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EXHIBIT 10.5
RESTRICTED STOCK PURCHASE AGREEMENT
THIS RESTRICTED STOCK PURCHASE AGREEMENT (this "AGREEMENT") is
made and entered into as of September 1, 1999 (the "EFFECTIVE DATE") by and
between EPS Solutions Corporation, a Delaware corporation (the "COMPANY") and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (the "PURCHASER").
A. The Purchaser is employed by the Company's wholly owned
subsidiary Enterprise Profit Solutions Corporation, a Delaware corporation
("EPS") or any of its affiliates (the "EMPLOYER") and has entered into that
certain Employment Agreement with the Employer dated as of August 6, 1999 (the
"EMPLOYMENT AGREEMENT").
B. In connection with that employment, the Purchaser is being
offered an opportunity to purchase shares of the common stock of the Company,
par value $0.001 per share (the "COMMON STOCK") at a price of $2.50 per share.
C. The Shares (as hereinafter defined) shall be subject to
repurchase by the Company, in the Company's discretion, if certain performance
related milestones described herein are not met.
D. The Shares shall be subject to certain additional restrictions
as set forth herein.
E. The Purchaser desires to purchase and the Company desires to
sell the Shares as set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants hereinafter set forth, the Company and the Purchaser hereby
agree as follows:
1. SALE AND PURCHASE OF THE SHARES.
1.1 SALE AND PURCHASE. Subject to the terms and conditions set forth
herein, the Company hereby sells and issues to the Purchaser, and the Purchaser
hereby purchases from the Company the number of shares of Series A Common Stock
set forth on Schedule 1.1 (the "SHARES") for the consideration of $2.50 per
Share, resulting in an aggregate purchase price as set forth on Schedule 1.1
(the "PURCHASE PRICE"). Concurrently herewith the Purchaser is paying to the
Company in cash $0.001 per Share, resulting in an aggregate payment of the
amount set forth on Schedule 1.1 under the item "Cash Payment" (the "CASH
PAYMENT"). The obligation of the Purchaser to pay the remainder of the Purchase
Price in the amount set forth on Schedule 1.1 under the item "Note" is evidenced
by the Purchaser's delivery to the Company concurrently herewith of a secured
promissory note of the Purchaser in the form attached hereto as Exhibit A (the
"NOTE"). The Note is secured by a pledge of the Shares made pursuant to Section
5 of the Note. The Shares are sold pursuant to and governed by this Agreement
and not any other contract or plan of the Company.
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1.2 DELIVERIES. In exchange for the Cash Payment and the Note, the
Company is issuing the Shares in the Purchaser's name on the Company's stock
transfer ledger, and valid stock certificates representing the Shares (the
"CERTIFICATES") shall be held by the Company or its agent pending release
pursuant to Section 4.1(h).
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser represents and
warrants to the Company and its officers, directors and agents as follows:
2.1 SECURITIES MATTERS.
(a) The Purchaser understands that (i) neither the Shares nor the
offer and sale thereof are registered or qualified under the Securities Act of
1933, as amended (the "SECURITIES ACT") or any state securities or "Blue Sky"
laws, on the ground that the sale provided for in this Agreement and the
issuance of securities hereunder is exempt from registration and qualification
under Sections 4(2) and 18 of the Securities Act, and (ii) the Company's
reliance on such exemptions is predicated on the Purchaser's representations set
forth herein.
(b) The Purchaser acknowledges that an investment in the Company
involves an extremely high degree of risk, lack of liquidity and substantial
restrictions on transferability and that the Purchaser may lose the Purchaser's
entire investment in the Shares.
(c) The Company has made available to the Purchaser or the
Purchaser's advisors the opportunity to obtain information to evaluate the
merits and risks of the purchase of the Shares, and the Purchaser has received
all information requested from the Company. The Purchaser 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, plans,
prospects, and financial condition of the Company and to obtain such additional
information as the Purchaser has deemed appropriate for purposes of investing in
the Shares pursuant to this Agreement.
(d) The Shares to be acquired by the Purchaser hereunder will be
acquired for the Purchaser's own account, for investment purposes, not as a
nominee or agent, and not with a view to or for sale in connection with any
distribution of the Shares in violation of applicable securities laws.
(e) The Purchaser understands that no federal or state agency has
passed upon the Shares or made any finding or determination as to the fairness
of the investment in the Shares.
(f) The Purchaser, personally or through advisors, has expertise
in evaluating and investing in private placement transactions of securities of
companies in a similar stage of development to the Company and has sufficient
knowledge and experience in financial and business matters to assess the
relative merits and risks of an investment in the Shares. In connection with the
purchase of the Shares, the Purchaser has relied solely upon independent
investigations made by the Purchaser, and has consulted the Purchaser's own
investment advisors, counsel and accountants. The Purchaser has adequate means
of providing for current
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needs and personal contingencies, and has no need for liquidity and can sustain
a complete loss of the investment in the Shares.
(g) The Purchaser is an "Accredited Investor" as defined in Rule
501(a) under the Securities Act and has documented his or her accredited status
by delivery to the Company of a completed questionnaire in the form of Exhibit B
hereto attesting thereto (the "ACCREDITED INVESTOR QUESTIONNAIRE").
(h) The Purchaser has not received any general solicitation or
general advertising concerning the Shares, nor is the Purchaser aware of any
such solicitation or advertising.
2.2 REVOCATION, CANCELLATION. The Purchaser acknowledges that the
Purchaser shall not have any right to cancel, terminate or revoke this
Agreement, or rescind purchase of the Shares, or return the Shares for a refund
except as specifically set forth in a written agreement between the Purchaser
and the Company.
