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EXHIBIT 10.14
CYBERGOLD, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
MAY 15, 1998
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TABLE OF CONTENTS
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1. Purchase and Sale of Stock...............................................................1
1.1 Sale and Issuance of Series C Preferred Stock...................................1
1.2 Closing.........................................................................1
1.3 Subsequent Sale of Series C Preferred Stock.....................................1
2. Representations and Warranties of the Company............................................2
2.1 Organization, Good Standing and Qualification...................................2
2.2 Capitalization and Voting Rights................................................2
2.3 Subsidiaries....................................................................3
2.4 Authorization...................................................................3
2.5 Valid Issuance of Preferred and Common Stock....................................3
2.6 Governmental Consents...........................................................4
2.7 Offering........................................................................4
2.8 Litigation......................................................................4
2.9 Proprietary Information and Inventions Agreement................................4
2.10 Patents and Trademarks.........................................................4
2.11 Compliance with Other Instruments..............................................5
2.12 Agreements; Action.............................................................5
2.13 Related-Party Transactions.....................................................6
2.14 Permits........................................................................6
2.15 Environmental and Safety Laws..................................................7
2.16 Manufacturing and Marketing Rights.............................................7
2.17 Disclosure.....................................................................7
2.18 Registration Rights............................................................7
2.19 Corporate Documents............................................................7
2.20 Title to Property and Assets...................................................7
2.21 Financial Statements...........................................................7
2.22 Changes........................................................................8
2.23 Employee Benefit Plans.........................................................9
2.24 Tax Returns....................................................................9
2.25 Labor Agreements and Actions; Employee Compensation............................9
2.26 Insurance.....................................................................10
2.27 Section 83(b) Elections.......................................................10
3. Representations and Warranties of the Investors.........................................10
3.1 Authorization..................................................................10
3.2 Purchase Entirely for Own Account..............................................10
3.3 Disclosure of Information......................................................10
3.4 Investment Experience..........................................................10
3.5 Accredited Investor............................................................11
3.6 Restricted Securities..........................................................11
3.7 Further Limitations on Disposition.............................................11
3.8 Legends........................................................................11
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4. Conditions of Investors' Obligations at Closing.........................................12
4.1 Representations and Warranties.................................................12
4.2 Performance....................................................................12
4.3 Compliance Certificate.........................................................12
4.4 Qualifications.................................................................12
4.5 Proceedings and Documents......................................................12
4.6 Proprietary Information and Inventions Agreements..............................12
4.7 Bylaws; Board of Directors.....................................................12
4.8 Restated Articles..............................................................12
4.9 Investors' Rights Agreement....................................................13
4.10 Opinion of Company Counsel....................................................13
5. Conditions of the Company's Obligations at Closing......................................13
5.1 Representations and Warranties.................................................13
5.2 Payment of Purchase Price......................................................13
5.3 Qualifications.................................................................13
7. Miscellaneous...........................................................................13
6.1 Survival of Warranties.........................................................13
6.2 Successors and Assigns.........................................................13
6.3 Governing Law..................................................................13
6.4 Counterparts...................................................................13
6.5 Titles and Subtitles...........................................................14
6.6 Notices........................................................................14
6.7 Finder's Fee...................................................................14
6.8 Expenses.......................................................................14
6.9 Amendments and Waivers.........................................................14
6.10 Severability..................................................................14
6.11 Corporate Securities Law......................................................15
6.12 Aggregation of Stock..........................................................15
6.13 Entire Agreement..............................................................15
6.14 Waiver of Conflicts...........................................................15
SCHEDULE A Schedule of Investors
SCHEDULE B Schedule of Exceptions
EXHIBIT A Amended and Restated Articles of Incorporation
EXHIBIT B Amended and Restated Investors' Rights Agreement
EXHIBIT C Opinion of Counsel for the Company
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CYBERGOLD, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES C PREFERRED STOCK PURCHASE AGREEMENT is made as of the 15th
day of May, 1998, by and among CyberGold, Inc., a California corporation (the
"Company"), and the investors listed on Schedule A hereto, each of which is
herein referred to as an "Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Sale and Issuance of Series C Preferred Stock.
(a) The Company shall adopt and file with the Secretary of
State of California on or before the Closing (as defined below) the Amended and
Restated Articles of Incorporation in the form attached hereto as Exhibit A (the
"Restated Articles").
(b) Subject to the terms and conditions of this Agreement,
each Investor agrees, severally and not jointly, to purchase at the Closing or
pursuant to SECTION 1.3 and the Company agrees to sell and issue to each
Investor at the Closing or pursuant to Section 1.3, that number of shares of the
Company's Series C Preferred Stock set forth opposite such Investor's name on
Schedule A hereto for the purchase price set forth thereon (the "Purchase
Price").
(c) On or prior to the Closing, the Company shall have
authorized (i) the sale and issuance to the Investors of the Series C Preferred
Stock and (ii) the issuance of the shares of Common Stock to be issued upon
conversion of the Series C Preferred Stock (the "Conversion Shares"). The Series
C Preferred Stock and the Conversion Shares shall have the rights, preferences,
privileges and restrictions set forth in the Restated Articles.
