EXHIBIT 10.5
IMX, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
This Agreement is made as of March 3, 1998 among IMX, Inc., a Delaware
corporation, with a principal place of business at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"), and the persons and entities listed
on the Schedule of Purchasers attached hereto as Exhibit A (the "Purchasers").
SECTION I
AUTHORIZATION AND SALE OF PREFERRED STOCK
1.1 Authorization. The Company will authorize the sale and issuance of
8,741,933 shares (the "Shares") of its Series C Preferred Stock (the
"Preferred"), at the price of $1.55 per share, having the rights, preferences,
privileges and restrictions as set forth in the Third Amended and Restated
Certificate of Incorporation (the "Restated Certificate") in the form attached
to this Agreement as Exhibit B.
1.2 Sale of Preferred. Subject to the terms and conditions hereof, the
Company will issue and sell to each of the Purchasers at the Closing (as defined
below), and the Purchasers will severally buy from the Company at the Closing,
the total number of Shares of Preferred specified opposite such Purchaser's name
on the Schedule of Purchasers, at the aggregate purchase price set forth on the
Schedule of Purchasers. The Company's agreements with each of the Purchasers are
separate agreements, and the sales of the Shares to each of the Purchasers are
separate sales.
SECTION II
CLOSINGS; DELIVERY
2.1 Closings.
(a) The Closing of the purchase and sale of the Preferred Shares (the
"Closing") shall take place at the offices of ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich LLP,
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ at 3:00 p.m., local time, on March 3,
1998 (the "Closing"), or at such other time and place as the Company and the
Purchasers shall agree (the date of the Closing is hereinafter referred to as
the "Closing Date").
(b) At its option, the Company may schedule one or more additional
closings ("Additional Closings") for the purchase and sale of any Shares not
sold at the Closing on such date or dates after the Closing as the Company may
determine, but not later than sixty (60) days after the initial Closing Date at
a price not less than $1.55 per share to Centex Corporation or entities
affiliated therewith, provided that such party or parties enter into the Rights
Agreement, the Voting Agreement and the Co-Sale Agreement (each as defined in
Section 32). Pursuant to this Agreement, the Company may sell Shares at the
Additional Closings, if any, without any
waiver, consent or approval of the Purchasers who participated in the Closing.
Each purchaser of Shares at any Additional Closing will become a party to this
Agreement and will be a "Purchaser," and such purchaser's shares will be
"Shares," for all purposes of this Agreement after such Additional Closing.
2.2 Delivery. At the Closing, the Company shall deliver to each Purchaser
a certificate or certificates, registered in such Purchaser's name set forth on
the Schedule of Purchasers, representing the number of Shares designated on the
Schedule of Purchasers to be purchased by such Purchaser, against payment of the
purchase price therefor, by check payable to the Company or wire transfer per
the Company's instructions, or a combination thereof.
SECTION III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on Exhibit C attached hereto, the Company represents
and warrants to the Purchasers as follows:
3.1 Organization and Standing; Certificate and Bylaws. The Company is a
corporation duly organized and validly existing under, and by virtue of, the
laws of the State of Delaware and is in good standing under such laws. The
Company has requisite corporate power and authority to own and operate its
properties and assets, and to carry on its business as currently conducted and
as proposed to be conducted in the Business Plan dated January 30, 1998 (the
"Business Plan"). The Company is currently qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the failure to
be so qualified would have a material adverse affect on the Company's business
as now conducted or its properties. The Company has furnished the Purchasers'
special counsel with true and complete copies of its Certificate of
Incorporation and Bylaws, as amended to date.
3.2 Corporate Power. The Company has all requisite corporate power and
authority to execute and deliver this Agreement, the Second Amended and Restated
Investor Rights Agreement in substantially the form attached hereto as Exhibit D
(the "Rights Agreement"), the First Amended and Restated Voting Agreement in
substantially the form attached hereto as Exhibit E (the "Voting Agreement"),
the Second Amended and Restated Co-Sale Agreement in substantially the form
attached hereto as Exhibit H (the "Co-Sale Agreement"), to sell and issue the
Shares hereunder, to issue the Common Stock of the Company (the "Common Stock")
issuable upon conversion of the Shares, and to carry out and perform all of its
obligations under the terms of this Agreement, the Rights Agreement, the Voting
Agreement, the Co-Sale Agreement and the Restated Certificate and to carry on
its business as presently conducted and as presently proposed to be conducted,
and such other agreements and instruments.
