1
EXHIBIT 10.7
CYBERSOURCE CORPORATION
SERIES C PREFERRED
STOCK PURCHASE AGREEMENT
THIS SERIES C PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is made
as of the 26th day of September, 1997 by and among CYBERSOURCE CORPORATION, a
California corporation (the "Company"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇")
(solely with respect to Sections 7.1 through 7.17, 8.6 and 8.7 hereof) and the
purchasers listed on the signature pages hereto under the heading "Investors",
each of whom is herein referred to as an "Investor").
In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereby agree as follows:
1. Purchase and Sale of Series C Preferred Stock.
1.1. Sale and Issuance of Series C Preferred Stock.
(a) The Board of Directors of the Company shall adopt
and file with the Secretary of State of the State of
California on or before the Initial Closing (as defined below)
the Second Amended and Restated Articles of Incorporation
(collectively, the "Restated Articles") in substantially the
form attached hereto as Exhibit A-1.
(b) Subject to the terms and conditions of this
Agreement, each Investor agrees severally and not jointly to
purchase, and the Company agrees to sell and issue to each
Investor, severally and not jointly, at the Closings (as
defined below) the number of shares of Series C Preferred
Stock (the "Preferred Shares"), set forth opposite the
Investor's name on the Schedule of Investors attached as
Exhibit B to this Agreement (the "Schedule of Investors"), for
up to an aggregate of 3,000,000 Preferred Shares at a purchase
price of $2.04 per share, for the purchase price shown
opposite such Investor's name on the Schedule of Investors
(for an aggregate purchase price of approximately $6,120,000).
1.2. Closings. The purchase and sale of the Preferred Shares shall
take place in three closings, the first of which will occur on September 26,
1997 (the "Initial Closing"), the second of which will occur on September 30,
1997 (the "Second Closing"), and the third of which will occur on October 6,
1997 (the "Final Closing") each at the offices of ▇▇▇▇▇▇▇ Tufts Cole & Black,
LLP, ▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, or at such other time and place
as the parties mutually agree upon (each such time and place to designated as a
"Closing" with respect to the Investors tendering funds in exchange for
Preferred Shares at that time, and collectively as the "Closings" ). At the
Closings, in the aggregate, the Company will deliver to
2
the Investors stock certificates representing 3,000,000 Preferred Shares against
payment of the purchase price therefor of $2.04 per share by wire transfers of
immediately available funds.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Investor, except as set forth on the Schedule of
Exceptions attached hereto as Exhibit C, which exceptions shall be deemed to be
representations and warranties as if made hereunder as follows:
2.1. Organization, Good Standing and Qualification. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of California and has all requisite corporate power and
authority to own and hold its properties, carry on its business as now conducted
and as proposed to be conducted. The Company has full corporate power and
authority to enter into and perform its obligations under this Agreement and to
carry out the transactions contemplated by this Agreement. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure so to qualify would have a material adverse effect on its
business or properties. A copy of the Company's Articles of Incorporation (as
amended) and the Company's Bylaws (as amended) have been delivered to each
Investor each of which are true and correct in full force and effect and have
not been amended.
2.2. Capitalization.
(a) Immediately prior to the Initial Closing the
authorized capital of the Company consists, or will consist of:
(i) Preferred Stock. 10,000,000 shares of
Preferred Stock, 1,985,520 of which have been designated
Series A Preferred Stock, no par value (the "Series A
Preferred Stock"), of which 1,985,520 shares are issued and
outstanding, 2,500,000 of which have been designated Series B
Preferred Stock, no par value (the "Series B Preferred Stock")
of which 2,037,038 shares are issued and outstanding and
3,000,000 of which have been designated Series C Preferred
Stock, no par value. No shares of Series C Preferred Stock
were issued and outstanding immediately prior to the Initial
Closing. The rights, preferences and privileges of the Series
A Preferred Stock, the Series B Preferred Stock, and the
Series C Preferred Stock will be as stated in the Restated
Articles.
(ii) Common Stock. 30,000,000 shares of Common
Stock, 9,000,000 shares of which were issued and outstanding.
(b) The list set forth in Item 2.2(b) of the Schedule
of Exceptions hereto is a complete and correct list of all security
holders of the Company, showing their holdings of issued and
outstanding shares of
- 2 -
3
Series A Preferred Stock, Series B Preferred Stock, Common Stock and
other Company securities (including options and warrants) as of the
date of this Agreement. To the best knowledge of the Company, each
such holder is the sole beneficial owner of all of the shares as to
which such holder is the record holder. Except as set forth in Item
2.2 of the Schedule of Exceptions hereto, holders of shares of the
Company's Series A Preferred Stock, Series B Preferred Stock and
Common Stock have no preemptive rights. True and complete copies of
the Series A Preferred Stock Purchase Agreements (as defined in
Section 2.11 of this Agreement) and Series B Preferred Stock
Purchase Agreements (as defined in Section 2.11 of this Agreement)
have been furnished to each Investor requesting them prior to the
date hereof. All such issued and outstanding shares have been duly
authorized and validly issued, are fully paid and nonassessable and
have been issued in compliance with all applicable state and federal
laws concerning the issuance of securities.
(c) Agreements for Purchase of Shares. Except for:
(i) the conversion privileges and preemptive
rights of the Series A Preferred Stock, the Series B Preferred
Stock, and the Series C Preferred Stock; and
(ii) options issued pursuant to the Company's
stock option plan and other agreements (as of the Initial
Closing options for 2,579,200 shares, including options for
1,000,000 shares issued outside of the Company's stock option
plan, are presently outstanding and an additional 420,800
shares are available for grant under the Company's stock
option plan, as amended.
prior to the Initial Closing there will not be any outstanding
options, warrants, rights (including conversion, preemptive rights
or rights of first offer) or agreements for the purchase or
acquisition from the Company of any shares of its capital stock.
2.3. Subsidiaries. Except as set forth in Item 2.3 of the Schedule
of Exceptions, the Company does not presently own or control, directly or
indirectly, any interest in any other corporation, association, partnership or
other business entity.
2.4. Authorization. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, the performance of all
obligations of the Company hereunder and the authorization, issuance (or
reservation for issuance) and delivery of the Preferred Shares being sold
hereunder and the Common Stock issuable upon conversion of the Preferred Shares,
has been taken or will be taken on or prior to each Closing, and this Agreement
constitutes a valid and legally binding
- 3 -
4
obligation of the Company enforceable in accordance with its terms, except as
affected by (i) bankruptcy or insolvency laws, or (ii) equitable principles or
public policy.
2.5. Valid Issuance of Preferred Stock. The Preferred Shares, when
issued, sold and delivered in accordance with the terms hereof for the
consideration expressed herein, will be duly and validly issued, fully paid and
nonassessable and, based in part upon the representations of the Investors set
forth in Section 3 of this Agreement, will be issued in compliance with all
applicable federal and state securities laws free and clear of all restrictions
on transfer (other than those arising from application of the securities laws).
The Common Stock issuable upon conversion of the Preferred Shares purchased
under this Agreement have been duly and validly reserved for issuance and when
issued and delivered in accordance with the Restated Articles will be duly and
validly issued, fully paid and nonassessable.
2.6. Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any United States federal, state, local or provincial governmental
authority on the part of the Company is required in connection with:
(a) the Company's valid execution, delivery, or
performance of this Agreement; and
(b) the offer, sale, or issuance of the Preferred
Shares by the Company hereunder or (assuming the exemption provided
by Section 3(a)(9) of the Securities Act of 1933, as amended, in its
current form is available and no commission is paid in conjunction
therewith) the issuance of Common Stock upon conversion of the
Preferred Shares;
except such filings as have been made prior to the Closings, and except
for any notices of sale required to be filed with the Securities and
Exchange Commission under Regulation D of the Securities Act of 1933, as
amended (the "Securities Act"), or such post-closing filings as may be
required under applicable state securities laws, which will be timely
filed within the applicable periods therefor. To the best knowledge of the
Company, neither the Company nor anyone acting on its behalf has offered
any of the Series C Preferred Stock being sold hereunder or substantially
similar securities of the Company for sale to, or solicited offers to buy
any securities of the Company from, or otherwise approached or negotiated
with respect thereto with any prospective purchaser other than the
Investors and other persons whom the Company believes to be Accredited
Investors as (as defined in Section 3.7 of this Agreement). The Company
agrees that neither the Company nor anyone acting on its behalf will offer
such securities of the Company or any part thereof or any similar
securities for issuance or sale to, or solicit any offer to acquire any of
the same from, anyone so as to make the issuance and sale of the Preferred
Shares being sold hereunder not exempt from the registration requirements
of Section 5 of the Securities Act. None of the shares of the Company's
capital stock issued and outstanding has been offered or sold in such a
manner as to make the issuance and sale of such shares or the Preferred
Shares being sold hereunder not exempt from such
- 4 -
5
registration requirements, and all such shares of capital stock have been
offered and sold in compliance with all applicable federal and state
securities laws.
2.7. Litigation. Except as disclosed in Item 2.7 of the Schedule of
Exceptions, there is no action, suit, proceeding or investigation pending or
currently threatened against the Company which questions the validity of this
Agreement or the right of the Company to enter into this Agreement, or to
consummate the transactions contemplated hereby, or which might result, either
individually or in the aggregate, in any material adverse change in the assets,
prospects, business, operations, or condition (financial or otherwise) of the
Company 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 Company is not a
party or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality. There is no action,
suit, proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
2.8. Patents and Trademarks.
(a) The list set forth in Item 2.8 of the Schedule of
Exceptions is a true and complete list and summary description of
all patents, patent applications, registered trademarks, registered
service marks, registered trade names and registered copyrights, and
licenses and rights to the foregoing presently owned or held by the
Company, none of which is in dispute or in any conflict with the
right of any other person or entity except as indicated on Item 2.7
of the Schedule of Exceptions.
(b) The Company's business as now conducted and as
presently proposed to be conducted does not conflict with or
infringe upon anyone's patents, copyrights, trademarks, trade
secrets, trade dress, know how, processes, or other proprietary
rights. The Company owns, or has the unrestricted right to use free
and clear of all material liens, claims and restrictions, all
patents, copyrights, trademarks, trade secrets, trade dress or other
proprietary rights necessary for the conduct of its business as it
is presently conducted or currently contemplated to be conducted,
without infringing on the right or claim of any person, any patents,
copyrights, trademarks, trade secrets, trade dress, know how,
processes, or other proprietary rights of others. Notwithstanding
any other provision of this Agreement, the exceptions described in
the Schedule of Exceptions do not apply to this subparagraph (b) of
Section 2.8.