1.2 Closing. The purchase and sale of the Series C Preferred Stock
shall take place at the offices of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 10:00
A.M., on May 15, 1998, or at such other time and place as the Company and
Investors acquiring in the aggregate more than half the shares of Series C
Preferred Stock sold pursuant hereto mutually agree upon orally or in writing
(which time and place are designated as the "Initial Closing"). At the Closings
(as defined below), the Company shall deliver to each Investor a certificate
representing the Series C Preferred Stock that such Investor is purchasing
against payment of the Purchase Price therefor by check, wire transfer,
cancellation of indebtedness, or any combination thereof.
1.3 Subsequent Sale of Series C Preferred Stock. At any time on or
before the sixtieth (60th) day following the Initial Closing, the Company may
sell up to the balance of the authorized number of shares of Series C Preferred
Stock not sold at the Initial Closing. All such sales shall be made on the terms
and conditions set forth in this Agreement, at closings to take place at such
times and places as the Company and the purchasers may mutually agree (the
"Subsequent Closings"), and any such purchaser shall execute and become a party
to this
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Agreement and that certain Amended and Restated Investors' Rights Agreement
dated May 15, 1998, by and among the Company and the Investors, the form of
which is attached hereto as Exhibit B (the "Investors' Rights Agreement") and
shall have the rights and obligations hereunder and thereunder (the Initial
Closing and Subsequent Closings are collectively referred to as the "Closing" or
the "Closings"). The purchasers at any Subsequent Closing and the number of
shares of Series C Preferred Stock to be purchased by each such purchaser at any
Subsequent Closing shall be mutually agreed upon by the Company, VantagePoint
Venture Partners and Alta Partners. In addition, the Schedule of Investors will
be amended to add the names and number of shares of Series C Preferred Stock
sold pursuant to this paragraph 1.3 and each purchaser thereof shall be deemed
to be an "Investor" for all purposes under this Agreement.
2. Representations and Warranties of the Company. The Company
hereby represents and warrants to each Investor that, except as set forth on a
Schedule of Exceptions (the "Schedule of Exceptions") furnished each Investor
and special counsel for the Investors and attached hereto as Schedule B, which
exceptions shall be deemed to be representations and warranties as if made
hereunder:
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 carry on its business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure to so qualify would have a material adverse
effect on its business or properties.
2.2 Capitalization and Voting Rights. The authorized capital of the
Company consists, or will consist immediately prior to the Closing, of:
(a) Preferred Stock. 13,330,000 shares of Preferred Stock
(the "Preferred Stock"). The Preferred Stock consists of 3,185,000 shares of
Series A Preferred Stock (the "Series A Preferred Stock"), of which 3,000,000
shares are issued and outstanding, 2,144,971 shares of Series B Preferred Stock
(the "Series B Preferred Stock"), of which 2,117,471 are issued and outstanding
and 8,000,029 shares of Series C Preferred Stock (the "Series C Preferred
Stock"), none of which will be outstanding immediately prior to the Closing and
up to all of which may be sold pursuant to this Agreement. The rights,
privileges and preferences of the Preferred Stock will be as stated in the
Company's Restated Articles.
(b) Common Stock. 21,670,000 shares of common stock (the
"Common Stock"), of which 5,997,751 shares are issued and outstanding.
(c) The outstanding shares of Common Stock and Preferred
Stock are all duly and validly authorized and issued, fully paid and
nonassessable, and were issued in accordance with the registration or
qualification provisions of the Securities Act of 1933, as amended (the "Act")
and any relevant state securities laws or pursuant to valid exemptions
therefrom.
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(d) Except for (i) the conversion privileges of the Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, (ii) the
rights provided in Section 2.4 of the Investors' Rights Agreement, (iii)
warrants to purchase up to an aggregate of 27,500 shares of Series B Preferred
Stock, (iv) warrants to purchase up to an aggregate of 250,000 shares of Common
Stock, (v) options to purchase up to an aggregate of 185,000 shares of Series A
Preferred Stock and (vi) currently outstanding options to purchase 1,227,000
shares of Common Stock granted to employees and other service providers pursuant
to the Company's 1996 Stock Option Plan (the "Option Plan"), there are not
outstanding any options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from the Company of any
shares of its capital stock. In addition to the aforementioned options currently
outstanding under the Option Plan, the Company has reserved an additional
375,249 shares of its Common Stock for purchase upon exercise of options to be
granted in the future under the Option Plan. The Company is not a party or
subject to any agreement or understanding, and, to the best of the Company's
knowledge, there is no agreement or understanding between any persons and/or
entities, which affects or relates to the voting or giving of written consents
with respect to any security or by a director of the Company.
2.3 Subsidiaries. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
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 and the Investors' Rights Agreement,
the performance of all obligations of the Company hereunder and thereunder, and
the authorization, issuance (or reservation for issuance), sale and delivery of
the Series C Preferred Stock being sold hereunder and the Common Stock issuable
upon conversion of the Series C Preferred Stock has been taken or will be taken
prior to the Closing, and this Agreement and the Investors' Rights Agreement
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, and (iii) to the extent the indemnification
provisions contained in the Investors' Rights Agreement may be limited by
applicable federal or state securities laws.
