provisions
of this Section (B) shall not be deemed to limit the Corporation with respect to
granting indemnification and advancement of expenses and purchasing and
maintaining insurance to the fullest extent permitted by law.
ARTICLE VIII
Whenever a compromise or arrangement is proposed between the Corporation and its
creditors or any class of them and/or between the Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for the Corporation under Section 291 of
Title 8 of the Delaware Code or on the application of trustees in dissolution or
of any receiver or receivers appointed for the Corporation under Section 279 of
Title 8 of the Delaware Code, order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of the Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of the Corporation, as the case
may be, and also on the Corporation.
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This Restated Certificate of Incorporation was duly adopted in accordance with
the provisions of Sections 242 and 245 of the GCL.
IN WITNESS WHEREOF ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. has caused this Amended and
Restated Certificate of Incorporation to be executed by its President and
attested to by its Secretary on this th day of February, 2000.
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By:
------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President
Attest:
---------------------------------
Name:
Title:
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