2.9. Compliance with Laws and Other Instruments. The Company is not
in violation or default of any provisions of its Articles of Incorporation or
Bylaws or of any instrument, judgment, order, writ, decree or contract to which
it is a party or by which it is bound or, to its knowledge, of any provision of
federal or state statute, rule or regulation applicable to the Company or any of
its property, which violation or default would be materially adverse to the
assets, properties, prospects, business, operations, or condition (financial or
otherwise) of the Company. To the best
- 5 -
6
knowledge of the Company, there is no contamination of any real property leased
or operated by the Company that could subject the Company to liability in the
aggregate in excess of $10,000 under any environmental laws or regulations. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not result in any such violation or be
in conflict with or constitute, with or without the passage of time and giving
of notice, either a default under any such provision, instrument, judgment,
order, writ, decree or contract or an event which results in the creation of any
lien, charge or encumbrance upon any assets of the Company, which violation,
default, conflict or event would be materially adverse to the assets,
properties, prospects, business, operations, or condition (financial or
otherwise) of the Company.
2.10. Agreements; Action.
(a) Except as set forth in Item 2.10 of the Schedule
of Exceptions, there are no agreements, understandings, instruments,
contracts or proposed transactions to which the Company is a party
or by which it is bound which involve (i) obligations of, or
payments to the Company in excess of, $25,000; (ii) the license of
any patent, copyright, trade secret or other proprietary right of
the Company; (iii) material restrictions on the Company's business;
or (iv) material proprietary rights of the Company.
(b) The Company has not (i) declared or paid any
dividends, or authorized or made any distribution upon or with
respect to any class or series of its capital stock, (ii) incurred
any indebtedness for money borrowed or incurred any other
liabilities or obligations (absolute or contingent), individually in
excess of $10,000 or in excess of $25,000 in the aggregate not
reflected in the balance sheet dated June 30, 1997 other than
obligations or liabilities of the Company for compensation under
employment, advisor or consulting agreements, or other than
obligations or liabilities incurred in the ordinary course of
business, (iii) made any loans or advances to any person, other than
in the ordinary course of its business. Without limiting the
generality of the foregoing, the Company does not know of any basis
for the assertion against the Company of any material liabilities of
the Company (not provided for in the documents listed in Item 2.10
of the Schedule of Exceptions or the Financial Statements).
2.11. Registration Rights. Except as set forth in (i) that certain
Series A Preferred Stock Purchase Agreement dated as of the 6th day of January
1995, as amended as of (A) the 27th day of February, 1996, (B) the 3rd day of
July, 1996, (C) the 12th day of July, 1996; (ii) that certain Series A Preferred
Stock Purchase Agreement dated as of the 27th day of February, 1996
(collectively, the "Series A Stock Purchase Agreements"), and (iii) that certain
Series B Preferred Stock Purchase Agreement dated as of the 12th day of July,
1996 and except as provided in Section 7 of this Agreement, the Company has not
granted or agreed to grant any registration rights, including piggy-back rights,
to any person or entity.
- 6 -
7
2.12. Title to Property and Assets. The Company has good and
marketable title to the property and assets it purports to own free and clear of
all mortgages, liens, loans and encumbrances, except such encumbrances and liens
which arise in the ordinary course of business and do not materially impair the
Company's ownership or use of such property or assets. With respect to the
property and assets it leases, the Company is in compliance with such leases and
holds a valid leasehold interest free of any liens, claims or encumbrances,
which liens, claims or encumbrances would be materially adverse to the Company.
Except as set forth in Item 2.12 of the Schedule of Exceptions, the Company owns
or has the right to use all assets (tangible and intangible), necessary for the
conduct of its business as presently conducted and believes it can acquire the
right to use or the ownership of all assets, necessary for the conduct of its
business as it is proposed to be conducted, except for such assets that are
individually or in the aggregate immaterial to the business of the Company. The
Company knows of no assets required for the conduct of its business as it is
presently conducted, or as it is proposed to be conducted, the right to use or
ownership of which it is unlikely to obtain, except for such assets that are
individually or in the aggregate immaterial to the business of the Company.
2.13. Financial Statements. The Company has delivered to each
Investor its audited financial statements (income statement, balance sheet and
cash flow statement) at and for the periods ended December 31, 1994, December
31, 1995 and December 31, 1996 and unaudited financial statements (balance sheet
and profit and loss statement) at and for the period ended June 30, 1997 (the
"Financial Statements"). The Financial Statements are complete and correct in
all material respects and have been prepared in accordance with generally
accepted accounting principles 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, subject to normal year-end adjustments. All accounts receivable shown
on the balance sheet constitute accounts receivable resulting from the sale of
goods and services in the ordinary course of business, and, to the best
knowledge of the Company, such accounts receivable are subject to no conditions
as to payment, offsets, counterclaims, defenses of any kind, returns,
allowances, or credits other than to the extent of the allowance for doubtful
accounts shown thereon, and other than warranty claims that in the aggregate do
not exceed $5,000. The Company has not received any material customer complaints
concerning its products or services.
2.14. Changes. Since June 30, 1997, there has not been (i) any
change in the assets, liabilities, condition (financial or otherwise), business,
or operating results, or to the best of the Company's knowledge, prospects of
the Company from that reflected in the Financial Statements, except changes in
the ordinary course of business which have not been, in the aggregate,
materially adverse; (ii) any damage, destruction or loss, whether or not covered
by insurance, affecting in any material way the assets, properties, condition
(financial or otherwise), operating results, prospects or business of the
Company (as such business is presently conducted and as it is proposed to be
conducted); (iii) any waiver by the Company of a material right or of a material
debt owed to it or any satisfaction or discharge of any material lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business; (iv) any change or amendment in any material respect to a
material contract or agreement by which the Company or any of its assets or
properties is bound or subject; or (v) any change in any compensation
arrangement or agreement with any officer, director or key employee. For the
purposes of this Section 2.14 only, prospects shall not
- 7 -
8
include general economic or industry trends. Notwithstanding any other provision
of this Agreement, the exceptions described in the Schedule of Exceptions do not
apply to this Section 2.14.
2.15. Proprietary Information. To the best of the Company's
knowledge, it has done nothing to compromise the secrecy, confidentiality or
value of any of its trade secrets, know-how, inventions, prototypes, designs,
processes or technical data required to conduct its business as now conducted or
as proposed to be conducted and has taken security measures to protect the
secrecy, confidentiality and value of all the intellectual property which it
believes are reasonable and customary in the industry in which it operates. All
of the Company's employees and consultants have executed a
non-disclosure/invention assignments agreement in the form attached as Annex III
to the Schedule of Exceptions. To the Company's knowledge, no employee of the
Company in connection with such employee's employment with the Company, has
violated the terms of any agreement with a previous employer.
2.16. Permits. The Company has all franchises, permits, licenses,
and any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company and
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted. The Company is not
in default in any material respect under any of such franchises, permits,
licenses, or other similar authority.
2.17. Shareholder Agreements. Except as set forth in the Series A
Preferred Stock Purchase Agreements and Series B Preferred Stock Purchase
Agreements, there are presently no outstanding shareholder agreements, voting
trusts, proxies or other arrangements or understandings between the Company and
its shareholders, or among any of the shareholders of the Company, relating to
either the voting or the disposition of their respective shares.
2.18. Brokers or Finders. The Company has not engaged any broker,
investment banker or finder in connection with the sale of the Preferred Shares.
2.19. Disclosure. The Company has provided each Investor with all
information that such Investor has requested in connection with such Investor's
decision to invest in the Preferred Shares. To the best of the Company's
knowledge after due inquiry, neither this Agreement nor any other written
statement made or delivered in connection herewith contains any untrue statement
of a material fact or, taking this Agreement and all such written statements as
a whole, omits to state a material fact necessary to make statements herein or
therein misleading; provided, however, with respect to any projections or
expressions of opinion or predictions, the Company represents only that such
projections or expressions of opinions and predictions were made in good faith
and that the Company believes that there is a reasonable basis therefor.
2.20. Insurance. Set forth in Item 2.20 of the Schedule of
Exceptions is a true and complete list of all current insurance policies of the
Company, all of which are in full force and effect.
- 8 -
9
2.21. Taxes. The Company has accurately prepared and timely filed
all federal, state and local reports, returns, estimates, declarations,
information returns and statements with respect to taxes (together, "Tax
Returns") that are required to be filed by it and has paid or made provision for
the payment of all taxes due with respect to the periods covered by such Tax
Returns. The provision for taxes in the financial statements is sufficient for
the payment of all accrued and unpaid taxes. No such Tax Returns of the Company
have been audited by any taxing authority, and there are no waivers in effect of
the applicable statute of limitations for any period. No deficiency assessment
or proposed adjustment of federal income taxes or state or municipal taxes of
the Company is pending and the Company has no knowledge of any proposed
liability for any tax to be imposed. There are no tax sharing agreements or
similar contracts or arrangements to which the Company is a party. The Company
has not been a member of an affiliated group (within the meaning of Section 1504
of the Internal Revenue Code), filing a consolidated federal income Tax Return.
No closing agreement pursuant to Section 7121 of the Internal Revenue Code, or
similar provision of any state or local law, has been entered into by or with
respect to the Company. For the purpose of this Section 2.21, "tax" or "taxes"
shall mean all federal, state, local or foreign taxes, including but not limited
to income, gross receipts, windfall profits, alternative minimum, value added,
severance, property, production, sales, use, license, excise, franchise,
employment, withholding or similar taxes, together with any interest, additions
or penalties with respect thereto and any interest in respect of such additions
or penalties.
2.22. ERISA. Except as listed in Item 2.22 of the Schedule of
Exceptions, the Company does not maintain, sponsor, or contribute to any program
or arrangement that is an "employee pension benefit plan" (a "Pension Plan"), an
"employee welfare benefit plan" or a "multiemployer plan", as those terms are
defined in Section 3(2), 3(1), and 3(37) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). Except as listed in Item 2.22 of the
Schedule of Exceptions, the Company has no other incentive or benefit
arrangements. Each plan listed on Item 2.22 of the Schedule of Exceptions which
is subject to ERISA is in substantial compliance with ERISA. Each plan listed on
Item 2.22 of the Schedule of Exceptions which is a Pension Plan intended to be
qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended,
has been amended to comply with the qualification provisions of the Tax Reform
Act of 1986 and subsequent legislation before the expiration of the applicable
remedial amendment period and has received a favorable determination letter from
the Internal Revenue Service, and the Company is not aware of circumstances
likely to result in the revocation of any such favorable determination letter.