3.3 Capitalization. The authorized capital stock of the Company consists,
or will, upon the filing of the Restated Certificate, consist, of 26,000,000
shares of Common Stock, of which 2,576,900 shares will be issued and outstanding
immediately prior to the Closing, and 17,939,328 shares of Preferred Stock, of
which 4,216,216 shares have been designated "Series A Preferred Stock",
4,981,179 shares have been designated "Series B Preferred Stock" and
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8,741,933 shares have been designated "Series C Preferred Stock". Immediately
prior to the Closing, 4,216,216 shares of Series A Preferred Stock, 4,970,179
shares of Series B Preferred Stock and no shares of Series C Preferred Stock
will be issued and outstanding. All outstanding shares of Common Stock, Series A
Preferred Stock and Series B Preferred Stock have been duly authorized and
validly issued, are fully paid and nonassessable, were issued in compliance with
all federal and state securities laws, and were not issued in violation of any
preemptive rights. There are no authorized or outstanding subscription, warrant,
option or other rights or commitments (including, without limitation, preemptive
rights, conversion rights or rights of first refusal) to purchase or acquire
from the Company any shares of any class of capital stock of the Company or
securities convertible into or exchangeable for such capital stock, other than
outstanding warrants to purchase 11,000 shares of Series B Preferred Stock and
authorized options to purchase 3,861,100 shares of Common Stock pursuant to the
Company's 1996 Stock Plan, of which 3,185,743 shares are subject to outstanding
options, 5,000 shares have been issued upon exercise of options and 670,357
shares are available for future grant. Other than the Voting Agreement, the
Company is not a party or subject to any agreement or understanding, and, to the
best of the Company's knowledge, there is no agreement or understanding between
any person and/or entities, which affects or relates to the voting or giving of
written consents with respect to any security or by a director of the Company.
3.4 Authorization. All corporate action on the part of the Company, its
directors, officers and stockholders necessary for the authorization, execution,
delivery and performance of this Agreement, the Rights Agreement, the Voting
Agreement and the Co-Sale Agreement by the Company, the authorization, sale,
issuance and delivery of the Shares and the Common Stock issuable upon
conversion of the Shares and the performance of all of the Company's obligations
hereunder and thereunder has been taken or will be taken prior to the Closing.
Each of this Agreement, the Rights Agreement, the Voting Agreement and the Co-
Sale Agreement when each is executed and delivered by the Company, shall
constitute a valid and binding obligation of the Company, enforceable in
accordance with its terms, except as the indemnification provisions of Section
5.7 of the Rights Agreement may be limited by principles of public policy, and
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and rules of law governing specific performance,
injunctive relief of other equitable remedies. The Shares, when issued in
compliance with the provisions of this Agreement, will be duly and validly
issued, fully paid and nonassessable, and will have the rights, preferences,
privileges and restrictions described in the Restated Certificate. The Common
Stock issuable upon conversion of the Shares has been duly and validly reserved
and, when issued in compliance with the provisions of this Agreement and the
Restated Certificate will be duly and validly issued, fully paid and
nonassessable. The issuance and delivery of the Shares and such Common Stock
issuable upon conversion thereof, as applicable, is not subject to any
preemptive or other similar rights or any liens or encumbrances or other
restrictions on transfer that have not been waived or complied with; provided,
however, that the Shares, and such Common Stock issuable upon conversion
thereof, as applicable, may be subject to restrictions on transfer under state
and/or federal securities laws as set forth herein or in the Rights Agreement.
3.5 Financial Statements. The Company has delivered to each Purchaser its
unaudited balance sheet as of December 31, 1997 and statements of income,
stockholders' equity and cash flows for the period then ended (collectively, the
"Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting
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principles applied on a consistent basis throughout the periods indicated. The
Financial Statements fairly present the financial condition and operating
results of the Company as of the dates, and for the periods, indicated therein.
Except as set forth in the Financial Statements, the Company has no liabilities
of any nature (matured or unmatured, fixed or contingent), other than (x)
liabilities incurred in the ordinary course of business subsequent to December
31, 1997 which, individually or in the aggregate, are not material to the
financial condition or operating results of the Company, and (y) obligations
under contracts and commitments incurred in the ordinary course of business
which, individually or in the aggregate, are not material to the financial
condition or operating results of the Company.