2.5 Valid Issuance of Preferred and Common Stock. The Series C
Preferred Stock that is being purchased by the Investors hereunder, when issued,
sold and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Investors' Rights
Agreement and under applicable state and federal securities laws. The Common
Stock issuable upon conversion of the Series C Preferred Stock purchased under
this Agreement has been duly and validly reserved for issuance and, upon
issuance in accordance with the terms of the Restated Articles, will be duly and
validly issued, fully paid, and nonassessable and will be free of restrictions
on transfer other than restrictions on transfer under this Agreement and the
Investors' Rights Agreement and under applicable state and federal securities
laws.
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2.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except (i) the filing of the Restated Articles
with the Secretary of State of California; and (ii) the filing pursuant to
Section 25102(f) of the California Corporate Securities Law of 1968, as amended,
and the rules thereunder, which filing will be effected within fifteen (15) days
of the sale of the Series C Preferred Stock hereunder, or such other
post-closing securities filings as may be required.
2.7 Offering. Subject in part to the truth and accuracy of each
Investor's representations set forth in Section 3 of this Agreement, the offer,
sale and issuance of the Series C Preferred Stock as contemplated by this
Agreement are exempt from the registration requirements of any applicable state
and federal securities laws, and neither the Company nor any authorized agent
acting on its behalf will take any action hereafter that would cause the loss of
such exemption.
2.8 Litigation. There is no action, suit, proceeding or
investigation pending or, to the Company's knowledge, overtly threatened against
the Company that questions the validity of this Agreement or the Investors'
Rights Agreement, or the right of the Company to enter into such agreements, or
to consummate the transactions contemplated hereby or thereby, or that might
result, either individually or in the aggregate, in any material adverse changes
in the assets, condition, affairs or prospects of the Company, financially or
otherwise, or any change in the current equity ownership of the Company, nor is
the Company aware that there is any basis for the foregoing. The foregoing
includes, without limitation, actions, suits, proceedings or investigations
pending or, to the Company's knowledge, threatened involving the prior
employment of any of the Company's employees, their use in connection with the
Company's business of any information or techniques allegedly proprietary to any
of their former employers, or their obligations under any agreements with prior
employers. The Company is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or that the Company intends to initiate.
2.9 Proprietary Information and Inventions Agreement. Each employee,
officer and consultant of the Company has executed a Proprietary Information and
Inventions Agreement in substantially the form provided to special counsel to
the Investors. The Company is not aware that any of its employees, officers or
consultants are in violation thereof, and the Company will use its best efforts
to prevent any such violation.
2.10 Patents and Trademarks. To the best of its knowledge (but
without having conducted any special investigation or patent search), the
Company has sufficient title and ownership of, or right to use, all patents,
trademarks, service marks, trade names, copyrights, trade secrets, information,
proprietary rights and processes necessary for its business as now conducted and
as proposed to be conducted without any conflict with or infringement of the
rights of others. There are no outstanding options, licenses, or agreements of
any kind relating to the foregoing, nor is the Company bound by or a party to
any options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity,
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except, in either case, for standard end-user, object code, internal use
software license and support/maintenance agreements. The Company has not
received any communications alleging that the Company has violated or, by
conducting its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity. The Company is not aware that
any of its employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of his or her best efforts to promote the interests of
the Company or that would conflict with the Company's business as proposed to be
conducted. Neither the execution nor delivery of this Agreement or the
Investors' Rights Agreement, nor the carrying on of the Company's business by
the employees of the Company, nor the conduct of the Company's business as
proposed, will, to the best of the Company's knowledge, conflict with or result
in a breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any of such employees is
now obligated. The Company does not believe it is or will be necessary to
utilize any inventions of any of its employees (or people it currently intends
to hire) made prior to their employment by the Company.
2.11 Compliance with Other Instruments. The Company is not in
violation or default in any material respect of any provision of its Restated
Articles or Bylaws, or in any material respect of any instrument, judgment,
order, writ, decree or contract to which it is a party or by which it is bound,
or, to the best of its knowledge, of any provision of any federal or state
statute, rule or regulation applicable to the Company. The execution, delivery
and performance of this Agreement and the Investors' Rights Agreement, and the
consummation of the transactions contemplated hereby and thereby will not result
in any such violation or be in conflict with or constitute, with or without the
passage of time and giving of notice, either a default under any such provision,
instrument, judgment, order, writ, decree or contract or an event that results
in the creation of any lien, charge or encumbrance upon any assets of the
Company or the suspension, revocation, impairment, forfeiture, or nonrenewal of
any material permit, license, authorization, or approval applicable to the
Company, its business or operations or any of its assets or properties.