Other than as set forth in Item 2.22, there are no other deferred compensation,
bonus, incentive, profit sharing, retirement or other employee compensation
arrangements or plans.
2.23. Labor Agreements and Actions. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or has sought to represent any
of the employees, representatives or agents of the Company. There is no strike
or other labor dispute involving the Company pending, or to the best knowledge
of the Company threatened, which could have a material adverse effect on the
assets, properties, condition (financial or otherwise), operating results,
prospects or business of
- 9 -
10
the Company (as such business is presently conducted and as it is proposed to be
conducted), nor is the Company aware of any labor organization activity
involving its employees. The Company is not aware that any officer, key
employee, key consultant or key contractor, or that any group of key employees,
intends to terminate such person's employment or relationship with the Company,
as the case may be, nor does the Company have a present intention to terminate
the employment of or relationship with any of the foregoing persons.
2.24. Qualified Small Business Stock. To the best of the Company's
knowledge, the Preferred Shares will meet each of the requirements for
qualification as "qualified small business stock" set forth in Section 1202(c)
of the Internal Revenue Code of 1986, as amended (the "Code"). The Company (and
any predecessor):
(a) is and will be a domestic C corporation;
(b) will not have made any purchases of its own stock
described in Code Section 1202(c)(3)(B) during the one year period
preceding the Closings;
(c) will not have made any purchases of its own stock
described in Code Section 1202(c)(3)(A) during the two year period
preceding the Closings; and
(d) has maintained and will maintain aggregate gross
assets, as defined by Code Section 1202(d)(2), at all times between
August 10, 1993 and through the Closings of less than $50 million,
taking into account the assets of any corporation required to be
aggregated with the Company in accordance with Code Section
1202(d)(3).
3. Representations and Warranties of Each Investor. Each Investor
hereby severally and not jointly represents and warrants that:
3.1. Authorization. This Agreement constitutes such Investor's
valid and legally binding obligation, enforceable in accordance with its terms
except as affected by (i) bankruptcy or insolvency laws, and (ii) equitable
principles or public policy. Each Investor who is not a natural person, hereby
represents that the person executing this Agreement on its behalf is duly
authorized to do so.
3.2. Purchase Entirely for Own Account. This Agreement is made with
each Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Preferred Shares to be received by such Investor hereunder
will be acquired for investment for such Investor's own account, not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof, and that such Investor has no present intention of otherwise
distributing the same. By executing this Agreement, each Investor purchasing
Preferred Shares hereunder further represents that such Investor does not have
any contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
- 10 -
11
respect to any of the Preferred Shares, or any portion thereof. Each Investor
that is an entity represents that it has full power and authority to enter into
this Agreement. Notwithstanding the foregoing, in certain limited circumstances,
Global Retail Partners, L.P., DLJ Diversified Partners, L.P., DLJ Diversified
Partners-A, L.P., GRP Partners, L.P., Global Retail Partners Funding, Inc., and
DLJ First ESC L.L.C. (collectively, the "DLJ Affiliates") may be contractually
obligated to transfer certain of the Preferred Shares owned by them to a limited
number of affiliates, each of whom is an Accredited Investor as defined in
Section 3.7 hereof.
3.3. Disclosure of Information. Each Investor believes he or it has
received all the information he or it considers necessary or appropriate for
deciding whether to purchase the Preferred Shares. Each such Investor further
represents that he or it has had an opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of the offering of
the Preferred Shares. The foregoing does not modify the Company's
representations and warranties set forth herein or the Investor's right to rely
thereon.
3.4. Investment Experience. Each Investor is an investor in
securities of companies in the development stage and acknowledges that he or it
is able to fend for himself or itself, can bear the economic risk of his or its
investment and has such knowledge and experience in financial or business
matters that he or it is capable of evaluating the merits and risks of the
investment in the Preferred Shares. If other than an individual, Investor also
represents it has not been organized solely for the purpose of acquiring the
Preferred Shares.
3.5. Restricted Securities. Each Investor purchasing Preferred
Shares hereunder understands that the Preferred Shares are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in a transaction not involving a public offering
and that under such laws and applicable regulations such Preferred Shares may be
resold without registration under the Securities Act only in certain limited
circumstances. In this connection each Investor represents that he or it is
familiar with Securities and Exchange Commission ("SEC") Rule 144, as presently
in effect, and understands the resale limitations imposed thereby and by the
Securities Act
3.6. Further Limitations on Disposition. Without in any way
limiting the representations set forth above, each Investor purchasing Preferred
Shares hereunder further agrees not to make any disposition of all or any
portion of the Preferred Shares (or the Common Stock issuable upon the
conversion of the Preferred Shares) unless and until:
(a) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such
disposition is made in accordance with such registration statement;
or
(b) (i) Such Investor shall have notified the Company
of the proposed disposition, (ii) if reasonably requested by the
Company, such Investor shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such Preferred
Shares under the Securities Act and (iii) if reasonably requested by
the Company, the transferee shall have
- 11 -
12
furnished to the Company its agreement to abide by the restrictions
on transfer set forth herein as if it were a purchaser hereunder.
3.7. Accredited Investor. The term "Accredited Investor" as used in
this Agreement means a person or entity who:
(a) is a director or executive officer of the Company;
or
(b) is a natural person whose individual net worth, or
joint net worth with his or her spouse, at the time of purchase
exceeds $1,000,000, and the total purchase price does not exceed ten
percent (10%) of his or her individual net worth, or joint net worth
with his or her spouse, at the time of sale; or
(c) is a natural person who had an individual income
in excess of $200,000 in each of the two most recent years or joint
income with that person's spouse in excess of $300,000 in each of
those years and reasonably expects to reach the same income level in
the current year, and the total purchase price does not exceed ten
percent (10%) of his or her individual net worth, or joint net worth
with his or her spouse, at the time of sale; or
(d) is a private business development company as
defined in section 202(a)(22) of the Investment Advisors Act of
1940; or
(e) is either (i) a bank as defined in section 3(a)(2)
of the Securities Act, or a savings and loan association or other
institution as defined in section 3(a)(5)(A) of the Securities Act
whether acting in its individual or fiduciary capacity; (ii) a
broker or dealer registered pursuant to section 15 of the Securities
Exchange Act of 1934; as amended (the "Exchange Act"), (iii) an
insurance company as defined in section 2(13) of the Securities Act;
(iv) an investment company registered under the Investment Company
Act of 1940 or a business development company as defined in section
2(a)(48) of that Act; (v) a Small Business Investment Company
licensed by the U.S. Small Business Administration under section
301(c) or (d) of the Small Business Investment Act of 1958; or (vi)
an employee benefit plan within the meaning of Title I of ERISA, if
the investment decision is made by a plan fiduciary, as defined in
section 3(21) of ERISA, which is either a bank, savings and loan
association, insurance company, or registered investment adviser, or
if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions
made solely by persons that are Accredited Investors; or
(f) is any organization described in section 501(c)(3)
of the Internal Revenue Code of 1986, as amended ("Internal Revenue
- 12 -
13
Code"), corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
Shares offered (and, in the case of an Investor located in
Washington, operating for not less than twelve months), with total
assets in excess of $5,000,000 (or, in the case of an Investor
located in the State of Washington, $10,000,000); or
(g) is any trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring the
Shares offered, whose purchase is directed by a sophisticated person
as described in Regulation 230.506(b)(2)(ii) promulgated under the
Securities Act; or
(h) is an entity in which all of its equity owners
meet one or more of the standards set forth in (a) through (g)
above.
As used in this Section 3.7, the term "net worth" means the excess of
total assets over total liabilities, and "income" means actual economic income,
which may differ from adjusted gross income for federal income tax purposes.
3.8. Representations and Warranties as to Accredited Investors and
Excluded Purchasers Status. Each Investor as to himself or itself, severally and
not jointly, further represents to the Company that such Investor is (i) an
Accredited Investor and (ii) an excluded purchaser (as such term is described in
Section 260.102.13 of Title 10 of the California Code of Regulations or section
25102(f) of the California Corporate Securities Law of 1968, as amended).
3.9. Legends. To the extent applicable, each certificate or other
document evidencing any of the Preferred Shares issued hereunder or any Common
Stock issued upon conversion of the Preferred Shares shall be endorsed with the
legends set forth below, and such Investor covenants that, except to the extent
such restrictions are waived by the Company, such Investor shall not transfer
the securities without complying with the restrictions on transfer described in
the legends endorsed thereon;
(a) The following legend under the Securities Act:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR COMPLIANCE WITH
RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS
COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."
- 13 -
14
(b) If required by the authorities of any state in
connection with the issuance or sale of the Preferred Shares, the
legend required by such state authority.
The Company shall not be required (i) to transfer on its books any
Preferred Shares which shall have been transferred in violation of any of
the provisions set forth in this Agreement, or (ii) to treat as owner of
such Preferred Shares or to accord the right to vote as such owner or to
pay dividends to any transferee to whom such Preferred Shares shall have
been so transferred.
3.10. Removal of Legends.
(a) Any legend endorsed on a certificate pursuant to
Section 3.9(a) or (b) hereof shall be removed (i) if Preferred
Shares represented by such certificate shall have been effectively
registered under the Securities Act or otherwise lawfully sold in a
public transaction, (ii) if such Preferred Shares may be transferred
in compliance with Rule 144(k) promulgated under the Securities Act,
or (iii) if the holder of such Preferred Shares shall have provided
the Company with an opinion from counsel, in form and substance
reasonably acceptable to the Company and from attorneys reasonably
acceptable to the Company, stating that a public sale, transfer or
assignment of such Preferred Shares may be made without
registration.
(b) Any legend endorsed on a certificate pursuant to
Section 3.9(b) hereof shall be removed if the Company receives an
order of the appropriate state authority authorizing such removal or
if the holder of the Preferred Shares provides the Company with an
opinion of counsel, in form and substance reasonably acceptable to
the Company and from attorneys reasonably acceptable to the Company,
stating that such state legend may be removed.