3.6 Business Condition. Since December 31, 1997, the Company has not:
(a) incurred any change in the assets, liabilities, financial
condition or operating results of the Company from that reflected in the
Financial Statements, except changes in the ordinary course of business that
have not been, in the aggregate, materially adverse;
(b) effected any material change or amendment to a material contract
or arrangement by which the Company or any of its assets or properties is bound
or subject;
(c) sold, exchanged, or otherwise disposed of any of its assets or
made any sale, assignment or transfer of any patents, trademarks, copyrights,
trade secrets or other intangible assets; other than in the ordinary course of
business;
(d) received notice of any resignation or termination of employment of
any key officer of the Company and, to the best of its knowledge, there is no
impending resignation or termination of employment of any such officer;
(e) incurred any absolute or contingent material obligation by way of
guaranty, endorsement, indemnity or warranty;
(f) suffered any damage, destruction or loss, whether or not covered
by insurance, to any of its material assets;
(g) waived or compromised a material right or debt owed to it;
(h) made any loan to its employees, officers or directors, other than
travel advances made in the ordinary course of business;
(i) entered into any contract or other arrangement relating to
compensation of the Company's employees, officers or directors;
(j) declared or paid any dividend or other distribution of the assets
of the Company;
(k) redeemed, repurchased, canceled, granted or issued or effected any
other change to any of the capital stock of the Company or options to purchase
the same;
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(l) entered into any agreement obligating the Company to make payments
exceeding $50,000 in any fiscal year; or
(m) to the best of its knowledge, suffered any other event or
condition of any character that might materially and adversely affect the
assets, properties, financial condition, operating results or business of the
Company (as such business is currently conducted and as it is proposed to be
conducted in the Business Plan).
3.7 Compliance with Other Instruments; No Conflicts. The Company is not
in breach or violation of any term of its Certificate of Incorporation, as
amended and restated, or Bylaws, of any term or provision of any contract,
agreement, instrument, judgment or decree, or any order, statute, rule or
regulation, in each case where such breach or violation would have a material
adverse effect on the Company. The execution, delivery and performance of and
compliance with this Agreement, the Rights Agreement, the Voting Agreement and
the Co-Sale Agreement and the issuance, sale and delivery of the Shares and the
Common Stock issuable upon conversion of the Shares and the consummation of the
other transactions contemplated hereby and thereby will not result in any such
breach or violation.
3.8 Litigation, Etc. There is no action, suit, proceeding or
investigation pending, or to the best of the Company's knowledge threatened,
against the Company or any of its properties or assets or that questions the
validity of this Agreement, the Rights Agreement, the Voting Agreement or the
Co-Sale Agreement, or any action taken or to be taken in connection herewith or
that is reasonably likely to result, either individually or in the aggregate, in
any material adverse changes in the assets, condition, affairs or prospects of
the Company, financially or otherwise, or any change in the current equity
ownership of the Company, nor is the Company aware that there is any basis for
the foregoing. The foregoing includes, without limitation, actions pending or
threatened (or any basis therefor known to the Company) involving the prior
employment of any of the Company's employees, their use in connection with the
Company's business of any information or techniques allegedly proprietary to any
of their former employers, or their obligations under any agreements with prior
employers. The Company is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality. No action, suit or proceeding has been instituted or is
threatened by the Company.
3.9 Intangible Property. The Company owns, or has the right to use (or
can obtain the right to use on reasonable commercial terms), all patents,
trademarks, service marks, names, trade names, copyrights, licenses, trade
secrets or other proprietary rights necessary to its business as now conducted,
and has not received any written notice that it is infringing upon or otherwise
acting adversely to the right or claimed right of any person under or with
respect to any of the foregoing, and to the Company's knowledge there is no
basis for any such claim. There are no outstanding options, licenses or
agreements of any kind relating to the foregoing, nor is the Company bound by or
a party to any options, licenses or agreements of any kind with respect to the
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information and other proprietary rights and process of any other
person or entity other than such licenses or agreements arising from the
purchase of "off the shelf" or standard products. The Company has not received
any communication alleging that the Company has violated or, by conducting its
business as proposed in the Business Plan, would violate any third party's
patent,
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maskwork right, moral right, trademark, trade secret, trade name or copyright.
To the Company's knowledge, none of the Company's officers or employees has
improperly used or is making improper use of any confidential information or
trade secrets of others, including those of any former employer of such officer
or employee. The Company is not aware of any violation by a third party of any
of its patents, licenses, trademarks, trade names, service marks, copyrights,
trade secrets or other proprietary rights.
3.10 Securities Laws; Governmental Consent. Based in part on the accuracy
of the Purchasers' representations and warranties set forth in Section 4, the
offer, sale and issuance of the Shares as provided in this Agreement are exempt
from the registration and prospectus delivery requirements of the Securities Act
of 1933, as amended (the "Securities Act"), and have been qualified (or are
exempt from qualification) under all applicable state securities qualification
requirements, and neither the Company nor any authorized agent acting on its
behalf will take any action hereafter that would cause the loss of such
exemption. Except for the filing of the Restated Certificate and except for the
filing of notices required or permitted to be filed after the Closing Date with
certain United States federal and state securities commissions, which notices
the Company will file on a timely basis, no consent, approval or authorization
of, or designation, declaration or filing with, any governmental authority on
the part of the Company is required in connection with the valid execution,
delivery and performance of this Agreement, the Rights Agreement, the Voting
Agreement or the Co-Sale Agreement, the offer, sale or issuance of the Shares
(and the issuance of the Common Stock issuable upon conversion of the Shares) or
the consummation of any other transaction contemplated hereby, or by the Rights
Agreement, the Voting Agreement or the Co-Sale Agreement.