2.12 Agreements; Action.
(a) Except for agreements explicitly contemplated hereby and
by the Investors' Rights Agreement, there are no agreements, understandings or
proposed transactions between the Company and any of its officers, directors,
affiliates, or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or by which it is bound that may involve (i) obligations
outside the normal course of business (contingent or otherwise) of, or payments
to the Company in excess of, $50,000, or (ii) the license of any patent,
copyright, trade secret or other proprietary right to or from the Company (other
than the license of the Company's software and products in the ordinary course
of business), or (iii) provisions restricting or affecting the development,
manufacture or distribution of the Company's products or services.
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(c) The Company has not (i) declared or paid any dividends
or authorized or made any distribution upon or with respect to any class or
series of its capital stock, (ii) incurred any indebtedness for money borrowed
or any other liabilities individually in excess of $10,000 or, in the case of
indebtedness and/or liabilities individually less than $10,000, in excess of
$50,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under its
Restated Articles or Bylaws that adversely affects its business as now conducted
or as proposed to be conducted, its properties or its financial condition.
(f) The Company has not engaged in the past three (3) months
in any discussion (i) with any representative of any corporation or corporations
regarding the consolidation or merger of the Company with or into any such
corporation or corporations, (ii) with any corporation, partnership, association
or other business entity or any individual regarding the sale, conveyance or
disposition of all or substantially all of the assets of the Company or a
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company is disposed of, or (iii) regarding any
other form of acquisition, liquidation, dissolution or winding up of the
Company.
2.13 Related-Party Transactions. No employee, officer, or director of
the Company or member of his or her immediate family is indebted to the Company,
nor is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the best of the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company, except
that employees, officers, or directors of the Company and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company. No member of the immediate family of any officer or director
of the Company is directly or indirectly interested in any material contract
with the Company.
2.14 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 the
Company believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. The
Company is not in default in any material respect under any of such franchises,
permits, licenses, or other similar authority.
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2.15 Environmental and Safety Laws. To the best of its knowledge, the
Company is not in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and to the best
of its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation.
2.16 Manufacturing and Marketing Rights. The Company has not granted
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person and is not bound by any agreement that affects the Company's
exclusive right to develop, manufacture, assemble, distribute, market or sell
its products.
2.17 Disclosure. The Company has fully provided each Investor with
all the information that such Investor has requested for deciding whether to
purchase the Series C Preferred Stock and all information that the Company
believes is reasonably necessary to enable such Investor to make such decision.
To the best of its knowledge, neither this Agreement, the Investors' Rights
Agreement, nor any other statements or certificates made or delivered in
connection herewith or therewith contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
or therein not misleading.
2.18 Registration Rights. Except as provided in the Investors' Rights
Agreement, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
2.19 Corporate Documents. Except for amendments necessary to satisfy
representations and warranties or conditions contained herein (the form of which
amendments has been approved by the Investors), the Restated Articles and Bylaws
of the Company are in the form previously provided to special counsel for the
Investors.
2.20 Title to Property and Assets. The Company owns its property and
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens that 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, to the best of its knowledge, holds a valid leasehold
interest free of any liens, claims or encumbrances.
2.21 Financial Statements. The Company has delivered to each Investor
its unaudited financial statements (balance sheet, income statement and
statement of cash flows) as at December 31, 1997 and for the fiscal year then
ended and its unaudited financial statements (balance sheet and statement of
operations) as at and for the three-month period ended March 31, 1998 (the
"Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated and with each other, except that the
unaudited Financial Statements may not contain all footnotes required by
generally accepted accounting principles. 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 audit
adjustments. Except as set forth in the Financial Statements, the Company has no
material liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business
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subsequent to March 31, 1998 and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected in the Financial
Statements, which, in both cases, individually or in the aggregate, are not
material to the financial condition or operating results of the Company. Except
as disclosed in the Financial Statements, the Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.
2.22 Changes. Since March 31, 1998 there has not been:
(a) any change in the assets, liabilities, financial
condition or operating results of the Company from that reflected in the
Financial Statements, except changes in the ordinary course of business that
have not been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the assets, properties,
financial condition, operating results, prospects or business of the Company (as
such business is presently conducted and as it is proposed to be conducted);
(c) any waiver by the Company of a valuable right or of a
material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and that is not material to the assets, properties, financial
condition, operating results or business of the Company (as such business is
presently conducted and as it is proposed to be conducted);
(e) any material change or amendment to a material contract
or arrangement by which the Company or any of its assets or properties is bound
or subject;
(f) any material change in any compensation arrangement or
agreement with any employee;
(g) any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets;
(h) any resignation or termination of employment of any key
officer of the Company; and the Company, to the best of its knowledge, does not
know of the impending resignation or termination of employment of any such
officer;
(i) receipt of notice that there has been a loss of, or
material order cancellation by, any major customer of the Company;
(j) any mortgage, pledge, transfer of a security interest
in, or lien, created by the Company, with respect to any of its material
properties or assets, except liens for taxes not yet due or payable;
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(k) any loans or guarantees made by the Company to or for
the benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(l) any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company;
(m) to the best of the Company's knowledge, any other event
or condition of any character that might materially and adversely affect the
assets, properties, financial condition, operating results or business of the
Company (as such business is presently conducted and as it is proposed to be
conducted); or
(n) any agreement or commitment by the Company to do any of
the things described in this Section 2.22.