4. California Commissioner of Corporations.
4.1. Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM
QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON
SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
5. Conditions of Each Investor's Obligations at Closing. The
obligations of each Investor under Section 1.1(b) of this Agreement are subject
to the fulfillment on or before the
- 14 -
15
Closing of its investment of each of the following conditions, the waiver of
which shall not be effective against any Investor who does not consent in
writing thereto:
5.1. Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
5.2. Performance. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing.
The entering into, delivery and performance of this Agreement by the Company
shall have been duly authorized by all necessary corporate action.
5.3. Consents, etc. The Company shall have secured all permits,
consents and authorizations that shall be necessary or required lawfully to
consummate this Agreement, to issue the Preferred Shares to be purchased by the
Investors hereunder and to issue the Common Stock into which it may be
converted, including without limitation to (i) the waiver of rights of first
refusal granted to holders of Series A Preferred Stock by such holders of Series
A Preferred Stock, the consent of the required majority of the holders of the
Series A Preferred Stock, and (ii) the waiver of rights of first refusal granted
to holders of Series B Preferred Stock by such holders of Series B Preferred
Stock, the consent of the required majority of the holders of the Series B
Preferred Stock.
5.4. Compliance Certificate. At the Closing, the Chief Executive
Officer of the Company shall deliver to the Investors a certificate certifying
that the conditions set forth in Sections 5.1, 5.2 and 5.3 have been fulfilled.
5.5. Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be in substance
and form reasonably satisfactory to Vulcan Ventures, Inc., and its counsel, and
such Investor and its counsel shall have received all such counterpart originals
or certified or other copies of such documents as such Investor or its counsel
may reasonably request.
5.6. Qualifications. The Commissioner of Corporations of the State
of California and any applicable United States state securities regulatory
authority shall have issued permits qualifying the offer and sale of the
Preferred Shares to the Investors pursuant to this Agreement, or such offer and
sale shall be exempt from such qualification under the California Corporate
Securities Law of 1968, as amended, and any other applicable state blue-sky law.
5.7. Restated Articles. The Company shall have adopted and filed
with the Secretary of State of the State of California on or before the date of
the Closing, the Restated Articles.
- 15 -
16
5.8. Legal Investment. At the time of such Closing, the purchase of
the Preferred Shares by the Investors shall be legally permitted by all laws and
regulations to which such Investors and the Company are subject.
5.9. Opinion of Counsel. At the Closing, the Investors shall have
received an opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & Black, LLP., counsel for the Company
dated as of the date of the Initial Closing and substantially in the form of
Exhibit D hereto.
5.10. Minimum Investment. Upon the consummation of the Initial
Closing, the Investors shall have subscribed for a minimum of 1,470,588
Preferred Shares at an aggregate purchase price of approximately $3,000,000.
Upon the consummation of the Second Closing, the Investors shall have subscribed
for a minimum of 2,941,176 Preferred Shares at an aggregate purchase price of
approximately $6,000,000. Upon consummation of the Final Closing the Investors
shall have subscribed for a minimum of 2,941,176 Preferred Shares at an
aggregate purchase price of approximately $6,120,000.
5.11. Key Man Insurance. The Company shall have made application for
Key Man life insurance on ▇▇▇▇▇▇▇▇▇ in the face amount of not less than
$1,000,000.
5.12. Shareholders Agreement. Prior to the obligation of the DLJ
Affiliates to close, a Shareholders Agreement (the "Shareholders Agreement")
shall have been executed by and between Vulcan Ventures, Inc. ('Vulcan"), the
DLJ Affiliates and the Company pursuant to which (A) Vulcan agrees to (i) vote
for the Series C Preferred Board of Director nominee selected by the DLJ
Affiliates, and (ii) not elect to redeem its shares of Series B Preferred Stock
until such time that holders of the Preferred Shares have a right to seek
redemption of the Preferred Shares pursuant to the Restated Articles, and (B)
the Company agrees to not permit the transfer of any of the Preferred Shares (or
Common Stock issuable upon conversion thereof) owned by Vulcan or the DLJ
Affiliates on its books or issue a new certificate representing any such shares
until the person to whom such shares are to be transferred has executed a
written agreement substantially in the form of the Shareholders Agreement and
has agreed to be bound by the terms thereof.
6. Conditions of the Company's Obligations at Closing. The obligations
of the Company to the Investors purchasing Preferred Shares hereunder are
subject to the fulfillment on or before the Closing of each Investor's
investment of each of the following conditions by such Investor:
6.1. Representations and Warranties. The representations and
warranties of the Investors contained in Section 3 hereof shall be true on and
as of the date of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing.
6.2. Payment of Purchase Price. Each Investor shall have delivered
the purchase price specified in Section 1.2.
- 16 -
17
6.3. Legal Investment. At the time of such Closing, the purchase of
the Preferred Shares by the Investors shall be legally permitted by all laws and
regulations to which the Investors and the Company are subject.
7. Registration Rights. The Company covenants and agrees as follows:
7.1. Definitions. For purposes of this Section 7:
(a) The terms "register," "registered," and
"registration" refer to a registration effected by preparing and
filing a registration statement or similar document in compliance
with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document;
(b) The term "Registrable Securities" means (i) the
Common Stock issuable or issued upon conversion of the Preferred
Shares being purchased hereunder (ii) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of
any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in
replacement of, such Preferred Shares, excluding in all cases,
however, any Registrable Securities sold by a person in a
transaction in which his registration rights are not assigned and
(iii) all shares of Common Stock which the Investors and their
permitted assignees may hereafter purchase (or shares of Common
Stock issuable upon exercise or conversion of securities hereafter
purchased) pursuant to their rights of first refusal or otherwise;
(c) The number of shares of "Registrable Securities
then outstanding" shall be determined by the number of shares of
Common Stock outstanding which are, and the number of shares of
Common Stock issuable pursuant to the exercisable or convertible
securities which are exercisable or convertible into, Registrable
Securities;
(d) The term "Holder" means any person owning or
having the right to acquire Registrable Securities or any assignee
thereof in accordance with Section 7.13 hereof. It is acknowledged
and agreed by the parties that the registration rights contained in
this Section 7 are pari-passu with and are not superior to the
registration rights granted pursuant to the Series A Purchase
Agreements or the Series B Purchase Agreement;
(e) The term "Series A Holder" shall mean a Holder
under the Series A Purchase Agreements.
(f) The term "Series B Holder" shall mean a Holder
under the Series B Purchase Agreement.
- 17 -
18
7.2. Request for Registration.
(a) If the Company shall receive (i) at any time
following the first to occur of December 31, 2001 or the date that
is six (6) months after the date of consummation of the Company's
sale of its Common Stock in a bona fide, firm commitment
underwriting pursuant to a registration statement on Form S-1 under
the Securities Act (a" Qualifying IPO") a written request from
Holders holding at least fifty percent (50%) of the Registrable
Securities then outstanding (the "First Initiating Holders") that
the Company file a registration statement under the Securities Act
covering the registration in an underwritten public offering of the
sale of Registrable Securities then outstanding having an
anticipated aggregate offering price, net of underwriting discounts
and commissions, equal to or more than $5,000,000 (the "Initial
Demand Registration"); or (ii) at any time after the consummation of
the Initial Demand Registration, a written request from Holders
holding at least twenty five percent (25%) of the Registrable
Securities then outstanding (the "Second Initiating Holders") that
the Company file a registration statement under the Securities Act
covering the registration in an underwritten public offering of the
sale of at least 25% of the Registrable Securities then outstanding
having an anticipated aggregate offering price, net of underwriting
discounts and commissions, equal to or more than $1,000,000 (the
"Second Demand Registration"), (iii) at any time after the
consummation of the Second Demand Registration a written request
from Holders holding at least fifty percent (50%) of the Registrable
Securities then outstanding (the "Third Initiating Holders"
collectively with the First Initiating Holders and the Second
Initiating Holders, the "Initiating Holders") that the Company file
a registration statement under the Securities Act covering the
registration in an underwritten public offering of the sale of at
least 50% of the Registrable Securities then outstanding having an
anticipated aggregate offering price, net of underwriting discounts
and commissions, equal to or more than $1,000,000; or (iv) the
requisite notice from the Series A Holders or the Series B Holders
of a demand registration, then the Company shall, within twenty-one
(21) days of the receipt thereof, give written notice of such
request to all Holders, Series A Holders and Series B Holders and
shall, subject to the limitations of subsection 7.2(b), file as soon
as practicable a registration statement under the Securities Act
covering all Registrable Securities which the Holders, Series A
Holders and Series B Holders request to be registered within twenty
(20) days of the mailing of such notice by the Company in accordance
with Section 9.6.
(b) Notwithstanding the foregoing, the Company shall
not be obligated to take any action to effect any such registration
pursuant to this Section 7.2:
- 18 -
19
(i) in any particular jurisdiction in which the
Company would be required to execute a general consent to
service of process in effecting such registration, unless the
Company is already subject to service in such jurisdiction and
except as may be required by the Securities Act; or
(ii) if the Company shall have initiated three
(3) registrations pursuant to this Section 7.2 and the
applicable registration statement has been declared effective
by the SEC and remained effective until the earlier of (A)
such time as all of the Registrable Securities included by the
Holders in such registration have been sold or disposed of by
them or (B) the expiration of the period described in Section
7.4(a). In addition, a request for registration shall not be
deemed to constitute a registration for purposes of this
subparagraph if: (I) the conditions to closing specified in
the purchase agreement or underwriting agreement entered into
in connection with such registration are not satisfied other
than by reason of some act or omission by the Holders
requesting such registration; (II) the Company voluntarily
takes any action that would result in the Holder not being
able to sell such Registrable Securities covered thereby
during the period during which the registration statement must
be kept effective; or (III) if, after it has become effective,
such registration becomes subject to any stop order,
injunction or other order or requirement of the SEC or other
governmental agency or court and such order, injunction or
requirement is not promptly withdrawn or lifted, and such
registration has not otherwise remained effective for the
relevant period (including effective periods both before and
after the order, injunction or requirement is made or
imposed).