3.11 Contracts and Other Commitments. The Company is not a party to or in
breach of any:
(a) agreement, or group of related agreements, for the purchase of
assets that involves an expenditure by the Company in excess of $25,000;
(b) indenture, loan or credit agreement, security agreement,
promissory note or other agreement or instrument, or group of related agreements
or instruments, relating to or evidencing indebtedness for borrowed money in
excess of $25,000;
(c) lease or other agreement, or group of related leases or other
agreements, under which the Company is lessee of or holds or operates any
property, real or personal, owned by any other person under which payments to
such person exceed $25,000 per year;
(d) license agreement, either as licensor or licensee, that is
material to the Company's business; or
(e) other agreement or group of related agreements under which the
Company is obligated to make payments exceeding $25,000 or which could result in
the loss by the Company of any rights that are material to the conduct of its
business.
3.12 Registration Rights. Except as provided in the Rights Agreement, the
Company has not granted or agreed to grant to any person or entity any rights
(including piggyback
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registration rights) to have any securities of the Company registered with the
United States Securities and Exchange Commission ("SEC") or any other
governmental authority.
3.13 Minute Books. The minute books of the Company provided to special
counsel to the Purchasers contain a complete summary of all meetings, consents
and actions of the board of directors and the stockholders of the Company since
the time of its incorporation, accurately reflecting all transactions referred
to in such minutes in all material respects.
3.14 Title to Property and Assets. The Company owns its material
properties and assets free and clear of all mortgages, deeds of trust, liens,
encumbrances, security interests and claims except for statutory liens for the
payment of current taxes that are not yet delinquent and liens, encumbrances and
security interests which arise in the ordinary course of business and which do
not affect the Company's rights to use and possess such properties and assets.
With respect to the property and assets it leases, the Company is in compliance
with such leases and, to the best of the Company's knowledge, the Company holds
valid leasehold interests in such assets free of any liens, encumbrances,
security interests or claims of any party other than the lessors of such
property and assets.
3.15 Labor Agreements and Actions. The Company is not bound by or subject
to any contract, commitment or arrangement with any labor union, and to the
Company's best knowledge, no labor union has requested, sought or attempted to
represent any employees, representatives or agents of the Company. There is no
strike or other labor dispute involving the Company pending nor, to the
Company's best knowledge, threatened, nor is the Company aware of any labor
organization activity involving its employees. The Company is not aware that any
officer or employee intends to terminate their employment with the Company, nor
does the Company have any present intention to terminate the employment of any
of its officers or employees. The employment of each officer and employee of the
Company is terminable at the will of the Company. To the best of its knowledge,
the Company has complied in all material respects with all applicable state and
federal equal employment opportunity and other laws related to employment. The
Company is not a party to or bound by any currently effective employment
contract, deferred compensation agreement, bonus plan, incentive plan, profit
sharing plan, retirement agreement, or other employee compensation agreement.
3.16 Interested Party Transactions. To the best knowledge of the Company,
no officer or director of the Company or any "affiliate" or "associate" (as
those terms are defined in Rule 405 promulgated under the Securities Act) of any
such person has, either directly or indirectly, a material interest in: (i) any
person or entity which purchases from or sells, licenses or furnishes to the
Company any goods, property, technology, intellectual or other property rights
or services or is in competition with the Company; or (ii) any contract or
agreement to which the Company is a party or by which it may be bound or
affected. No employee, officer, or director of the Company or member of his or
her immediate family is indebted to the Company, nor is the Company indebted (or
committed to make loans or extend or guarantee credit) to any of them.
3.17 Stock Restriction Agreements. The Company has furnished to special
counsel to the Purchasers true and complete copies of all stock restriction or
other agreements pursuant to which shares of the Company's Common Stock have
been issued.
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3.18 Invention Assignment and Confidentiality Agreement. Each current and
former employee, consultant and contractor of the Company has entered into and
executed an Invention Assignment and Confidentiality Agreement in the form
attached to this Agreement as Exhibit G or an employment or consulting agreement
containing substantially similar terms. No such employee, consultant or
contractor has excluded works or inventions from his or her assignment of
inventions to such employee or contractor's Invention Assignment and
Confidentiality Agreement. The Company is not aware that any of its employees,
consultants or contractors are in violation of such agreement.