2.23 Employee Benefit Plans. The Company does not have any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
2.24 Tax Returns. The Company has filed all tax returns and reports
(including information returns and reports) as required by law. These returns
and reports are true and correct in all material respects, except to the extent
that a reserve has been reflected on the Financial Statements in accordance with
generally accepted accounting principles. The Company has paid all taxes and
other assessments due, except those contested by it in good faith that are
listed in the Schedule of Exceptions.
2.25 Labor Agreements and Actions; Employee Compensation. 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, to the
best of the Company's knowledge, 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 of the Company's
knowledge, threatened, that could have a material adverse effect on the assets,
properties, financial condition, operating results, or business of 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 or key employee, or that
any group of key employees, intends to terminate their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any of the foregoing. The employment of each officer and employee
of the Company is terminable at the will of the Company. To the best of its
knowledge, the Company has complied in all material respects with all applicable
state and federal equal employment opportunity and other laws related to
employment. The Company is not a party to or bound by any currently effective
employment contract, deferred compensation agreement, bonus plan, incentive
plan, profit sharing plan, retirement agreement, or other employee compensation
agreement.
9
13
2.26 Insurance. The Company has in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed.
2.27 Section 83(b) Elections. To the best of the Company's knowledge,
all individuals who have purchased unvested shares of the Company's Common Stock
have timely filed elections under Section 83(b) of the Code and any analogous
provisions of applicable state tax laws.
3. Representations and Warranties of the Investors. Each Investor
hereby represents and warrants that:
3.1 Authorization. Such Investor has full power and authority to
enter into this Agreement and the Investors' Rights Agreement, and each such
Agreement constitutes its valid and legally binding obligation, enforceable in
accordance with its terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies, and (iii) to the extent the indemnification provisions
contained in the Investors' Rights Agreement may be limited by applicable
federal or state securities laws.
3.2 Purchase Entirely for Own Account. This Agreement is made with
such 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 Series C Preferred Stock to be received by such Investor and
the Common Stock issuable upon conversion thereof (collectively, the
"Securities") will be acquired for investment for such Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, such Investor further represents that such Investor does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Securities.
3.3 Disclosure of Information. Such Investor believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Series C Preferred Stock. Such Investor further
represents that it has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the offering of the
Series C Preferred Stock and the business, properties, prospects and financial
condition of the Company. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 2 of this Agreement or
the right of the Investors to rely thereon.
3.4 Investment Experience. Such Investor is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment, and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Series C
Preferred Stock. If other than an individual, Investor also represents it has
not been organized for the purpose of acquiring the Series C Preferred Stock.
10
14
3.5 Accredited Investor. Such Investor is an "accredited investor"
within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D, as presently in effect.
3.6 Restricted Securities. Such Investor understands that the
Securities it is purchasing are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act, only in certain limited circumstances. In this connection, such
Investor represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
3.7 Further Limitations on Disposition. Without in any way limiting
the representations set forth above, such Investor further agrees not to make
any disposition of all or any portion of the Securities unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3 and the Investors' Rights Agreement provided and to the extent
this Section and such agreement are then applicable, and:
(a) There is then in effect a Registration Statement under
the 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 and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (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 shares under the Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of Paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an Investor that is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner or the transfer
by gift, will or intestate succession of any partner to his or her spouse or to
the siblings, lineal descendants or ancestors of such partner or his or her
spouse, if the transferee agrees in writing to be subject to the terms hereof to
the same extent as if he or she were an original Investor hereunder.
3.8 Legends. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act."
11
15
(b) Any legend required by the laws of the State of
California, including any legend required by the California Department of
Corporations and Sections 417 and 418 of the California Corporations Code.
(c) Any legend required by the Blue Sky laws of any other
state to the extent such laws are applicable to the shares represented by the
certificate so legended.
4. Conditions of Investors' Obligations at Closing. The obligations
of each Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
thereto:
4.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
4.2 Performance. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
4.3 Compliance Certificate. The President of the Company shall
deliver to each Investor at the Closing a certificate stating that the
conditions specified in Sections 4.1 and 4.2 have been fulfilled.
4.4 Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Closing.
4.5 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Investors' special counsel, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
4.6 Proprietary Information and Inventions Agreements. Each employee
of and consultant to the Company shall have entered into a Proprietary
Information and Inventions Agreement in the form previously provided to special
counsel for the Investors.
4.7 Bylaws; Board of Directors. The Bylaws of the Company shall
provide that the Board of Directors of the Company shall consist of six (6)
persons. Initially, the Board of Directors will be composed of ▇▇▇ ▇▇▇▇▇, A.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇.
4.8 Restated Articles. The Company shall have adopted and filed with
the Secretary of State of California the Restated Articles in the form attached
hereto as Exhibit A.
12
16
4.9 Investors' Rights Agreement. The Company and each Investor shall
have entered into the Investors' Rights Agreement in the form attached as
Exhibit B.
4.10 Opinion of Company Counsel. Each Investor shall have received
from ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP ("▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇"), counsel for the Company, an opinion, dated as of the Initial Closing,
in the form attached hereto as Exhibit C.