(c) Subject to the foregoing paragraph 7.2(b), the
Company shall file a registration statement as soon as possible
after receipt of the request or requests of the Initiating Holders
under this Section 7.2; provided, however, that if the Company shall
furnish to such Initiating Holders within sixty (60) days of receipt
of such request a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors of
the Company (as evidenced by a board resolution) it would be
significantly detrimental to the Company and its shareholders for
such registration statement to be filed on or before the date filing
would be required and it is therefore essential to defer the filing
of such registration statement, the Company shall have the right to
defer such filing to a date not later than one hundred twenty (120)
days after receipt of such request, provided that the Company will
not exercise this right more than once in any twelve-month period.
- 19 -
20
(d) The underwriting shall be managed by an
underwriter or underwriters of national reputation selected by the
Initiating Holders, which selection shall be subject to the consent
of the Company, which consent shall not be unreasonably withheld.
The right of any Holder to registration pursuant to Section 7.2
shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable
Securities in the underwriting. The Company shall (together with all
Holders, Series A Holders and Series B Holders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or
underwriters selected as above provided. Notwithstanding any other
provision of this Section 7.2, if the underwriters advise the
Initiating Holders and the Company in writing that marketing factors
require a limitation of the number of shares to be underwritten and
that the total amount of securities that all Holders, Series A
Holders, and Series B Holders (initiating and non-initiating)
request pursuant to this Section 7.2(d) to be included in such
offering exceeds the amount of securities that the underwriters
reasonably believe compatible with the success of the offering, the
Company shall so advise all Holders and all of the shares to be
included in the registration shall be allocated among all Holders,
Series A Holders, and Series B Holders requesting inclusion
(initiating and non-initiating) pro rata according to the total
amount of securities entitled to be included in such registration
owned by each Holder, each Series A Holder, and each Series B Holder
requesting inclusion (initiating or non-initiating) or in such other
proportions as shall be mutually agreed by such selling
shareholders; provided, however, that in the event of such an
allocation ▇▇▇▇▇▇▇▇▇ may not include more than 35% of the shares to
be included in such registration statement by all selling
shareholders without the consent of the holders of the majority of
the shares requesting inclusion in the registration. For the
purposes of this Section 7.2(d) and Section 7.8 of this Agreement,
the language in such sections referring to ▇▇▇▇▇▇▇▇▇'▇ right to
participate as a selling shareholder at the 35% level means that all
▇▇▇▇▇▇▇▇▇ Shares (as defined in the Series A Stock Purchase
Agreements and the Series B Stock Purchase Agreements) included in
such a registration, whether held by ▇▇▇▇▇▇▇▇▇ or a transferee of
▇▇▇▇▇▇▇▇▇, shall be counted against such 35% limit. In addition, the
language in Section 7.2(d) and Section 7.8 referring to the ability
of the holders of a majority of the shares requesting inclusion in a
registration to waive such 35% limit means that only the holders of
a majority of such shares, calculated without regard to any
▇▇▇▇▇▇▇▇▇ shares, may effect such a waiver.
If any person does not agree to the terms of any such underwriting, he
shall be excluded therefrom by written notice from the Company or the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such
- 20 -
21
registration. If shares are so withdrawn from the registration, the Company
shall then offer to all persons who have retained the right to include
securities in the registration the right to include additional securities in the
registration in an aggregate amount equal to the number of shares so withdrawn,
with such shares to be allocated among the persons requesting additional
inclusion pro rata according to the total amount of securities entitled to be
included in such registration owned by each such person or in such other
proportions as shall be mutually agreed by such selling shareholders.
7.3. Company Registration. If (but without any obligation to do so)
at any time after the date of the Final Closing hereunder the Company proposes
to register (including for this purpose a registration effected by the Company
for shareholders other than the Holders of Registrable Securities except a
registration in which the Holders have the right to include Registrable
Securities under Section 7.2) any of its stock or other securities under the
Securities Act in connection with the public offering of such securities solely
for cash (other than a registration relating solely to the sale of securities to
participants in a Company stock plan, or a registration relating to shares to be
issued in connection with the acquisition of another company, or a registration
on any form which does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Registrable Securities), the Company shall, at such time, promptly give each
Holder of Registrable Securities written notice of such registration. Upon the
written request of each Holder of Registrable Securities given within twenty
(20) days after the effectiveness of such notice by the Company in accordance
with Section 9.6, the Company shall, subject to the provisions of Section 7.8,
cause to be registered under the Securities Act all of the Registrable
Securities that each such Holder of Registrable Securities has requested to be
registered.
7.4. Obligations of the Company. Whenever required under this
Section 7 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become
effective (but in no event later than 120 days after the initial
request for registration), and, upon the request of the Holders of a
majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to one hundred twenty
(120) days, plus a period equal to any period during which the
Holders are prohibited from making sales because of any stop order,
injunction or other order or requirement of the SEC or any other
governmental agency or court or a period during which the happening
of any event which makes any statement made in the registration
statement, the prospectus or any document incorporated therein by
reference untrue or misleading in any material respect until a
curative amendment or supplement is filed and furnished to the
Holders; provided, however, that before filing a registration
statement or prospectus or any amendments or supplements thereto
(including documents that would be incorporated or
- 21 -
22
deemed to be incorporated therein by reference) the Company will
furnish to the Holders of the Registrable Securities covered by such
registration and, the underwriters, and any attorney, accountant or
other agent retained by the Holders of Registrable Securities
covered by such registration statement or underwriters copies of all
such documents proposed to be filed, which documents will be subject
to the reasonable and timely review and comment of such Holders,
such counsel and underwriters, if any, and the Company will not file
any registration statement or any amendment thereto or any
prospectus or any supplement thereto filed in connection with a
registration pursuant to Section 7.2 (including such documents
incorporated by reference and proposed to be filed after the initial
filing of the registration statement) to which the Holders of a
majority of the Registrable Securities covered by such registration
statement or the underwriters, if any, shall reasonably and timely
object;
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used
in connection with such registration statement as may be necessary
to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration
statement;
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus and all amendments
and supplements thereto, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable
Securities owned by them;
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as shall be
reasonably requested by the Holders of Registrable Securities,
provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions; and
(e) Enter into and perform its obligations under an
underwriting agreement, in usual and customary form, with the
managing underwriter of such offering. Each Holder of Registrable
Securities participating in such underwriting shall also enter into
and perform its obligations under such an agreement.
7.5. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 7 that
the selling Holders of Registrable Securities shall furnish to the Company such
information regarding themselves, the Registrable
- 22 -
23
Securities held by them, and the intended method of disposition of such
securities as shall be required to effect the registration of the Registrable
Securities.
7.6. Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 7.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements (not to exceed $35,000) of one counsel for the
selling Holders, selling Series A Holders, and selling Series B Holders shall be
borne by the Company; provided, however, that the Company shall not be required
to pay for any expenses of any registration proceeding begun pursuant to Section
7.2 if the registration request is subsequently withdrawn at the request of the
Holders (initiating and non-initiating) holding a majority of the Registrable
Securities to be registered (in which case all participating Holders shall bear
such expenses), unless the Holders of at least 66-2/3% of the Registrable
Securities agree to forfeit their right to initiate one demand registration
pursuant to Section 7.2. (provided that if immediately prior to the time of such
withdrawal, the Holders have learned of a materially adverse change in the
condition, business or prospects of the Company from that known to the Holders
at the time of their request, then the Holders shall not be required to pay any
such expenses and shall retain their rights pursuant to Section 7.2).
7.7. Expenses of Company Registration. The Company shall bear and
pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 7.3 for each Holder (which right may be assigned as provided
in Section 7.13), including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees relating or apportionable
thereto and the fees and disbursements of one counsel (not to exceed $35,000)
for the selling Holders, selling Series A Holders, and selling Series B Holders
selected by them, but excluding underwriting discounts and commissions relating
to Registrable Securities.
7.8. Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 7.3 to include any of the Holders'
Registrable Securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it, and then only in such quantity as will not, in the opinion of the
underwriters, jeopardize the success of the offering by the Company. If the
total amount of securities, including Registrable Securities, requested by
shareholders to be included in an offering (other than a registration effected
pursuant to Section 7.2) exceeds the amount of securities sold other than by the
Company that the underwriters reasonably believe compatible with the success of
the offering, then the Company shall be required to include in the offering only
that number of such securities, including Registrable Securities, which the
underwriters believe will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling
shareholders, including Series A Holders and Series B Holders, according to the
total amount of securities entitled to be included therein owned by each selling
shareholder or in such other proportions as shall mutually be agreed to by such
selling shareholders). The underwriters,
- 23 -
24
pursuant to the preceding sentence, may completely exclude the Holder's
Registrable Securities from such underwriting if no other selling shareholders'
securities are so included.
If any person does not agree to the terms of any such underwriting, he
shall be excluded therefrom by written notice from the Company or the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration. If
shares are so withdrawn from the registration, the Company shall then offer to
all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among the persons requesting additional inclusion pro rata
according to the total amount of securities entitled to be included in such
registration owned by each such person or in such other proportions as shall be
mutually agreed by such selling shareholders.
For purposes of the immediately preceding parenthetical concerning
apportionment, for any selling shareholder which is a holder of Registrable
Securities and which is a partnership or corporation, the partners, retired
partners and shareholders of such holder, or the estates and family members of
any such partners and retired partners, and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single "selling shareholder," and
any pro rata reduction with respect to such "selling shareholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling shareholder," as defined in
this sentence.
7.9. Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 7.
7.10. Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 7:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless: (i) each Holder, the officers,
directors, agents, partners and legal counsel of each Holder of
Registrable Securities, and (ii) each person, if any, who controls
such Holder within the meaning of the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the officers, directors, agents, partners and legal counsel of
such control person, against any losses, claims, damages or
liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or state
law, rule or regulation insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively, a "Violation"): (A) any untrue statement or alleged
untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto,
- 24 -
25
(B) the omission or alleged omission to state therein a material
fact required to be stated therein, or necessary to make the
statements therein not misleading, or (C) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act,
any state securities law or any rule or regulation promulgated under
the Securities Act, the Exchange Act or any state securities law;
and the Company will reimburse each such Holder, officer, agent,
director, partner, legal counsel, underwriter or controlling person
each officer, director, agent, partner and legal counsel of such
controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action as such expenses are
incurred; provided, however, that the indemnity agreement contained
in this subsection 7.10(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if
such settlement is effected without the consent of the Company
(which shall not be unreasonably withheld), nor shall the Company be
liable in any such case for any such loss, claim, damage, liability
or action to the extent that it primarily arises out of or is based
upon a Violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection
with such registration by any such Holder, officer, partner,
director, agent, legal counsel or controlling person.