3.19 Disclosure. The Company has fully provided the Purchasers with all
the information the Purchasers have requested for deciding whether to purchase
the Shares. This Agreement and the Exhibits hereto (when read together) do not
contain any untrue statement of a material fact and do not omit to state a
material fact necessary to make the statements therein or herein not misleading.
3.20 No Breach by Employee. The Company is not aware that any employee,
contractor or consultant of the Company is obligated under any agreement
(including licenses, covenants or commitments of any nature) or subject to any
judgment, decree or order of any court or administrative agency, or any other
restriction relating to the relationship of any such employee, contractor or
consultant with the Company or any prior employer that would interfere with the
use of his or her best efforts to carry out his or her duties for the Company or
to promote the interests of the Company or that would conflict with the
Company's business as proposed to be conducted. Neither the execution nor
delivery of this Agreement, the Rights Agreement, the Voting Agreement or the
Co-Sale Agreement, nor the carrying on of the Company's business by the
employees, consultants and contractors of the Company and the conduct of the
Company's business as presently proposed will not, to the best of the Company's
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees, consultants or contractors or the
Company is now obligated. The Company does not believe it is or will be
necessary to utilize any inventions of any employees of the Company (or persons
the Company currently intends to hire) made prior to or outside the scope of
their employment by the Company.
3.21 Subsidiaries. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
3.22 Tax Returns, Payments and Elections. The Company has filed all tax
returns and reports as required by law. These returns and reports are true and
correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith that are set forth
on Exhibit C hereto. The Company has not elected pursuant to the Internal
Revenue Code of 1986, as amended (the "Code"), to be treated as a Subchapter S
corporation or a collapsible corporation pursuant to Section 1362(a) and Section
341(f) of the Code, respectively, nor has it made any other elections pursuant
to the Code (other than elections that relate solely to methods of accounting,
depreciation or amortization) that would have a material effect on the Company,
its financial condition, its business as presently conducted or proposed to be
conducted or any of its properties or material assets. The Company has never had
any tax deficiency proposed or assessed against it and has not executed any
waiver of any statute
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of limitations on the assessment or collection of any tax or governmental
charge. None of the Company's federal income tax returns and none of its state
income or franchise tax or sales or use tax returns has ever been audited by
governmental authorities. Since inception, the Company has made adequate
provisions on its books of account for all taxes, assessments and governmental
charges with respect to its business, properties and operations. The Company has
withheld or collected from each payment made to each of its employees, the
amount of all taxes (including, but not limited to, federal income taxes,
Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes)
required to be withheld or collected therefrom, and has paid the same to the
proper tax receiving officers or authorized depositories.
3.23 Insurance. The Company has in full force and effect fire, casualty
and liability insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed and adequate to protect the Company and its
financial condition against the risks involved in the business of the Company.
3.24 Marketing Rights. The Company has not granted rights to license,
market, or sell its products to any other person and is not bound by any
agreement that affects the Company's exclusive right to develop, distribute,
market, or sell its products.
3.25 Permits. The Company has all franchises, permits, licenses, and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which would be reasonably likely to materially and
adversely affect the business, properties, prospects, or financial condition of
the Company, and the Company believes it can obtain, without undue burden or
expense, any similar authority for the conduct of its business as planned to be
conducted as set forth in the Business Plan. The Company is not in default in
any material respect under any of such franchises, permits, licenses, or other
similar authority.
3.26 Qualified Small Business Stock. As of the Closing: (i) the Company
will not have taken any of the following actions that would prevent it from
being treated as an "eligible corporation" as defined in Section 1202(e)(4) of
the Code; (ii) the Company will not have made any purchases of its own stock
during the one-year period preceding the Closing having an aggregate value
exceeding 5% of the aggregate value of all of its stock as of the beginning of
such period; and (iii) the Company's aggregate gross assets, as defined by Code
Section 1202(d)(2), at no time between the Company's date of incorporation and
through the Closing will have exceeded or will exceed $50 million, taking into
account the assets of any corporations required to be aggregated with the
Company in accordance with Code Section 1202(d)(3).
3.27 Small Business Concern. The Company, together with its affiliates
(as that term is defined in 13 C.F.R. (S) 121.103), is a "small business
concern" within the meaning of the Small Business Investment Act of 1958, as
amended, and the regulations promulgated thereunder (the "Small Business
Investment Act") and Part 121 of Title 13 of the United States Code of Federal
Regulations. The information provided by the Company to each Purchaser that is a
licensed Small Business Investment Company (an "SBIC Investor") on SBA Forms
480, 652 and 1031 delivered in connection herewith is accurate and complete. The
Company acknowledges that,
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based on information provided to the Company by such investor, each SBIC
Investor is a Federal licensee under the Small Business Investment Act.