2.3 THE COMPANY AND THE CONSOLIDATION TRANSACTIONS.
(a) The Purchaser is aware that:
(i) The Company has recently been organized and has
limited financial and operating history.
(ii) There can be no assurance that the Company will
acquire any more businesses, that the Company will be successful in
accomplishing the purpose for which it was formed or that it will ever be
profitable. No assurance can be given regarding (A) whether the companies
acquired by the Company in the Consolidation Transactions can be successfully
integrated and operated, or (B) what companies will ultimately be acquired by
the Company. No company is obligated to participate in the Additional
Consolidation Transactions unless a written agreement to such effect is entered
into by the Company and such Additional Consolidation Transaction company.
(iii) No assurances can be given that an initial public
offering ("IPO") of the Company's securities will occur. If an IPO does occur,
no assurances can be given as to timing of the IPO, whether the Purchaser will
be able to participate, or the price at which any shares of Common Stock would
be sold.
(iv) No assurances can be given as to the ultimate value
of the Common Stock or the Shares or the liquidity thereof.
(v) All decisions regarding the Consolidation
Transactions, any IPO, and the Company's management and operations will be made
by the Company's management, and certain individuals involved in planning the
Consolidation Transactions and managing the business of the Company will have
the right to vote the Shares pursuant to the voting agreement referenced in
Section 4.1(i).
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(b) The Purchaser acknowledges that no assurances have been made
to the Purchaser with respect to any of the foregoing and no representations,
oral or written, have been made to the Purchaser by the Company or any of its
employees, representatives or agents concerning the Shares, their potential
value or the prospects of the Company, except as set forth herein.
(c) The proceeds from the sale of the Common Stock to the
Sponsors and the Founders are intended to be used by the Company for general and
administrative expenses and working capital. The proceeds from such sales may be
exhausted notwithstanding failure of the Company to achieve its objectives.
2.4 ENFORCEABILITY OF TRANSACTION DOCUMENTS. This Agreement and all
other documents to be delivered in connection herewith (collectively, the
"TRANSACTION DOCUMENTS") have been (or upon execution and delivery will have
been) duly executed and delivered by the Purchaser, and (assuming due execution
and delivery by the other parties thereto) constitute (or upon execution by the
Purchaser will constitute) legal, valid and binding obligations of the
Purchaser, except as such enforceability may be limited by general principles of
equity and bankruptcy, insolvency, reorganization and moratorium and other
similar laws relating to creditors' rights (the "BANKRUPTCY EXCEPTION").
2.5 BROKERS. No broker, finder, investment banker, or other person is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Purchaser.
2.6 TAX MATTERS. The Purchaser has received tax advice from the
Purchaser's own advisors and has not received, and is not relying upon, any tax
representations or advice from the Company or any representative of the Company.
2.7 SUMMARY OF CERTAIN CONSIDERATIONS. The Purchaser acknowledges
receipt and understanding of the Summary of Certain Considerations attached
hereto as Exhibit C.
2.8 ACCURACY OF INFORMATION. No representation or warranty made by the
Purchaser contained in this Agreement or in any other Transaction Document
contains or will contain an untrue statement of a material fact or omits or will
omit to state a material fact required to be stated herein or therein or
necessary to make the statements and facts contained herein or therein not
materially false or misleading.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to the Purchaser that:
3.1 ORGANIZATION AND CORPORATE AUTHORITY. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. This
Agreement and the other Transaction Documents to be executed and delivered by
the Company have been (or upon execution and delivery by the Company will have
been) duly executed and delivered by the Company, have been effectively
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authorized by all necessary action of the Company, corporate or otherwise, and
(assuming due execution and delivery by the other parties thereto) constitute
(or upon execution and delivery by the Company will constitute) legal, valid and
binding obligations of the Company, except as such enforceability may be limited
by the Bankruptcy Exception.
3.2 NO CONFLICT OR VIOLATION. The execution, delivery and performance by
the Company of the Transaction Documents to be executed and delivered by the
Company and the consummation of the transactions contemplated thereby do not and
will not: (i) violate or conflict with any provision of the charter documents or
bylaws of the Company; or (ii) violate any provision or requirement of any
domestic or foreign, federal, state or local law, statute, judgment, order,
writ, injunction, decree, award, rule, or regulation of any court, arbitrator,
federal, state, local or foreign government agency, regulatory body, or other
governmental authority or any department, agency, board, commission, bureau or
instrumentality of any of the foregoing (each a "GOVERNMENTAL ENTITY," and
collectively "GOVERNMENTAL ENTITIES") applicable to the Company.
3.3 CAPITALIZATION. The authorized capital stock of the Company consists
of 240,000,000 shares of Common Stock, of which 200,000,000 are Series A Common
Stock and 40,000,000 are Series B Common Stock; and 10,000,000 shares of
undesignated preferred stock. All capital stock of the Company has a par value
of $0.001 per share. Holders of Series B Common Stock are entitled to elect all
the directors in one of the Company's three classes of directors, with the
holders of the Series A Common Stock entitled to elect the remaining directors.
In all other respects, the Series A Common Stock and the Series B Common Stock
is identical. The Shares, when issued, sold, and delivered in accordance with
the terms of this Agreement for the consideration expressed herein will be duly
and validly issued, fully paid, and nonassessable, except that the Purchaser may
be required to pay amounts owed under the Note.
3.4 ENFORCEABILITY OF TRANSACTION DOCUMENTS. This Agreement and the
other Transaction Documents have been (or upon execution and delivery will have
been) duly executed and delivered by the Company, and (assuming due execution
and delivery by the other parties thereto) constitute (or upon execution by the
Company will constitute) legal, valid and binding obligations of the Company,
except as such enforceability may be limited by the Bankruptcy Exception.