(b) To the extent permitted by law, each selling
Holder will, severally but not jointly, indemnify and hold harmless
(i) the Company; each of its officers, directors, agents, partners
and legal counsel; and (ii) each person, if any, who controls the
Company within the meaning of the Securities Act and the officers,
directors, agents, partners and legal counsel of such control
person, and any other Holder selling securities in such registration
statement or any of such other Holder's officers, directors, agents,
partners, legal counsel or any person who controls such Holder,
against any losses, claims, damages or liabilities (joint or
several) to which the Company or any officer, director, agent,
partner, legal counsel, or controlling person, or other such Holder
or director, officer, legal counsel or controlling person of such
other Holder may become subject, under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereto)
primarily arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished
by such Holder expressly for use in connection with such
registration; and each such Holder will reimburse any legal or other
expenses reasonably incurred by the Company or any officer,
director, agent, partner, legal counsel, controlling person, other
Holder, or officer, director, agent, partner, legal counsel or
controlling person of such other Holder in connection with
investigating or defending any such loss, claim,
- 25 -
26
damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 7.10(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the
consent of the Investor (which consent shall not be unreasonably
withheld) and provided further that in no event shall the liability
of any selling Holder hereunder be greater in amount than the dollar
amount of the proceeds (net of the payment of underwriting discounts
and commissions payable by such selling Holder) received by any such
selling Holder upon the sale of the Registrable Securities giving
rise to such indemnification obligation.
(c) Promptly after receipt by an indemnified party
under this Section 7.10 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if
a claim in respect thereof is to be made against any indemnifying
party under this Section 7.10, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying
party shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel at
its own expense if it so desires. Notwithstanding the foregoing, if
the indemnified party and the indemnifying party have conflicting
interests with respect to the action so that joint counsel for them
would be inappropriate, (as determined by counsel to the indemnified
party and counsel to the indemnifying party), then the indemnifying
party shall pay reasonable fees and expenses of one counsel to the
indemnified party. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of
any such action, if it materially adversely effects the ability to
defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 7.10, but the
omission to deliver written notice to the indemnifying party will
not relieve it of any liability that it may have to any indemnified
party otherwise than under this Section 7.10. No indemnifying party,
in the defense of any such action, shall, except with the consent of
each indemnified party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified
party of a release from liability in respect of such action.
(d) If the indemnification provided for in this
Section 7.10 is held by a court of competent jurisdiction to be
unavailable to an indemnified party, then, except to the extent that
contribution is not permitted under Section 11(f) of the Securities
Act, each indemnifying party, in lieu of indemnifying such
indemnified party thereunder, hereby
- 26 -
27
agrees to contribute to the amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one hand and of
the indemnified party on the other. The parties hereto agree that it
would not be just and equitable if contribution pursuant to this
Section 7.10(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the
equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 7.10(d),
no indemnifying party that is a selling Holder shall be required to
contribute any amount in excess of the amount by which the net
proceeds received by such selling Holder from the sale of
Registrable Securities exceeds the amount of any damages that such
selling Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
indemnity and contribution agreements contained in this Section 7.10
are in addition to any liability that the indemnifying parties may
have to the indemnified parties.
(e) The obligations of the Company and Holders under
this Section 7.10 shall survive the completion of any offering of
Registrable Securities in a registration statement under this
Section 7, and otherwise.
7.11. Reports Under Securities Exchange Act of 1934. With a view to
making available to the Investors purchasing Shares hereunder the benefits of
Rule 144 promulgated under the Securities Act and any other rule or regulation
of the SEC that may at any time permit a Holder to sell securities of the
Company to the public without registration, the Company agrees to:
(a) make and keep public information available, as
those terms are understood and defined in SEC Rule 144, at all times
after ninety (90) days after the effective date of the first
registration statement filed by the Company for the offering of its
securities to the general public;
(b) file with the SEC in a timely manner all reports
and other documents required of the Company under the Securities Act
and the Exchange Act; and
(c) furnish to any Holder, so long as the Holder owns
any Registrable Securities, forthwith upon request (i) a written
statement by the Company that it has complied with the reporting
requirements of SEC Rule 144 (at any time after ninety (90) days
after the effective date of
- 27 -
28
the first registration statement filed by the Company), the
Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements), and (ii) a copy of the most
recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company.
7.12. Form S-3 Registration. In case the Company shall receive
written request or requests from Holders owning a majority of the Registrable
Securities then outstanding, that the Company effect a registration on Form S-3
and any related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all
other Holders of Registrable Securities; and
(b) as soon as practicable, effect such registration
and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all
such portion of such Holder's or Holders' Registrable Securities as
are specified in such request, together with all or such portion of
the Registrable Securities of any other Holder or Holders joining in
such request as are specified in a written request given within 20
days after effectiveness of such written notice from the Company
pursuant to Section 9.6 hereof; provided, however, that the Company
shall not be obligated to effect any such registration,
qualification or compliance pursuant to this Section 7.12: (i) if
Form S-3 is not available for such offering by the Holders; (ii) if
the Holders, together with the holders of any other securities of
the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at
any aggregate price to the public of less than $1,000,000; (iii) if
the Company shall furnish to the Holders a certificate signed by the
Chief Executive Officer of the Company stating that in the good
faith judgment of the Board of Directors of the Company it would be
seriously detrimental to the Company and its stockholders for such
Form S-3 Registration to be effected at such time, in which event
the Company shall have the right to defer the filing of the Form S-3
Registration Statement for a period of not more than one hundred
twenty (120) days after receipt of the request of the Holder or
Holders under this Section 7.12; provided, however, that the Company
shall not utilize this right more than once in any 12 month period;
(iv) if the Company within the twelve month period preceding the
date of such request, already has effected two registrations on Form
S-3 for the Holders pursuant to this Section 7.12, or (v) if the
Company has completed a Qualifying IPO within the preceding 180
days, or (vi) in any particular jurisdiction in which the Company
would be required to qualify to do
- 28 -
29
business or to execute a general consent to service of process in
effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable
after receipt of the request or requests of the Holders. All
expenses, other than underwriting discounts and commissions,
incurred in connection with requested pursuant to Section 7.12,
including (without limitation) all other registration, filing,
qualification, printer's and accounting fees shall be borne by the
Company, including up to $35,000 of reasonable fees and disbursement
for one counsel for the Selling Shareholders.
7.13. Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 7 may be
assigned by a Holder to a transferee or assignee who (i) is not a competitor of
the Company and acquires at least fifty thousand (50,000) shares (as adjusted
for stock splits, combinations, etc.) of Registrable Securities, (ii) is an
Investor as defined hereunder, or (iii) is a partner or equity holder or an
affiliate of an Investor (or a third party duly authorized to act on behalf of
an Investor or its partners or equity holders), provided that such partner or
equity holder or affiliate has appointed such Investor (or such duly authorized
third party) as its lawful attorney-in-fact to receive notices, vote and
otherwise make binding decisions under the terms of this Section 7; provided, in
each case, the Company is, within thirty days of such transfer, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned;
and provided, further, that such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Securities Act.
7.14. "Market Stand-Off" Agreement. Each Holder of Registrable
Securities hereby agrees that it shall not, to the extent requested by the
Company and an underwriter of Common Stock (or other securities) of the Company,
sell or otherwise transfer or dispose of any securities of the Company (other
than securities registered in the offering) whether or not acquired by such
Holder under this Agreement during a reasonable and customary period of time
(not to exceed one hundred twenty (120) days), as agreed to by the Company and
the underwriters, following the effective date of a registration statement of
the Company filed under the Securities Act; provided, however, that:
(a) such agreement shall be applicable only to the
first such registration statement of the Company which covers shares
(or securities) to be sold on its behalf to the public in an
underwritten offering; and
(b) all officers and directors of the Company, holders
of 5% or more of the Company's issued and outstanding capital stock
and all
- 29 -
30
other persons with registration rights (whether or not pursuant to
this Agreement) similarly agree not to sell or transfer.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such reasonable and customary period.
7.15. Amendment of Registration Rights. Any provision of this
Section 7 may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
at least 66-2/3% of the Registrable Securities. Any amendment or waiver effected
in accordance with this paragraph shall be binding upon each holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, and the Company.
7.16. Rights That May Be Granted to Subsequent Investors.
(a) Within the limitations prescribed by this
paragraph (a), but not otherwise, the Company may grant to
subsequent investors in the Company rights of incidental
registration (such as those provided in Section 7.3). Such rights
may only pertain to shares of Common Stock, including shares of
Common Stock into which any other securities may be converted. Such
rights may be granted with respect to (i) registrations actually
requested by Initiating Holders pursuant to Section 7.2 or by Series
A Holders pursuant to Section 7.2 of the Series A Purchase Agreement
or by Series B Holders pursuant to Section 7.2 of the Series B
Purchase Agreement, but only in respect of that portion of any such
registration as remains after inclusion of all Registrable
Securities requested by Holders, Series A Holders, and Series B
Holders and (ii) registrations initiated by the Company, but only in
respect of that portion of such registration as is available under
the limitations set forth in Section 7.8 (which limitations shall
apply pro-rata to all Holders, Series A Holders, and Series B
Holders) and such rights shall be limited in all cases to sharing
pro-rata in the available portion of the registration in question
with Holders, Series A Holders and the Series B Holders, such
sharing to be based on the number of shares of Common Stock held by
the respective Holders, Series A Holders, and the Series B Holders
and held by such other investors, plus the number of shares of
Common Stock into which other securities held by the Holders, Series
A Holders, and Series B Holders and such other investors are
convertible, which are entitled to registration rights. With respect
to registrations which are for underwritten public offerings,
"available portion" shall mean the portion of the underwritten
shares which is available as specified in clauses (i) and
- 30 -
31
(ii) of the third sentence of this paragraph (a). Shares not
included in such underwriting shall not be registered.
(b) The Company may not grant to subsequent investors
in the Company rights of registration upon request (such as those
provided in Section 7.2) unless (i) such rights are limited to
shares of Common Stock, (ii) all Holders, Series A Holders, and the
Series B Holders are given enforceable contractual rights to
participate in registrations requested by such subsequent investors
on a pro-rata basis with such subsequent investors such
participation to be on a pro-rata basis, and subject to the
limitations, described in the final three sentences of paragraph (a)
of this Section 7.16, (iii) such rights shall not become effective
prior to one hundred eighty (180) days after the effective date of
the first registration pursuant to Section 7.2 and (iv) such rights
shall not be more favorable than those granted to the Holders.