3.28 Acquisition Discussions. The Company has not engaged in the past
three (3) months in any discussion (i) with any representative of any
corporation or corporations regarding the consolidation or merger of the Company
with or into any such corporation or corporations, (ii) with any corporation,
partnership, association or other business entity or any individual regarding
the sale, conveyance or disposition of all or substantially all of the assets of
the Company or a transaction or series of related transactions in which more
than fifty percent (50%) of the voting power of the Company is disposed of, or
(iii) regarding any other form of acquisition, liquidation, dissolution or
winding up of the Company.
SECTION IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby severally represents and warrants to the Company with
respect to the purchase of Shares as follows:
4.1 Investment Experience. It is aware of the Company's business affairs
and financial condition and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the Shares
and the underlying Common Stock. Such Purchaser: (i) has experience as an
investor in securities of companies in the development stage and acknowledges
that such Purchaser is able to fend for itself, can bear the economic risk of
such Purchaser's investment in the Shares and has such knowledge and experience
in financial or business matters that such Purchaser is capable of evaluating
the merits and risks of this investment in the Shares and protecting its own
interests in connection with this investment and/or (ii) has a preexisting
personal or business relationship with the Company and certain of its officers,
directors or controlling persons of a nature and duration that enables such
Purchaser to be aware of the character, business acumen and financial
circumstances of such persons. Such Purchaser is an "accredited investor" within
the meaning of Regulation D promulgated under the Securities Act.
4.2 Investment intent. It is acquiring the Shares and the underlying
Common Stock for investment only for its own account, and not with the view to,
or for resale in connection with, any distribution thereof. It understands that
the issuances of the Shares and the underlying Common Stock to such Purchaser
have not been, and will not be, registered under the Securities Act by reason of
a specific exemption from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the bona fide nature of
the investment intent of such Purchaser as expressed herein.
4.3 Rule 144. It acknowledges that the Shares and the underlying Common
Stock must be held indefinitely unless subsequently registered under the
Securities Act or unless an exemption from such registration is available. It is
aware of the provisions of Rule 144 promulgated under the Securities Act which
permit limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things,
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the existence of a public market for the shares, the availability of certain
current public information about the Company, the resale occurring not less than
one year after the security was last held by the Company or an affiliate of the
Company, the sale being effected through a "broker's transaction" or in
transactions directly with a "market maker" and the number of shares being sold
during any three-month period not exceeding specified limitations.
4.4 No Public Market. It understands that no public market now exists for
any of the securities issued by the Company, and that the Company has made no
assurances that a public market will ever exist for the Company's securities.
4.5 Access to Data. It has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management. It
understands that such discussions, as well as any written information issued by
the Company, were intended to describe certain aspects of the Company's business
and prospects which the Company believes to be material, but were not a thorough
or exhaustive description, except as set forth in Section 3 hereof. The
foregoing, however, does not limit or modify the representations and warranties
made by the Company in Section 3 or the rights of the Purchasers to rely
thereon.
4.6 Authorization. Each of this Agreement, the Rights Agreement, the
Voting Agreement and the Co-Sale Agreement when executed and delivered by such
Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, except as the
indemnification provisions of Section 5.7 of the Rights Agreement may be limited
by principles of public policy, and subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies.
4.7 Legends. It is understood that the certificates evidencing the Shares
may bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE
144 OF SUCH ACT. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFER
FOLLOWING AN INITIAL PUBLIC OFFERING PURSUANT TO AN AGREEMENT BETWEEN THE
HOLDERS OF THESE SECURITIES AND THE COMPANY."
(b) Any legend required by the laws of the State of California,
including any legend required by the California Department of Corporations and
Sections 417 and 418 of the California Corporations Code.
4.8 California Corporate Securities Law. THE SALE OF THE SECURITIES THAT
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR
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RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES PRIOR TO SUCH
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM
QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON
SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS EXEMPT.
SECTION V
CONDITIONS TO CLOSING
5.1 Conditions to the Purchasers' and the Company's Obligations. The
obligations of a Purchaser to purchase and of the Company to issue and sell the
Shares are subject to the fulfillment, on or prior to the Closing, of all of the
following conditions, any of which may be waived in whole or in part by mutual
agreement of such Purchaser and the Company:
(a) The Company shall have obtained all consents, permits and waivers
necessary or appropriate on the part of the Company for consummation of the
transactions contemplated by this Agreement, the Rights Agreement, the Voting
Agreement and the Co-Sale Agreement at such Closing. Except for the notices
required to be filed after such Closing with certain federal and state
securities commissions, which notices the Company will file on a timely basis,
the Company shall have obtained all approvals of any federal or state
governmental authority or regulatory body that are required on the part of the
Company in connection with the lawful sale and issuance of the Shares and the
Common Stock issuable upon conversion of the Shares at such Closing.