3.5 ACCURACY OF INFORMATION. No representation or warranty made by the
Company contained in this Agreement or in any other Transaction Document
delivered by the Company contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary in
order to make the statements and facts contained herein or therein not
materially false or misleading.
4. CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES.
4.1 PERFORMANCE RESTRICTIONS, STOCKHOLDER AND VOTING AGREEMENTS.
(a) The Shares are subject to "RESTRICTIONS" and may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of, alienated
or encumbered until the
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Shares "vest" by the lapse of the Restrictions as set forth in Section 4.1(b)
and any additional requirements or restrictions contained herein have been
satisfied, terminated or expressly waived by the Company in writing. Any
attempted transfer in violation of such Restrictions will be void.
(b) The Restrictions will lapse and the Shares will vest in
accordance with the provisions in Schedule 4 (the "VESTING SCHEDULE"), provided,
however, that the Company, in its discretion, may from time to time accelerate
the vesting of any Shares at any time or forgive Restrictions and allow Shares
or restricted shares owned by any other party to vest notwithstanding that the
conditions to vesting thereof may not have been satisfied.
(c) In addition to any repurchase rights of the Company set forth
in Schedule 4, the Company, or its assignee, may, in the Company's discretion,
at any time and from time to time for a period of one (1) year following the end
of each Measurement Period (as described in Schedule 4), repurchase from the
Purchaser at the price per Share that the Purchaser paid to the Company, and the
Purchaser will sell to the Company, any or all of the Shares that were eligible
to vest but did not vest in accordance with the Vesting Schedule for such
Measurement Period. Shares originally corresponding to any Measurement Period
that cannot vest because of failure prior to the end of that Measurement Period
of conditions to vesting thereof may be repurchased at any time and from time to
time from the failure of such conditions to the end of the applicable repurchase
period specified herein. Any Shares that do not vest in accordance with the
Vesting Schedule shall be subject to repurchase by the Company regardless of the
services performed, or other consideration given, by the Purchaser to the
Company. Shares not vested in accordance with the Vesting Schedule but not
repurchased by the Company during the applicable repurchase periods described
herein (including in Schedule 4) shall vest.
(d) (i) Termination of the Purchaser's employment by the Employer
under the circumstances described in Schedule 4 under the heading "Vesting Upon
Certain Termination of Employment" will cause vesting as described therein,
provided that the vesting of any Shares upon termination of the Purchaser's
employment with the Employer, or subsequent to such termination shall be
contingent upon execution and delivery by the Purchaser to the Company of an
unconditional release in substantially the form attached hereto as Exhibit D.
Upon such a termination of employment, any Shares that do not vest as described
therein will be subject to repurchase in the manner described in Section
4(d)(ii).
(ii) In case of termination of the Purchaser's employment
by the Employer for any reason other than a reason that causes vesting as
described in Schedule 4, the Company or its assignee may, in the Company's
discretion, at any time and from time to time for a period of one (1) year
following the termination of employment, repurchase from the Purchaser at the
price per Share that the Purchaser paid to the Company, and the Purchaser will
sell to the Company, any or all of the Shares designated by the Company that
have not vested as of the date of termination of employment.
(iii) In addition to the Company's repurchase rights set
forth above, if any of the events or circumstances constituting "Cause" listed
in Schedule 1 of the Purchaser's
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Employment Agreement occurs at any time before the end of the final Measurement
Period, then notwithstanding any vesting provided for herein the Company or its
assignee may, in the Company's discretion, at any time and from time to time for
a period of one (1) year following such occurrence, repurchase from the
Purchaser at the price per Share that the Purchaser paid to the Company, and the
Purchaser will sell to the Company, any or all Shares designated by the Company
that had not vested at the time of such occurrence, or that vested effective as
of a date within 365 days before such occurrence, provided however, that (i) if
the Purchaser's employment with the Employer was terminated by the Employer
without Cause or by the Purchaser for Good Reason (each as defined in the
Employment Agreement), or (ii) the Purchaser's employment with the Employer is
terminated by the Purchaser or the Employer (or its successor) within one
hundred twenty (120) days after a Change in Control (as defined in the
Employment Agreement) of the Company, then the Company will not be entitled to
repurchase vested Shares pursuant to this subparagraph (iii) solely because of
the occurrence after termination of employment of any of the events or
circumstances constituting Cause listed in item A of Schedule 1 of the
Purchaser's Employment Agreement.
(e) (i) The purchase price for any repurchase pursuant to this
Section 4.1 shall be paid, (A) by deducting the purchase price from any amount
outstanding on the Note and canceling the Note upon deduction of the full amount
outstanding on the Note, if applicable; and (B) if the purchase price exceeds
the amount outstanding on the Note, in the Company's discretion, in cash or by a
promissory note bearing interest at 7% and payable in up to 12 equal monthly
amortizing installments of principal and accrued interest, or any combination of
cash and such a promissory note.
(ii) If the Company wishes to exercise its right to
repurchase any Shares under this Agreement but the Purchaser cannot deliver such
Shares to the Company because such Shares have previously been sold by the
Purchaser, the Company may, in its discretion, upon payment to the Purchaser of
the price per Share that the Purchaser paid to the Company, recover from the
Purchaser, and the Purchaser shall deliver to the Company, all proceeds to the
Purchaser of the sale of such Shares (or the cash value thereof), such that the
Purchaser retains no benefit from having owned the Shares.