5. Conditions of the Company's Obligations at Closing. The
obligations of the Company to each Investor under this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions by
that Investor:
5.1 Representations and Warranties. The representations and
warranties of the Investors contained in Section 3 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 Closing.
5.2 Payment of Purchase Price. The Investor shall have delivered the
purchase price specified in Sections 1.2 or 1.3.
5.3 Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Closing.
6. Miscellaneous.
6.1 Survival of Warranties. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
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.
6.2 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Securities). Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
6.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
6.4 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.
13
17
6.5 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.
6.6 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.
6.7 Finder's Fee. Each party represents that it neither is nor will
be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which 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 finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
6.8 Expenses. The Company shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
this Agreement. The Company shall reimburse the reasonable fees and expenses of
▇▇▇▇▇▇ Godward LLP, special counsel for the Investors, not to exceed fifteen
thousand dollars ($15,000), upon receipt of a ▇▇▇▇ therefor. If any action at
law or in equity is necessary to enforce or interpret the terms of this
Agreement, the Investors' Rights Agreement, or the Restated Articles, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
6.9 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Common Stock issuable or issued upon conversion of the Series
C Preferred Stock. 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.
6.10 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 the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
14
18
6.11 Corporate Securities Law. THE SALE OF THE SECURITIES THAT ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
6.12 Aggregation of Stock. All shares of the Preferred Stock 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.
6.13 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
6.14 Waiver of Conflicts. Each party to this Agreement acknowledges
that ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, counsel for the Company, has in the past and may
continue to perform legal services for certain of the Investors in matters
unrelated to the transactions described in this Agreement, including the
representation of such Investors in venture capital financings and other
matters. Accordingly, each party to this Agreement hereby (1) acknowledges that
they have had an opportunity to ask for information relevant to this disclosure;
(2) acknowledges that ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ represented the Company in the
transaction contemplated by this Agreement and has not represented any
individual Investor or any individual shareholder or employee of the Company in
connection with such transaction; and (3) gives its informed consent to
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ representation of certain of the Investors in such unrelated
matters and to ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ representation of the Company in connection
with this Agreement and the transactions contemplated hereby.
15
19
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CYBERGOLD, INC.
By: /s/ A. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------
President
Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
20
ALTA CALIFORNIA PARTNERS, L.P.
By: Alta California Management
Partners, L.P.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
General Partner
ALTA EMBARCADERO PARTNERS, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
Member
Address:
--------------------------------
--------------------------------
--------------------------------
Telephone:
------------------------------
Facsimile:
------------------------------
SIGNATURE PAGE TO CYBERGOLD, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
21
VANTAGEPOINT VENTURE PARTNERS 1996
By: VantagePoint Associates LLC
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
Managing Member
Address:
--------------------------------
--------------------------------
--------------------------------
Telephone:
------------------------------
Facsimile:
------------------------------
SIGNATURE PAGE TO CYBERGOLD, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
22
GC&H INVESTMENTS
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Print Name:
-----------------------------
Title:
----------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
Telephone:
------------------------------
Facsimile:
------------------------------
SIGNATURE PAGE TO CYBERGOLD, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
23
By: /s/ ▇▇▇ ▇▇▇▇▇
-------------------------------------
▇▇▇ ▇▇▇▇▇
Title:
----------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
Telephone:
------------------------------
Facsimile:
------------------------------
SIGNATURE PAGE TO CYBERGOLD, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
24
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------
▇.▇. ▇▇▇▇▇▇▇▇▇
Title:
----------------------------------
By: /s/ P.M. Fishburne
-------------------------------------
P.M. Fishburne
Title:
----------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
Telephone:
------------------------------
Facsimile:
------------------------------
SIGNATURE PAGE TO CYBERGOLD, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
25
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
Title:
----------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
Telephone:
------------------------------
Facsimile:
------------------------------
SIGNATURE PAGE TO CYBERGOLD, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
26
▇▇▇▇▇ ▇. ▇▇▇▇▇ 1996 CHARITABLE
REMAINDER UNITRUST
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
Trustee
Address:
--------------------------------
--------------------------------
--------------------------------
Telephone:
------------------------------
Facsimile:
------------------------------
SIGNATURE PAGE TO CYBERGOLD, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
27
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
` ▇▇▇▇ ▇▇▇▇▇▇▇
Title:
----------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
Telephone:
------------------------------
Facsimile:
------------------------------
SIGNATURE PAGE TO CYBERGOLD, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
28
THE ▇▇▇▇▇▇▇▇▇ TRUSTS PARTNERSHIP
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Managing Partner
Address:
--------------------------------
--------------------------------
--------------------------------
Telephone:
------------------------------
Facsimile:
------------------------------
SIGNATURE PAGE TO CYBERGOLD, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
29
SCHEDULE A
SCHEDULE OF INVESTORS
NUMBER OF TOTAL PURCHASE
NAME AND ADDRESS SHARES PURCHASED PRICE OF SHARES
---------------- ---------------- ---------------
ALTA CALIFORNIA PARTNERS, L.P. 3,223,068 $2,932,991.88
ALTA EMBARCADERO PARTNERS, LLC 73,635 67,007.85
VANTAGEPOINT VENTURE PARTNERS 1996 2,472,528 2,250,000.48
GC&H INVESTMENTS 54,945 49,999.95
30
SCHEDULE B
SCHEDULE OF EXCEPTIONS
31
CYBERGOLD, INC.