7.17. Termination of Registration Rights. The Company's obligations
pursuant to this Section 7 shall terminate with respect to each Holder of
Registrable Securities on the earlier to occur of (i) five years from the date
of consummation a Qualifying IPO or (ii) such time as such Holder is eligible to
sell all of its Registrable Securities pursuant to Rule 144 (other than pursuant
to Rule 144(k)) under the Securities Act in a single three (3) month period
provided that the Company has been continually subject to the reporting
requirements of the Exchange Act for at least two years immediately prior to the
time of such sale.
8. Covenants.
8.1. Delivery of Financial Statements. The Company shall deliver to
each Investor for as long as such Investor (together with its affiliates) holds
not less than 100,000 Preferred Shares (or Common Stock into which such
Preferred Shares have been converted), as adjusted for stock splits, stock
dividends, reclassifications and similar events:
(a) as soon as practicable, but in any event within
one hundred twenty (120) days after the end of each fiscal year of
the Company, an income statement for such fiscal year, a balance
sheet of the Company as of the end of such year, and a cash flow
statement, such year-end financial reports to be in reasonable
detail, prepared in accordance with generally accepted accounting
principles ("GAAP") audited by independent public accountants of
recognized national standing; and
(b) within forty-five (45) days of the end of each
quarter, a statement of operations, cash flow analysis and balance
sheet for and as of the end of such quarter, in reasonable detail;
such quarterly statements shall also compare actual performance to
budget and to the prior year's comparable period.
- 31 -
32
8.2. Inspections. On a quarterly basis, the Company shall permit
each Investor or its authorized representatives, at such Investor's expense, to
visit and inspect the Company's properties, to examine its books of account and
records and to discuss the Company's affairs, finances and accounts with its
senior management at reasonable times as may be requested by the Investor;
provided, however, that the Company shall not be obligated pursuant to this
Section 8.2 to provide access to any information which it reasonably considers
to be a trade secret or similar confidential information.
8.3. Director Elected by Holders of Series C Preferred Stock. The
Investors will consult with the Company with respect to any director elected
from time to time by the holders of Series C Preferred Stock and will make
reasonable efforts to elect a director reasonably acceptable to the Company.
8.4. Termination of Covenants. The covenants set forth in Section
8.1 and 8.2 shall terminate and be of no further force or effect upon the
consummation of a Qualifying IPO or the Company first becomes subject to the
periodic reporting requirements of section 13(a) or 15(d) of the Exchange Act,
whichever event shall first occur.
8.5. Insurance. The Company shall keep and maintain in full force
and effect (i) fire and casualty insurance policies, with extended coverage,
reasonably sufficient in amount to allow it to replace any of its properties
that might be damaged or destroyed and (ii) general liability insurance in
amounts customary for entities in similar business and at a similar stage of
development.
8.6. Co-Sale Rights. ▇▇▇▇▇▇▇▇▇ agrees that during the period ending
on the consummation of a Qualifying IPO or immediately after the closing of the
sale or merger of the Company (where the Company is not the surviving entity or
where there otherwise is a change of control), he will not sell any shares of
Common Stock of the Company owned by him (the "▇▇▇▇▇▇▇▇▇ Common Stock') without
notifying the Investors twenty (20) or more days prior to the closing of such
sale and permitting the Investors and the holders of the Series A Preferred
Stock and Series B Preferred Stock then entitled to similar rights to
participate (through the sale of shares of Common Stock) in such sale on a
pro-rata basis, treating ▇▇▇▇▇▇▇▇▇'▇ Common Stock and all of the Preferred
Shares (on an as converted to Common Stock basis), and such Series A Preferred
Stock and Series B Preferred Stock (on an as converted to Common Stock basis) as
a group. Each Investor must notify ▇▇▇▇▇▇▇▇▇ in writing that such Investor will
participate in such sale (and sell such Investor's shares of Common Stock in
strict accordance with the terms and conditions of such sale as described in the
notice) on or before ten (10) business days before the anticipated closing of
such sale, or such Investor will have no right to participate in such sale. This
Section 8.6 shall not pertain to any transfers by ▇▇▇▇▇▇▇▇▇ to his ancestors,
descendants or spouse or to trusts for the benefit of such persons, or any bona
fide gift by ▇▇▇▇▇▇▇▇▇; provided, however, any shares of ▇▇▇▇▇▇▇▇▇'▇ Common
Stock transferred in a transaction described in this sentence shall continue to
be subject to the same co-sale obligations set forth in this Section 8.6 as if
▇▇▇▇▇▇▇▇▇ continued to own such shares.
- 32 -
33
8.7. Rights of First Offer on Transfers by ▇▇▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇▇▇
agrees that during the period ending on the consummation of a Qualifying IPO or
immediately after the closing of the sale or merger of the Company (where the
Company is not the surviving entity or where there otherwise is a change of
control), he will not sell any shares of ▇▇▇▇▇▇▇▇▇ 's Common Stock without
notifying the Investors twenty (20) or more days prior to the closing of such
sale and permitting such Investors the right to purchase all (but not less than
all) such ▇▇▇▇▇▇▇▇▇ Common Stock. Each Investor may purchase his or its pro rata
share (which proportion is to be determined by dividing the number of shares of
Common Stock issued or issuable upon conversion of the Series C Preferred Stock
held by such Investor by all of the Company's Common Stock then outstanding or
issuable upon conversion of the Series C Preferred Stock) of such ▇▇▇▇▇▇▇▇▇
Common Stock on the same terms and conditions as ▇▇▇▇▇▇▇▇▇ is offering such
▇▇▇▇▇▇▇▇▇ Common Stock to other persons. Prior to any sale by ▇▇▇▇▇▇▇▇▇ of any
▇▇▇▇▇▇▇▇▇ Common Stock subject to this right of first offer, ▇▇▇▇▇▇▇▇▇ shall
notify the Investors, in writing, of his intention to sell such ▇▇▇▇▇▇▇▇▇ Common
Stock, setting forth the terms under which he proposes to make such sale. Within
ten (10) days after receipt of such notice, each Investor shall notify ▇▇▇▇▇▇▇▇▇
as to whether he or it desires to purchase any or all of his or its pro rata
share of such ▇▇▇▇▇▇▇▇▇ Common Stock for the price and on the general terms
specified in the notice. In the event any Investor elects not to purchase such
holder's pro rata share of such ▇▇▇▇▇▇▇▇▇ Common Stock, the remaining Investors
shall have the right to purchase their pro rata share of such available shares
on the terms described above. ▇▇▇▇▇▇▇▇▇ shall promptly notify the remaining
Investors of the shares available for purchase ("Remaining ▇▇▇▇▇▇▇▇▇ Shares").
If, within ten (10) days after ▇▇▇▇▇▇▇▇▇ gives his aforesaid notice, an Investor
has not notified ▇▇▇▇▇▇▇▇▇ of the number of Remaining ▇▇▇▇▇▇▇▇▇ Shares he or it
desires to purchase upon the terms and conditions set forth in such notice (in
the event such shares are over subscribed each Investor will be entitled to
purchase on a pro-rata basis), ▇▇▇▇▇▇▇▇▇ may, during a period of one hundred
twenty (120) days following the end of such ten (10) day period, sell such
Remaining ▇▇▇▇▇▇▇▇▇ Shares at a price and upon terms and conditions no more
favorable to such purchasers than those set forth in such notice, subject to
compliance with the Co-Sale rights of the Investors set forth in Section 8.6
hereof. If the Investors elect to purchase all of the ▇▇▇▇▇▇▇▇▇ Common Stock
offered, the Investors so purchasing shall pay for the ▇▇▇▇▇▇▇▇▇ Common Stock by
a wire transfer of immediately available funds against delivery of the
securities at the executive offices of the Corporation at the time of the
scheduled closing therefor. ▇▇▇▇▇▇▇▇▇ shall take all such action as may be
reasonably required by any regulatory authority in connection with the exercise
by the Investors of the right to purchase ▇▇▇▇▇▇▇▇▇ Common Stock as set forth
herein. The right of first refusal contained in this Section 8.7 shall not apply
to (i) securities sold by ▇▇▇▇▇▇▇▇▇ in connection with an underwritten offering
pursuant to a registration statement filed under the Securities Act or in
connection with the sale or merger of the Company, or (ii) any transfers by
▇▇▇▇▇▇▇▇▇ to his ancestors, descendants or spouse or to trusts for the benefit
of such persons, or any bona fide gift by ▇▇▇▇▇▇▇▇▇; provided, however, any
shares of ▇▇▇▇▇▇▇▇▇ Common Stock transferred in a transaction described in this
sentence shall continue to be subject to the same right of first offer
obligations set forth in this Section 8.7 as if ▇▇▇▇▇▇▇▇▇ continued to own such
shares.
- 33 -
34
8.8. Qualified Small Business Status. The Company shall use its
commercially reasonable efforts not to and shall not knowingly, without the
prior written consent or affirmative vote or written consent of the holders of
at least a majority of the total outstanding shares of Series C Preferred Stock
who purchased such shares of Series C Preferred Stock from the Company pursuant
to this Agreement, voting separately as a class, take any action affecting, or
permit any action, other than a Permitted Action (as defined below), to affect,
the capital structure (including purchases of its own stock) or operation of its
business which would cause the Preferred Shares not to qualify as "qualified
small business stock" under Code Section 1202. As used in this Agreement,
"Permitted Action" shall mean a merger of the Company with or into any other
corporation or corporations (other than a mere reincorporation transaction), a
sale of all or substantially all of the assets of the Company or a transaction
or series of related transactions in which the Company issues shares
representing more than 50% of the voting power of the Company immediately after
giving effect to such transaction.
9. Miscellaneous.
9.1. Survival of Warranties; Indemnification. The warranties,
representations and covenants of the Company and the Investors contained in or
made pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the Final Closing and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf of the
Investors or the Company. The Company agrees to indemnify and hold harmless each
Investor from any losses or damages (including without limitation reasonable
attorneys fees) suffered arising out of a breach of any representation, warranty
or covenant of the Company under this Agreement.