(f) The exercise of the Company's right to repurchase Shares or
to accelerate vesting or forgive Restrictions pursuant to this Section 4.1, and
its right to repurchase Common Stock purchased by other parties that are subject
to restrictions, or to accelerate vesting or forgive Restrictions applicable to
such Common Stock, shall be within the discretion of the Company. The Company
may (but will not be required to) exercise its right to repurchase, accelerate,
or forgive Restrictions with respect to any or all shares of restricted Common
Stock owned by the Purchaser or any third party without incurring any obligation
to repurchase, accelerate, or forgive Restrictions with respect to any other
Common Stock owned by the Purchaser or any third party.
(g) The Shares shall be subject to a Stockholder Agreement in the
form attached hereto as Exhibit E (the "STOCKHOLDER AGREEMENT") restricting
transfers and imposing certain obligations upon the Purchaser, which must be
executed and delivered by the Purchaser as described in Section 5.2(b). Shares
that have vested shall nevertheless be governed by the
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Stockholder Agreement. The Company's repurchase rights hereunder will supersede
the purchase provisions of the Stockholder Agreement.
(h) The Company will release the Certificates representing Shares
as such Shares become free of both the Restrictions and the Stockholder
Agreement, provided that (a) the Purchaser has paid to the Company the full
Purchase Price for such Shares, and an amount sufficient to satisfy any taxes or
other amounts required by any Governmental Entity to be withheld and paid over
to such Governmental Entity for the Purchaser's account, or otherwise made
arrangements satisfactory to the Company for payment of such amounts through
withholding or otherwise, and (b) the Purchaser has, if requested by the
Company, made appropriate representations in a form satisfactory to the Company
that such Shares will not be transferred other than (i) pursuant to an effective
registration statement under the Securities Act, or an applicable exemption from
the registration requirements of the Securities Act; (ii) in compliance with all
applicable state securities laws and regulations; and (iii) in compliance with
all terms and conditions of the Stockholder Agreement.
4.2 SECURITIES RESTRICTIONS.
(a) In addition to the contractual restrictions on transfer set
forth in this Agreement and the Stockholder Agreement, the Shares (or interests
therein) cannot be offered, sold or transferred unless the Shares are registered
and qualified under the Securities Act and applicable state securities laws or
exemptions from such registration and qualification requirements are available,
or such registration and qualification requirements are inapplicable, as
reflected in an opinion of counsel to the Purchaser in form and substance
reasonably satisfactory to the Company. In the absence of an effective
registration statement covering the Shares or an available exemption from
registration under the Securities Act and applicable state securities laws, the
Shares must be held indefinitely and may not be sold pursuant to Rule 144
promulgated under the Securities Act unless all of the conditions of that rule
are met.
(b) In addition to any legends required by the Stockholder
Agreement and the Voting Agreement, the Certificates will bear a legend to the
effect set forth below, and appropriate stop transfer instructions against the
Shares will be placed with any transfer agent of the Company to ensure
compliance with the restrictions set forth herein.
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW
AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, ASSIGNED,
PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO THE HOLDER OF THE
SHARES OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS
COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."
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(c) Each recipient of Shares or interests therein shall, as a
condition to transfer of any Shares or interest therein, cause the transferee to
enter into the Stockholder Agreement and the Voting Agreement, provided that,
with respect to each such agreement, this requirement will not apply to
transfers made after the agreement has terminated.
(d) In connection with any underwritten public offering of
securities of the Company or any of its affiliates within three (3) years of the
date hereof, if the managing underwriter believes that it is appropriate in
connection with the offering to limit public sales of such securities by
Company's stockholders, the Purchaser will agree to the managing underwriter's
standard form of "lock up" agreement prohibiting transfers of any Common Stock
owned by the Purchaser, including without limitation shares acquired other than
pursuant hereto (other than shares included in the offering) for such period as
may be required by the managing underwriter not to exceed twenty (20) days prior
to, and one hundred and eighty (180) days after, the effective date of the
registration statement for such offering, provided however, that (i) such lock
up provision may not be invoked more than once in any 365 day period, (ii) such
lock up provision will be contingent upon the officers and directors of the
registrant entering into similar lock up agreements, and (iii) the Purchaser
will not be required to comply with this lock up provision if any other
stockholder owning more shares of Common Stock than the Purchaser and who is
subject to a contractual lock up provision similar to this one has been released
from such lock up obligation.
4.3 STOCKHOLDER RIGHTS. During the period prior to the lapse and removal
of the Restrictions, except as otherwise provided herein, and subject to the
Voting Agreement, the Purchaser will have all of the rights of a stockholder of
the Company with respect to all of the Shares, including without limitation the
right to receive all dividends or other distributions with respect to such
Shares. In connection with the payment of such dividends or other distributions,
the Company will be entitled to deduct any taxes or other amounts required by
any Governmental Entity to be withheld and paid over to such Governmental Entity
for the Purchaser's account.
4.4 CHANGE IN CONTROL. Notwithstanding anything in this Agreement or
other agreements to the contrary, any unvested Shares shall vest and the
Restrictions shall lapse as of immediately before the closing of a transaction
that constitutes a Change in Control (as defined in the Employment Agreement),
or upon a Change in Control other than a transaction, in any case that occurs
during Employee's employment by the Company or any of its affiliates or within
90 days thereafter. Accordingly, the Company will defer its repurchase rights
hereunder for at least such 90 day period.