(b) At such Closing, the purchase of the Shares by the Purchasers
hereunder shall be legally permitted by all laws and regulations to which the
Purchasers or the Company is subject.
(c) The Restated Certificate shall have been filed with and accepted
by the Secretary of State of the State of Delaware.
(d) The Company and the Purchasers shall have entered into the Rights
Agreement, the Voting Agreement and the Co-Sale Agreement.
5.2 Additional Conditions to the Purchasers' Obligations. In addition to
the conditions set forth in Section 5.1 hereof, each Purchaser's obligation to
purchase the Shares is subject to the fulfillment, on or prior to the Closing,
of all of the following conditions (except as otherwise provided below), any of
which may be waived in whole or in part by such Purchaser:
(a) The representations and warranties made by the Company in Section
3 hereof shall be true and correct when made, and shall be true and correct as
of the Closing with the same force and effect as if they had been made on and as
of the Closing.
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(b) The Company shall have performed all obligations and conditions
herein and in the Rights Agreement required to be performed or observed by it on
or prior to the Closing.
(c) Effective upon the Closing, the Board of Directors shall consist
of ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, and one (1)
vacancy.
(d) The Purchasers shall have received from ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ &
Freidenrich LLP, counsel to the Company, an opinion letter addressed to them,
dated such Closing Date and in substantially the form attached hereto as Exhibit
F.
(e) The Voting Agreement, the Co-Sale Agreement and the Rights
Agreement shall have been executed by the parties thereto (other than the
Purchasers).
(f) The Company shall have delivered to the Purchasers a certificate,
executed by the President of the Company and dated the Closing Date, certifying
to the fulfillment of the conditions specified in Sections 5.1(a), 5.2(a),
5.2(b) and 5.2(c) and that there has been no materially adverse change in the
business, affairs, prospects, operations, properties, assets or condition of the
Company since December 31, 1997.
(g) 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 each Purchaser and to
the Purchasers' special counsel, and they shall each have received all such
counterpart originals and certified or other copies of such documents as they
may reasonably request. Such documents shall include (but not be limited to)
the following:
(i) A copy of the Restated Certificate and the Bylaws of the
Company (as amended through the date of such Closing), certified by the
Secretary or the Assistant Secretary of the Company as true and correct copies
thereof as of such Closing.
(ii) A certificate of the Secretary or an Assistant Secretary or
other officer of the Company certifying the names of the officers of the Company
authorized to sign this Agreement, the Rights Agreement, the Co-Sale Agreement
and the Voting Agreement, the certificates for the Shares and the other
documents, instruments or certificates to be delivered pursuant to this
Agreement by the Company or any of its officers, together with the true
signatures of such officers.
(iii) A copy of the resolutions of the Board of Directors and, if
required, the stockholders of the Company evidencing the amendment to the
Company's Certificate of Incorporation providing for the authorization of the
Shares, the approval of this Agreement, the Rights Agreement, the Voting
Agreement, the Co-Sale Agreement and the issuance of the Shares and the other
matters contemplated hereby.
(iv) Good standing certificates issued by the Delaware Secretary
of State and the California Secretary of State dated within ten (10) days of the
Closing.
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(h) The Company shall have executed and delivered to each Purchaser
that is a licensed Small Business Investment Company (an "SBIC Investor") a Size
Status Declaration on SBA form 480 and an Assurance of Compliance on SBA form
652, and shall have provided to each such Purchaser information necessary for
the preparation of a Portfolio financing Report on SBA form 1031.
(i) The Company shall have executed and delivered to Technology
Crossover Ventures II, L.P., a Delaware Limited Partnership, and the other
Purchasers affiliated therewith (collectively, "TCV"), a Management Rights
Agreement in form and substance reasonably acceptable to counsel to the Company
and counsel to the Purchasers.
5.3 Additional Condition to Obligations of the Company. In addition
to the conditions set forth in Section 5.1 hereof, the Company's obligation to
issue and sell the Shares to each Purchaser is subject to the fulfillment to the
Company's satisfaction, on or prior to the Closing, of the following conditions,
any of which may be waived in whole or in part by the Company:
(a) The representations and warranties made by such Purchaser in
Section 4 hereof shall be true and correct when made, and shall be true and
correct as of such Closing with the same force and effect as if they had been
made on and as of the Closing.