SCHEDULE OF EXCEPTIONS TO THE
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
DATED MAY 15, 1998
The following are exceptions to the representations and warranties made
by CyberGold, Inc. (the "Company") in Section 2 of the Series C Preferred Stock
Purchase Agreement dated May 15, 1998 (the "Agreement") among the Company and
the Investors listed on Schedule A thereto (collectively, the "Investors"),
which exceptions shall be deemed to be representations and warranties as if made
under the Agreement. To the extent any exception is disclosed pursuant to any
specific section of the Agreement designated below, it shall be deemed to be
disclosed for any and all purposes required pursuant to the Agreement. (Where
the terms of a lease, contract or other disclosure item have been summarized or
described in this Schedule of Exceptions, such summary or description does not
purport to be a complete statement of the material terms of such lease, contract
or other item.) Terms defined in the Agreement shall have the same meanings when
used herein unless otherwise defined.
Section 2.2 Capitalization and Voting Rights
The Company has entered into two equipment lease lines with LINC Capital
Management ("LINC") for the leasing of computer equipment and other personal
property. The first equipment lease line, entered into on March 27, 1997, is for
an aggregate principal amount of up to $350,000 and has been fully used. A
warrant to purchase 17,500 shares of Series B Preferred Stock was issued to LINC
in connection with this lease line. The second equipment lease line, entered
into on March 31, 1998, is for an aggregate principal amount of up to $150,000,
of which approximately $67,261 is still available. A warrant to purchase up to
10,000 shares of Series B Preferred Stock was issued to LINC in connection with
this second lease line. The exact number of shares for which this warrant to
purchase up to 10,000 shares of Series B Preferred Stock may be exercised
depends upon how much of the available principal that the Company draws down
under the lease line. As of May 1, 1998, the warrant was exerciseable for
approximately 60% of the total amount, or 6,000 shares.
▇▇▇▇ ▇▇▇▇▇▇▇, a former employee of the Company, resigned from his
employment with the Company before reaching his one-year cliff vesting date.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, the Company's Chief Executive Officer, intends to request
that the Board of Directors permit ▇▇. ▇▇▇▇▇▇▇ to exercise his option as if it
had vested on a monthly basis so that ▇▇. ▇▇▇▇▇▇▇ would be vested in options to
purchase approximately 15,000 shares of the Company's Common Stock. It is
anticipated that the Board will discuss this issue at its next meeting.
The Company entered into a letter agreement with ▇▇▇ ▇▇▇▇▇▇▇ dated June
9, 1997, with respect to matters relating to ▇▇. ▇▇▇▇▇▇▇ providing services to
the Company. Pursuant to the letter agreement, the Company, among other things,
agreed to grant ▇▇. ▇▇▇▇▇▇▇ options to purchase 70,000 shares of the Company's
Common Stock if ▇▇. ▇▇▇▇▇▇▇ is elected to the Company's Board of Directors
within twelve months of the date of the letter agreement.
32
On January 16, 1998, the Company entered into a Settlement and Release
Agreement with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇. This agreement provided for the payment of
certain severance benefits and the acceleration of ▇▇. ▇▇▇▇▇▇▇▇▇▇▇▇'▇ options
such that he vested in options to purchase an aggregate of 39,062 shares of
Common Stock, exerciseable for up to three months following his termination. ▇▇.
▇▇▇▇▇▇▇▇▇▇▇▇ indicated to the Company that he intended to exercise the options.
However, ▇▇. ▇▇▇▇▇▇▇▇▇▇▇▇ did not complete and return the necessary exercise
paperwork to the Company within the required three-month period.
The Company has entered into a consulting agreement with ▇▇. ▇▇▇▇▇
▇▇▇▇▇▇, a director of the Company, whereby ▇▇. ▇▇▇▇▇▇ will be compensated for
his services in the form of Series C Preferred Stock. A copy of this agreement
has been provided to special counsel to the Investors.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, the Company's Chief Executive Officer and a member
of the Company's Board of Directors, has made certain arrangements regarding the
transfer of the shares of the Company's capital stock that he owns for estate
planning purposes. Such arrangements do not violate ▇▇. ▇▇▇▇▇▇▇▇▇'▇ obligations
under the Amended and Restated Investors' Rights Agreement.
Section 2.8 Litigation
The Company holds the domain name, "▇▇▇▇.▇▇▇." On February 3, 1998, the
Company received a letter from AT&T indicating that the Company's use of this
domain name may infringe AT&T's trademarks. The domain name is not currently in
use, and there has been no further action with regard to this matter. A copy of
this letter has been provided to special counsel for the Investors.