4.5 SECTION 83(b) ELECTION. The Purchaser may make an election pursuant
to Section 83(b) of the Internal Revenue Code, or comparable provisions of any
state tax law, to include in the Purchaser's gross income the amount by which
the fair market value of the Shares the Purchaser acquires exceeds the price
paid therefor only if, prior to making any such election, the Purchaser (a)
notifies the Company of the Purchaser's intention to make such election, by
delivering to the Company a copy of the fully-executed Section 83(b) Election
Form attached hereto as Exhibit F, and (b) pays to the Company an amount
sufficient to satisfy any taxes or
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other amounts required by any Governmental Entity to be withheld or paid over to
such Governmental Entity for the Purchaser's account, or otherwise makes
arrangements satisfactory to the Company for the payment of such amounts through
withholding or otherwise.
4.6 NO RIGHT TO CONTINUED EMPLOYMENT. Neither this Agreement nor the
ownership of the Shares confers upon the Purchaser any right to continue as an
employee of the Employer, or limits in any way the right of the Employer to
terminate the Purchaser's services to the Employer at any time, with or without
cause. Such matters are addressed, if at all, only pursuant to the Employment
Agreement.
4.7 REGISTRATION.
(a) The Purchaser will have no rights to demand registration of
any of the Shares, or to participate in any registration undertaken by the
Company except as set forth in this Section 4.7. If the Company files a
registration statement with the Securities and Exchange Commission for an
underwritten IPO of its equity securities or any subsequent underwritten public
offering within twenty-four (24) months of the closing of the IPO (not including
a registration statement filed in connection with an acquisition or employee
benefit plan), and if the managing underwriter of such offering believes that
the market will accommodate selling stockholders in the offering, then the
Purchaser shall have the right, subject to the limitations set forth in this
Section 4.7(a), to include in such registration statement or statements and
offering or offerings Shares and other Common Stock owned by the Purchaser.
Other stockholders (including but not limited to stockholders who acquired
Common Stock in the Consolidation Transactions and stockholders who acquired
Common Stock in the formation, or work on behalf of, the Company) will have
rights to include shares of Common Stock in such offering, and if the aggregate
amount of shares that all stockholders with such rights (collectively, the
"SELLING STOCKHOLDERS") desire to include exceeds the number of shares of Common
Stock that can be sold by all Selling Stockholders, then all Selling
Stockholders desiring to sell in any such offering will participate pro-rata on
the basis of the relative numbers of shares of Common Stock eligible for
inclusion that they originally sought to include. However, notwithstanding the
foregoing no Selling Stockholder will be permitted to include in any such
registration and offering (i) any Shares subject to performance-related
restrictions at the time of filing of the registration statement for such
offering, or (ii) more than, in the aggregate for all such registrations and
offerings, half of the Shares and other Common Stock owned by the Purchaser as
of the date hereof. Furthermore, in no case will the Purchaser be permitted to
include in the IPO registration and offering more than the number of Shares
listed on Schedule 1.1 under the item "Maximum IPO Shares."
(b) If the Purchaser acting pursuant to this Section 4.7 includes
any securities in any registration of the Company, the Company will agree to
indemnify the Purchaser from and against any claims, costs and liabilities
incurred by the Purchaser as a result of any untrue, or alleged untrue,
statement of a material fact contained in any registration statement,
preliminary prospectus or prospectus (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) or caused by any
omission, or alleged omission, to state therein
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a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such claims, costs or
liabilities are caused by any untrue statement or alleged untrue statement or
omission or alleged omission so made in conformity with information furnished in
writing to the Company by the Purchaser expressly for use therein, for which the
Purchaser will be responsible.
(c) Shares may only be included in a registration and offering
pursuant to this Section 4.7, pursuant to the underwriting agreement negotiated
between the Company and the underwriters, and the Purchaser must enter into the
underwriting agreement with respect to any Shares to be included in the
registration and offering. The Purchaser shall pay (i) all underwriting
discounts and commissions applicable to any such sale of shares, (ii) the
Purchaser's ratable share (based on the relative number of shares of Common
Stock included in the offering) of any fees and disbursements of a single
counsel for all Selling Stockholders, which counsel shall be selected by the two
(2) stockholders (or affiliated stockholder groups) selling the most shares in
the offering, and (iii) the fees and costs of any separate counsel retained by
the Purchaser alone.
(d) At all times that equity securities of the Company are
registered pursuant to the Securities Exchange Act of 1934, as amended, the
Company shall use its best efforts to fulfill all conditions applicable to a
registrant as are necessary to enable selling security holders of the Company to
make sales pursuant to Rule 144 under the Securities Act.
4.8 INDEMNIFICATION. The Purchaser shall indemnify, defend and hold
harmless the Company, its affiliates, their successors and assigns, and the
officers, directors, employees and agents of any of them, from and against any
and all losses, liabilities, claims, damages, obligations, assessments,
penalties, interests, demands, actions and expenses (including, without
limitation, settlement costs and any and all expenses reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim) arising out of or in connection with or based upon any
false acknowledgment, representation or warranty, or breach or failure by the
Purchaser to comply with any covenant or agreement, made by the Purchaser herein
or in any other Transaction Document.
4.9 ENFORCEMENT OF THE AGREEMENT.
(a) The Company and the Purchaser acknowledge that irreparable
damage would occur if any of the obligations of the parties under this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. Either party shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement by the other and to enforce specifically the
terms and provisions hereto, this being in addition to any other remedy to which
such party is entitled at law or in equity.
(b) Concurrent herewith, the Purchaser shall deliver a stock
power executed by the Purchaser and the Purchaser's spouse, if applicable (the
"STOCK POWER"), in blank to the Secretary of the Company, to hold in escrow to
facilitate the enforcement of restrictions on transfer of the Shares set forth
herein or in the Stockholder Agreement. The Company shall have the right, in its
discretion, to exercise the Stock Power if the Company becomes entitled to
repurchase any or all of the Shares pursuant to the provisions of this Agreement
or the
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Stockholder Agreement.