9.2. Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties, including permitted transferees of the
Preferred Shares and the Common Stock into which it has been converted. Nothing
in this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
9.3. Governing Law. This Agreement shall be governed by and
construed under the internal substantive laws (but not the choice of law rules)
of the State of California.
9.4. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.5. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.6. Notices. Except as otherwise expressly provided herein, any
notice required or permitted hereunder shall be given in writing and it or any
certificates or other
- 34 -
35
documents delivered hereunder shall be deemed effectively given or delivered (as
the case may be) upon personal delivery (professional courier permissible) or
when mailed by receipted United States certified mail delivery, five (5)
business days after deposit in the United States mail. Such certificates,
documents or notice may be personally delivered or sent to the following
address: (a) if to a Investor, to the address set forth with respect to such
investor on Exhibit B-2 attached hereto, or to such other address of which such
investor shall have given notice pursuant hereto the Company, or (b) if to the
Company, to CyberSource Corporation, ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or to such other address of which the Company shall have
given notice pursuant hereto.
9.7. Finder's Fee. Each Investor severally agrees to indemnify and
hold harmless the Company from any liability for any commission or compensation
in the nature of a finder's fee (and the costs and expenses of defending against
such liability or asserted liability) for which such investor or any of its
officers, partners, employees or representatives is responsible. The Company
agrees to indemnify and hold harmless each Investor from any liability for any
commission or compensation in the nature of a finder's fee (and the costs and
expenses of defending against such liability or asserted liability) for which
the Company or any of its officers, employees or representatives is responsible.
9.8. Expenses. Each party to this Agreement shall bear its own
expenses incurred in connection with the negotiation, preparation, execution and
consummation of this Agreement, including the fees, expenses and disbursements
of its respective legal counsel incurred in connection herewith.
9.9. Amendments and Waivers. Except as specified in Section 7.14,
any term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the holders of at least 66-2/3% of shares of the Common Stock issued or
issuable upon conversion of the Preferred Shares; provided, however, the
conditions to Closing set forth in Section 5 hereof may only be amended by
unanimous agreement of the Investors.
9.10. Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
9.11. Aggregation of Stock. All Preferred Shares (or Common Stock
issued on conversion thereof) held or acquired by affiliated entities or persons
shall be aggregated together for the purpose of determining the availability of
any rights under this Agreement.
9.12. Confidentiality Agreement. Each Investor and any successor or
assign of such Investor who receives from the Company or its agents, directly or
indirectly, any information which the Company has not made generally available
to the public, pursuant to the preparation and execution of this Agreement or
disclosure in connection therewith or pursuant to the provisions of Section 8
hereof, acknowledges and agrees that such information is confidential
- 35 -
36
and for its use only in connection with evaluating its investment in the
Company, and further agrees that it will not disseminate such information to any
person other than its accountant, investment advisor or attorney and that such
dissemination shall be only for purposes of evaluating its investment.
9.13. Enforcement.
(a) Remedies at Law or in Equity. If the Company or
any Investor shall default in any of its obligations under this
Agreement or if any representation or warranty made by or on behalf
of the Company or any Investor, as the case may be, in this
Agreement or in any certificate, report or other instrument
delivered under or pursuant to any term hereof shall be untrue or
misleading in any material respect as of the date of this Agreement
or as of the Closing of such investment or as of the date it was
made, furnished or delivered, the Company or such Investor may
proceed to protect and enforce its rights, including by way of suit
in equity or action at law, whether for the specific performance of
any term contained in this Agreement or the Restated Articles of the
Company or for an injunction against the breach of any such term or
in furtherance of the exercise of any power granted in this
Agreement or such Restated Articles, or for damages or to enforce
any other legal or equitable right of such Investor (including
Investor's right to indemnification under Section 9.1) or to take
any one or more of such actions. In the event such an action is
brought, the prevailing party in such dispute shall be entitled to
recover from the losing party all fees, costs and expenses of
enforcing any right of such prevailing party under or with respect
to this Agreement or the Restated Articles of the Company, including
without limitation such reasonable fees and expenses of attorneys
and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
(b) Remedies Cumulative; Waiver. No remedy referred to
herein is intended to be exclusive, but each shall be cumulative and
in addition to any other remedy referred to above or otherwise
available to the Company or any Investor at law or in equity. No
express or implied waiver by the Company or any Investor of any
default shall be a waiver of any future or subsequent default as to
such party. The failure or delay of the Company or any party in
exercising any rights granted it hereunder shall not constitute a
waiver of any such right and any single or partial exercise of any
particular right by such party shall not exhaust the same or
constitute a waiver of any other right provided herein.
9.13.2. Entire Agreement. This Agreement and the other documents and
agreements delivered pursuant hereto constitute the full and entire
understanding and agreement among the parties with regard to the subjects
hereof and thereof and
- 36 -
37
supersedes any prior agreements (including any memorandum of understanding
or letters of intent) between the parties regarding the subject matter
hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Solely with respect to the agreements "Company"
made in Sections 7.1 - 7.17, 8.6 and CYBERSOURCE CORPORATION, a
8.7 hereof: California corporation
_______________________________ By: ___________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President and Chief Executive
Officer
"Investors"
VULCAN VENTURES, INC.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
By: ___________________________________
Name: _________________________________
Title: ________________________________
- 38 -
38
GLOBAL RETAIL PARTNERS, L.P.
By: GLOBAL RETAIL PARTNERS, INC.
General Partner
By: ___________________________________
Name: _________________________________
Title: ________________________________
GLOBAL RETAIL PARTNERS FUNDING, INC.
By: ___________________________________
Name: _________________________________
Title: ________________________________
GRP PARTNERS, L.P.
By: GLOBAL RETAIL PARTNERS, INC.
General Partner
By: ___________________________________
Name: _________________________________
Title: ________________________________
- 39 -
39
DLJ DIVERSIFIED PARTNERS, L.P.
By: DLJ DIVERSIFIED PARTNERS, INC.
General Partner
By: ___________________________________
Name: _________________________________
Title: ________________________________
DLJ DIVERSIFIED PARTNERS-A, L.P.
By: DLJ DIVERSIFIED PARTNERS, INC.
General Partner
By: ___________________________________
Name: _________________________________
Title: ________________________________
DLJ FIRST ESC L.L.C.
By: DLJ LBO PLANS MANAGEMENT
CORPORATION, Manager
By: ___________________________________
Name: _________________________________
Title: ________________________________
WA&H INVESTMENT, L.L.C.
By: ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ Group,
L.L.C. its managing member
By:_____________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: CFO/Managing Director
▇▇▇▇▇▇ INDUSTRIES, INC.
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
By: ___________________________________
Name: _________________________________
Title: ________________________________
- ▇▇ -
▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ PARTNERS
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
By: ___________________________________
Name: _________________________________
Title: ________________________________
----------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
RAINBOW TRADING PARTNERS, LTD.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
By: ___________________________________
Name: _________________________________
Title: ________________________________
RAINBOW TRADING VENTURE PARTNERS, L.P.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
By: ___________________________________
Name: _________________________________
Title: ________________________________
▇▇▇▇▇▇ INC.
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
By: ___________________________________
Name: _________________________________
Title: ________________________________
- 41 -
41
UH TECHNOLOGY PARTNERS, LDC
By: ____________________________________
General Partner of its Investment
Manager, Unterberg Harris Capital
Management, LP
UH CAPITAL PARTNERS INTERNATIONAL, LDC
By: ____________________________________
General Partner of its Investment
Manager, Unterberg Harris Capital
Management, ▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ PRIVATE EQUITY
PARTNERS, LP
By: ____________________________________
Member of its Investment General
Partner, Unterberg Harris LLC
UNTERBERG HARRIS PRIVATE EQUITY
PARTNERS, CV
By: ____________________________________
Member of its Investment General
Partner, Unterberg Harris LLC
- 42 -
42
WILBLAIRCO ASSOCIATES, L.P.
By: ____________________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Its: General Partner
- 43 -
43
EXHIBIT A-1
SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
- 44 -
44
EXHIBIT B-1
SCHEDULE OF INVESTORS
NO. OF SHARES
"INVESTOR" PURCHASE PRICE PURCHASED
Global Retail Partners, L.P. $ 1,923,444.60 942,865
Vulcan Ventures, Inc. $ 1,461,998.64 716,666
UH Technology Partners, LDC $ 377,775.36 185,184
UH Capital Partners International, LDC $ 122,224.56 59,914
Unterberg Harris Private Equity Partners, LP $ 412,000.44 201,961
Unterberg Harris Private Equity Partners, CV $ 87,999.48 43,137
DLJ Diversified Partners, L.P. $ 573,146.16 280,954
DLJ Diversified Partners-A, L.P. $ 212,847.48 104,337
GRP Partners, L.P. $ 125,035.68 61,292
Global Retail Partners Funding, Inc. $ 132,420.48 64,912
DLJ First ESC L.L.C $ 33,105.12 16,228
WA&H Investment, L.L.C $ 300,000.36 147,059
▇▇▇▇▇▇ Industries, Inc. $ 65,000.52 31,863
▇▇▇▇▇▇, Inc. $ 65,000.52 31,863
Pacific Asset Partners $ 30,000.24 14,706
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇ $ 25,999.80 12,745
Rainbow Trading Partners, Ltd. $ 25,999.80 12,745
Rainbow Trading Venture Partners, L.P. $ 25,999.80 12,745
TOTAL $ 5,999,999.04 2,941,176
45
EXHIBIT B-2
NOTICES
WITH A COPY TO:
▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ Pepper & Shefelman PLLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Rainbow Trading Partner, Ltd.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Rainbow Trading Venture Partners, L.P.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Pacific Assets Partners
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
46
WITH A COPY TO:
▇▇▇ ▇▇▇▇▇
WA&H Investment
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Unterberg Harris Capital Partners
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇ ▇▇▇▇▇
FTL Investment, Inc.
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, Inc.
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Global Retail Partners, L.P.
2121 Avenue of the Stars, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
WITH A COPY TO:
▇▇▇ ▇▇▇▇▇
DLI Diversified Partners, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
- 2 -
47
WITH A COPY TO:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
GRP Partners, L.P.
2121 Avenue of the Stars, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Global Retail Partners Funding, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
WITH A COPY TO:
▇▇▇ ▇▇▇▇▇
DLJ First ESC L.L.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
- 3 -
48
EXHIBIT C
SCHEDULE OF EXCEPTIONS