(b) Such Purchaser shall have performed all obligations and conditions
herein or in the Rights Agreement required to be performed or observed by it on
or prior to the Closing.
(c) Such Purchaser shall have paid the consideration for the Shares to
be sold to such Purchaser as set forth on Exhibit A hereto.
SECTION VI
MISCELLANEOUS
6.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of California as such laws are applied to agreements
between California residents entered into and to be performed entirely within
California.
6.2 Survival. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by the Purchaser and the
closing of the transactions contemplated hereby. All statements as to factual
matters contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder as of the date of such certificate or instrument.
6.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto, provided, however, that the rights of the Purchaser to purchase
Preferred shall not be assignable without the written consent of the Company.
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6.4 Entire Agreement; Amendment. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof. Neither this
Agreement nor any provision hereof may be amended, changed, waived, discharged
or terminated other than by a written instrument signed by the party against who
enforcement of any such amendment, change, waiver, discharge or termination is
sought; provided, however, that holders of more than fifty percent (50%) of the
outstanding Shares (or Common Stock issued upon conversion of the Shares or a
combination thereof) may waive or amend, with the Company's written consent, on
behalf of all Purchasers and other holders of Shares, any provisions hereof
benefiting the Purchasers (other than the provisions of Sections 5.1 and 5.2) so
long as the effect thereof will be that all such Purchasers and other holders of
Shares will be treated equally.
6.5 Notices. Etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
upon personal delivery to the party to be notified twenty-four (24) hours after
confirmed transmission of a facsimile, one business day after deposit with a
recognized overnight courier and four business days after deposit in the U.S.
mail, certified or registered, return receipt requested, addressed (a) if to a
Purchaser, at the address or addresses set forth on Exhibit A or at such other
address as such Purchaser shall have furnished the Company in writing, with a
copy to ▇▇▇▇▇ ▇▇▇▇▇▇, Esq., ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, or (b) if to the
Company, at its address set forth at the beginning of this Agreement, or at such
other address as the Company shall have furnished to the Purchaser in writing,
with a copy to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich LLP, ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
6.6 Severability. If any provision of this Agreement shall be judicially
determined to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
6.7 Finder's Fees.
(a) Except as set forth on Exhibit C hereto, the Company (i)
represents and warrants that it has retained no finder or broker in connection
with the transactions contemplated by this Agreement and (ii) hereby agrees to
indemnify and to hold the Purchasers harmless of and from any liability for any
commission or compensation in the nature of a finder's fee to any broker or
other person or firm (and the costs and expenses of defending against such
liability or asserted liability) for which the Company, or any of its employees
or representatives, is responsible.
(b) Each Purchaser (i) represents and warrants that it has retained no
finder or broker in connection with the transactions contemplated by this
Agreement and (ii) hereby agrees to indemnify and to hold the Company and the
other Purchasers harmless of and from any liability for any commission or
compensation in the nature of a finder's fee to any broker or other person or
firm (and the costs and expenses of defending against such liability or asserted
liability) for which such Purchaser, or any of its employees or representatives,
is responsible.
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6.8 Invention Assignment and Confidentiality Agreement. The Company shall
use commercially reasonable efforts to prevent any violations of any Invention
Assignment and Confidentiality Agreement between the Company and any employee,
consultant or contractor of or to the Company.
6.9 Titles and Subtitles. The section headings of this Agreement are for
convenience of reference only and are not to be considered in construing this
Agreement.
6.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.11 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party upon any breach or
default of any other party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed to be a waiver of any such breach or
default, or any acquiescence therein, or of any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. It is further agreed that any waiver, permit, consent or approval of
any kind or character of any breach or default under this Agreement, or any
waiver of any provisions or conditions of this Agreement must be in writing and
shall be effective only to the extent specifically set forth in writing, and
that all remedies, either under this Agreement, by law or otherwise, shall be
cumulative and not alternative.
6.12 Payment of Fees and Expenses. Each party shall be responsible for
paying its own fees, costs and expenses in connection with this Agreement and
the transactions herein contemplated; provided, however, that if the Closing is
effected, the Company agrees to pay the reasonable fees and expenses of special
counsel to the Purchasers at Closing, provided that such fees and expenses of
special counsel to the Purchasers are presented to the Company in a reasonably
detailed invoice and that such amount does not exceed $20,000. In the event of
any action to enforce any of the terms of this Agreement, the prevailing party
shall be entitled to reimbursement from the non-prevailing party of its costs
and expenses (including reasonable attorneys' fees) incurred in connection
therewith, in addition to all other remedies and relief to which such prevailing
party is entitled.
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