4.10 SUPPLEMENTAL DISCLOSURE. Until the second anniversary of the
Effective Date, the Purchaser shall promptly provide written notice to the
Company with particularity of any breach or inaccuracy of any representation,
warranty, agreement or covenant contained herein or in any other Transaction
Document.
5. CONCURRENT DELIVERIES.
5.1 DELIVERIES BY THE COMPANY. Concurrent herewith, the Company shall
deliver to the Purchaser a photocopy of the Certificates issued in the
Purchaser's name.
5.2 DELIVERIES BY THE PURCHASER.
(a) The Cash Payment. Concurrent herewith, the Purchaser shall
deliver to the Company the Cash Payment.
(b) Documents of the Purchaser. In addition to the Note and the
Accredited Investor Questionnaire, concurrent herewith and as a condition to
receipt of any Shares, the Purchaser shall execute and deliver to the Company,
each dated the Effective Date:
(i) The Stockholder Agreement described in Section 4.1(g);
(ii) The Voting Agreement described in Section 4.1(i); and
(iii) The Stock Power described in Section 4.9(b).
(c) Other Closing Documents. The Company shall receive such other
duly executed certificates, instruments and documents in furtherance of the
transactions contemplated by this Agreement and the other Transaction Documents
as the Company may reasonably request.
6. MISCELLANEOUS.
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Regardless of any
party's investigations prior to the date hereof, the representations and
warranties contained herein and in the other Transaction Documents shall survive
the execution and delivery hereof and the purchase and sale of the Shares.
6.2 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed given upon personal delivery
or three (3) days after being mailed by certified or registered mail, postage
prepaid, return receipt requested, or one (1) business day after being sent via
a nationally recognized overnight courier service if overnight courier service
is requested from such service or upon receipt of electronic or other
confirmation of transmission if sent via facsimile, to the parties, their
successors in interest or their assignees at the addresses and telephone numbers
set forth on the signature page hereof or at such other addresses or telephone
numbers as the parties may designate by written notice in accordance with
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this Section 6.2.
6.3 ASSIGNABILITY AND PARTIES IN INTEREST. This Agreement and any of the
rights, interests or obligations hereunder may not be assigned by any of the
parties hereto except that the Company may assign this Agreement or any of its
rights hereunder to its affiliates or to successors to all or substantially all
of its business. Nothing in this Agreement will confer upon any person or entity
not a party to this Agreement, or the legal representatives of such person or
entity, any rights or remedies of any nature or kind whatsoever under or by
reason of this Agreement. This Agreement will be binding upon the successors and
assignees of the Company.
6.4 GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of California, without
regard to its conflicts-of-law principles.
6.5 COUNTERPARTS. This Agreement and the other Transaction Documents may
be executed in counterparts, each of which shall be deemed an original, but all
of which shall constitute but one and the same instrument.
6.6 COMPLETE AGREEMENT. This Agreement, the exhibits and schedules
hereto, and the other Transaction Documents contain the entire agreement between
the parties hereto with respect to the subject matter contemplated herein and
therein and supersede all previous oral and written and all contemporaneous oral
negotiations, commitments, and understandings with respect thereto. The parties
acknowledge that their agreements hereunder were not procured through
representations or agreements not set forth herein or therein.
6.7 AMENDMENTS. This Agreement and the other Transaction Documents may
be amended only by written instrument duly executed and delivered by the parties
hereto or thereto, as the case may be.
6.8 CONSTRUCTION. The headings contained in this Agreement and the other
Transaction Documents are for reference purposes only and shall not affect in
any way the meaning or interpretation hereof or thereof. References herein or
therein to Articles, Sections, Schedules and Exhibits refer to the referenced
Articles, Sections, Schedules or Exhibits hereof or thereof as the case may be,
unless otherwise specified. This Agreement and the other Transaction Documents
shall be deemed the joint work product of the parties hereto or thereto without
regard to the identity of the draftsperson, and any rule of construction that a
document shall be interpreted or construed against the drafting party shall not
be applicable.
6.9 SEVERABILITY. Any provision of this Agreement or any other
Transaction Document which is invalid, illegal, or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity, illegality, or unenforceability, without affecting in any way
the remaining provisions hereof in such jurisdiction or rendering that or any
other provision of this Agreement or any other Transaction Document invalid,
illegal, or unenforceable in any other jurisdiction.
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6.10 EXPENSES OF TRANSACTIONS. All fees, costs and expenses incurred by
the Company or the Purchaser in connection with the transactions contemplated by
this Agreement and the other Transaction Documents shall be borne by the party
incurring the same.
6.11 ARBITRATION.
(a) (i) Any controversy or claim arising out of or relating to
this Agreement shall be solely and finally settled by arbitration administered
by the American Arbitration Association (the "AAA") in accordance with its
Commercial Arbitration Rules as then in effect (the "RULES"), except to the
extent such Rules vary from the following provisions. Notwithstanding the
previous sentence, the parties hereto may seek provisional remedies in courts of
appropriate jurisdiction and such request shall not be deemed a waiver of the
right to compel arbitration of a dispute hereunder.
(ii) If any controversy or claim arising out of or
relating to this Agreement also arises out of or relates to the employment of
the Purchaser by the Employer, the provisions of this Agreement governing
dispute resolution shall govern resolution of such controversy or claim. The
provisions of this Agreement governing dispute resolution supersede any
provisions relating to such matters in any employment agreement between the
Purchaser and the Employer.
(iii) The arbitration shall be conducted by one
independent and impartial arbitrator, appointed by the AAA; provided however, if
the claim and any counterclaim, in the aggregate, together with other
arbitrations that are consolidated pursuant to Section 6.11(f), exceed Five
Hundred Thousand Dollars ($500,000) (the "THRESHOLD"), exclusive of interest and
attorneys' fees, the dispute shall be heard and determined by three (3)
arbitrators as provided herein (such arbitrator or arbitrators are hereinafter
referred to as the "ARBITRATOR"). The judgment of the award rendered by the
Arbitrator may be entered in any court having jurisdiction thereof. The
arbitration proceedings shall be held in Orange County, California unless the
parties agree to another location.
(b) If a party hereto determines to submit a dispute for
arbitration pursuant to this Section 6.11, such party shall furnish the other
party with whom it has the dispute with a notice of arbitration as provided in
the Rules (an "ARBITRATION NOTICE") which, in addition to the items required by
the Rules, shall include a statement of the nature, with reasonable detail, of
the dispute. A copy of the Arbitration Notice shall be concurrently provided to
the AAA, along with a copy of this Agreement, and if pursuant to Section 6.11(a)
one (1) Arbitrator is to be appointed, a request to appoint the Arbitrator. If a
party has a counterclaim against the other party, such party shall furnish the
party with whom it has the dispute a notice of such claim as provided in the
Rules (a "NOTICE OF COUNTERCLAIM") within ten (10) days of receipt of the
Arbitration Notice, which, in addition to the items required by the Rules, shall
include a statement of the nature, with reasonable detail, of the dispute. A
copy of the Notice of Counterclaim shall be concurrently provided to the AAA. If
the claim set forth in the Notice of Counterclaim causes the aggregate amount in
dispute to exceed the Threshold, the Notice of Counterclaim shall so state. If
pursuant to Section 6.11(a) three (3) Arbitrators are to be appointed, within
fifteen (15) days after receipt of the Arbitration Notice or the Notice of
Counterclaim as applicable, each party shall select one
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person to act as Arbitrator and the two (2) selected shall select a third
arbitrator within ten (10) days of their appointment. If the Arbitrators
selected by the parties are unable or fail to agree upon the third arbitrator
within such time, the third arbitrator shall be selected by the AAA. Each
arbitrator shall be a practicing attorney or a retired or former judge with at
least twenty (20) years experience with and knowledge of securities laws,
complex business transactions, and mergers and acquisitions.
(c) Once the Arbitrator is selected, the Arbitrator shall
schedule a pre-hearing conference to reach agreement on procedural and
scheduling matters, arrange for the exchange of information, obtain stipulations
and attempt to narrow the issues.
(d) At the pre-hearing conference, the Arbitrator shall have the
discretion to order, to the extent the Arbitrator deems relevant and
appropriate, that each party may (i) serve a maximum of one set of no more than
twenty (20) requests for production of documents and one set of ten (10)
interrogatories (without subparts) upon the other parties; and (ii) depose a
maximum of three (3) witnesses. All objections to discovery are reserved for the
arbitration hearing except for objections based on privilege and proprietary or
confidential information. The responses to the document demand, the documents to
be produced thereunder, and the responses to the interrogatories shall be
delivered to the propounding party thirty (30) days after receipt by the
responding party of such document demand or interrogatory. Each deposition shall
be taken on reasonable notice to the deponent, and must be concluded within four
(4) hours and all depositions must be taken within forty-five (45) days
following the pre-hearing conference. Any party deposing an opponent's expert
must pay the expert's fee for attending the deposition. All discovery disputes
shall be decided by the Arbitrator.
(e) The parties must file briefs with the Arbitrator at least
three (3) days before the arbitration hearing, specifying the facts each intends
to prove and analyzing the applicable law. The parties have the right to
representation by legal counsel throughout the arbitration proceedings. The
presentation of evidence at the arbitration hearing shall be governed by the
Federal Rules of Evidence. Oral evidence given at the arbitration hearing shall
be given under oath. Any party desiring a stenographic record may secure a court
reporter to attend the arbitration proceedings. The party requesting the court
reporter must notify the other parties and the Arbitrator of the arrangement in
advance of the hearing, and must pay for the cost incurred.
(f) Any arbitration can be consolidated with one or more
arbitrations involving other parties, which arise under agreement(s) between the
Company and such other parties, if more than one such arbitration is commenced
and any party thereto contends that two or more arbitrations are substantially
related and that the issues should be heard in one proceeding. The Arbitrator
selected in the first-filed of such proceedings shall determine whether, in the
interests of justice and efficiency, the proceedings should be consolidated
before that Arbitrator.
(g) The Arbitrator's award shall be in writing, signed by the
Arbitrator and shall contain a concise statement regarding the reasons for the
disposition of any claim.
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(h) To the extent permissible under applicable law, the award of
the Arbitrator shall be final. It is the intent of the parties that the
arbitration provisions hereof be enforced to the fullest extent permitted by
applicable law.
6.12 SUBMISSION TO JURISDICTION. All actions or proceedings arising in
connection with this Agreement or any other Transaction Document for preliminary
or injunctive relief or matters not subject to arbitration, if any, shall be
tried and litigated exclusively in the state or federal courts located in the
County of Orange, State of California. The aforementioned choice of venue is
intended by the parties to be mandatory and not permissive in nature, thereby
precluding the possibility of litigation between the parties with respect to or
arising out of this Agreement or any other Transaction Document in any
jurisdiction other than that specified in this paragraph. Each party hereby
waives any right it may have to assert the doctrine of forum non conveniens or
similar doctrine or to object to venue with respect to any proceeding brought in
accordance with this paragraph, and stipulates and acknowledges that it has had
sufficient minimum contacts with California such that the State and Federal
courts located in the County of Orange, State of California shall have in
personam jurisdiction over each of them for the purpose of litigating any such
dispute, controversy, or proceeding. Each party hereby authorizes and accepts
service of process sufficient for personal jurisdiction in any action against it
as contemplated by this Section by registered or certified mail, return receipt
requested, postage prepaid, to its address for the giving of notices as set
forth in Section 6.2. Nothing herein shall affect the right of any party to
serve process in any other manner permitted by law.
6.13 ATTORNEYS' FEES. If the Purchaser brings any action, suit,
counterclaim, cross-claim, appeal, arbitration, or mediation for any relief
against the Company, or if the Company brings any action, suit, counterclaim,
cross-claim, appeal, arbitration, or mediation for any relief against the
Purchaser, declaratory or otherwise, to enforce the terms of or to declare
rights under this Agreement or any other Transaction Document (collectively, an
"ACTION"), in addition to any damages and costs which the Prevailing Party
otherwise would be entitled, the non-Prevailing Party shall pay to the
Prevailing Party a reasonable sum for attorneys' fees and costs (at the
Prevailing Party's attorneys' then-prevailing rates) incurred in bringing and
prosecuting or defending such Action and/or enforcing any judgment, order,
ruling, or award (collectively, a "DECISION") granted therein, all of which
shall be deemed to have accrued on the commencement of such Action and shall be
paid whether or not such action is prosecuted to a Decision. Any Decision
entered in such Action shall contain a specific provision providing for the
recovery of attorneys' fees and costs incurred in enforcing such Decision.
For the purposes of this Section, attorneys' fees shall include, but not
be limited to, fees incurred in the following: (1) post-judgment motions and
collection actions; (2) contempt proceedings; (3) garnishment, levy and debtor
and third party examinations; (4) discovery; and (5) bankruptcy litigation.
"PREVAILING PARTY" within the meaning of this Section includes, without
limitation, a party who agrees to dismiss an action on the other party's payment
of the sum allegedly due or performance of the covenants allegedly breached, or
who obtains substantially the relief sought by it. If there are multiple claims,
the Prevailing Party shall be determined with respect to each
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claim separately. The Prevailing Party shall be the party who has obtained the
greater relief in connection with any particular claim, although, with respect
to any claim, it may be determined that there is no Prevailing Party.
6.14 UNIQUE AGREEMENT; ADVICE OF COUNSEL. This Agreement includes
provisions unique to the Purchaser and is independent of the employment terms of
any other employee or purchaser of the Company's stock. The Company acknowledges
the Purchaser's advice that the Company seek independent legal counsel with
respect to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
EPS SOLUTIONS CORPORATION PURCHASER
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------- ---------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------- -------------------------------
Title: CEO
----------------------------
Address: Address:
▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ------------------------------------
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Winnetka, Ill.
------------------------------------
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇ ----------------------
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
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SCHEDULES
1.1 Shares and Purchase Price
4 Vesting Schedule
EXHIBITS
A. Form of the Note
B. Form of the Accredited Investor Questionnaire
C. Summary of Certain Considerations
D. Form of Release
E. Form of the Stockholder Agreement
F. Section 83(b) Election Form
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SCHEDULE 1.1
SHARES AND PURCHASE PRICE
Aggregate Number of Shares: 857,142
Aggregate Purchase Price: $2,142,855
Cash Payment: $857.14
Note: $2,141,997.86
Maximum IPO Shares: 171,428
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SCHEDULE 4
VESTING SCHEDULE
The Shares consist of 857,142 "EMPLOYMENT SHARES."
EMPLOYMENT SHARES
Subject to the terms and conditions described in this Agreement, the
Restrictions applicable to the Employment Shares will lapse and the Employment
Shares will vest in installments as described below, provided, however, that
except as set forth in this Schedule 4, in order for Employment Shares eligible
to vest for any Measurement Period to vest, the Purchaser must have remained an
employee of the Employer from the date hereof through the last day of that
Measurement Period.
On the last day of each of the Measurement Periods set forth in
the table below, if the Purchaser has remained an employee of the Employer from
the date hereof through the last day of such Measurement Period, the
Restrictions will lapse with respect to such number of Employment Shares as is
equal to the product of the Vesting Percentage corresponding to that Measurement
Period and the total number of Employment Shares.
VESTING
MEASUREMENT PERIOD PERCENTAGE
September 1, 1999 - December 31, 1999 8.4%
January 1, 2000 - December 31, 2000 25%
January 1, 2001 - December 31, 2001 25%
January 1, 2002 - December 31, 2002 25%
January 1, 2003 - September 1, 2003 16.6%
VESTING UPON CERTAIN TERMINATION OF EMPLOYMENT
If employment of the Purchaser with the Employer is terminated by the
Employer without "Cause" or by the Purchaser with "Good Reason" (each as defined
in the Employment Agreement), the Restrictions will immediately lapse and
vesting will immediately occur with respect to all of the Shares not already
vested. If employment of the Purchaser with the Employee terminates as a result
of the Purchaser's death or Disability (as defined in the Employment Agreement),
the Restrictions will immediately lapse with respect to half of the Shares not
then already vested.
FRACTIONAL SHARES
Fractional vested Shares will be carried forward and combined to
constitute whole vested Shares that can be issued, or repurchased by the Company
or its assignee at fair market value on the date of repurchase.