On April 7, 1998, the Company received a letter from ▇▇▇▇▇▇, ▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, L.L.P., counsel for Terran Systems ("Terran") alleging that the
Company owed Terran, an executive recruiting firm, the sum of $18,400 as
consideration for the placement of a candidate with the Company. The Company
believes that this matter may be resolved without recourse to litigation. Copies
of all correspondence have been provided to special counsel for the Investors.
On March 17, 1998, the Company received a letter from Remedy Temp, Inc.
("Remedy") alleging that the Company owed Remedy payment in the amount of $2800
for the placement of an employee with the Company. On April 23, 1998, the
Company contacted Remedy seeking documentation with regard to such claim. To
date, the Company has received no such documentation. A copy of the March 17,
1998 letter has been provided to special counsel for the Investors.
In 1996, the Company was sued by Maritz Corporation regarding alleged
trademark infringement. The case was settled in 1996.
33
Section 2.10 Patents and Trademarks
On April 2, 1998, the Company received a letter from its patent attorney
stating that its trademark application for the ▇▇▇▇ CyberGold has been delayed
due to a processing error by the Patent and Trademark Office.
Pursuant to an Assignment Agreement dated December 9, 1995, A. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇ assigned to the Company the full and exclusive right to
the "Attention Brokerage" process. Messrs. Goldhaber and ▇▇▇▇▇ are members of
the Company's Board of Directors.
Section 2.12 Agreements; Action
The Company has entered into the following agreements and has taken the
following actions:
1. The Company has sold and issued shares of its Series A
Preferred Stock to investors of the Company pursuant to a Series A
Preferred Stock Purchase Agreement, dated July 2, 1996. Certain of those
investors were and continue to be directors and shareholders of the
Company.
2. The Company has sold and issued shares of its Series B
Preferred Stock to investors of the Company pursuant to a Series B
Preferred Stock Purchase Agreement, dated June 12, 1997 (the "Series B
Purchase Agreement"). Certain of those investors were and continue to be
directors and shareholders of the Company.
3. Pursuant to a Note Purchase Agreement dated January 15,
1997, the Company issued Convertible Promissory Notes in the aggregate
amount of $1,000,000 to A. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Alafi Capital Company,
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, JTWROS. The outstanding principal and interest
under such notes converted into shares of Series B Preferred Stock in
connection with the transactions contemplated by the Series B Purchase
Agreement.
4. The Company has sold and issued Common Stock and/or
issued options to purchase Common Stock to its directors, officers and
certain of its employees and consultants.
5. The Company leases premises located at ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ from Weilman, ▇▇▇▇▇▇▇ & Co. (the "Lessor")
pursuant to that certain Commercial Lease and Deposit Receipt between
the Company and Lessor dated December 20, 1995. The current monthly rent
is $11,245.
6. The Company leases various equipment financed through
Sun Microsystems Finance. The current monthly payment under the lease
for the equipment totals approximately $8,400.
7. Pursuant to a sale-and-leaseback transaction in March
1997, the Company sold to and now leases computer equipment from LINC
Capital Management. The
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current monthly payment under the lease for the computer equipment
totals approximately $8,210.
8. Pursuant to a sale-and-leaseback transaction in January
1998, the Company sold to and now leases computer equipment from LINC
Capital Management. The current monthly payment under such lease totals
approximately $3,187.
9. Pursuant to a sale-and-leaseback transaction in March
1998, the Company leases computer equipment and other personal property
from LINC Capital Management. The current monthly payment under such
lease totals approximately $2,762.
10. The Company has entered into a service agreement with
AboveNet Communications, Inc. The current monthly payment pursuant to
this service agreement is approximately $1,960.
11. The Company, America Online ("AOL") and Digital
Marketing Services, a subsidiary of AOL ("DMS"), have held preliminary
discussions regarding a potential alliance and/or a business
combination, including the possibility of a merger of the Company's
incentive marketing business with DMS. These discussions are ongoing.
12. The Company has entered into a partnering agreement with
Audits & Surveys Worldwide ("ASW") regarding market research on-line.
13. The Company has entered into agreements with Visa and
the First National Bank of Omaha. Under the terms of this agreement, the
Company may not enter into a similar agreement with a competitor of Visa
for a period of up to two years.
14. The Company has entered into a reseller agreement with
Earthlink.
15. The Company has entered into an agreement with
Interactive Coupons.
16. The Company has entered into an agreement with
CyberSource.
Section 2.13 Related-Party Transactions
▇▇▇▇▇ ▇▇▇▇▇▇ is a director of the Company and serves as a marketing
consultant. ▇▇. ▇▇▇▇▇▇ is also a consultant to Visa, one of the Company's
partners.
▇▇▇ ▇▇▇▇▇▇▇ serves as VP Business Development as well as a partner in
the Philadelphia law firm ▇▇▇▇▇▇, ▇▇▇▇▇▇▇. The Company pays ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ not
more than $12,500 per month for ▇▇. ▇▇▇▇▇▇▇'▇ services. The Company also
reimburses ▇▇. ▇▇▇▇▇▇▇ for reasonable travel and lodging expenses incurred in
connection with services to the Company.
The Company is contemplating a future marketing or licensing
relationship with InterTrust Technologies Corporation ("InterTrust"). ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ is a shareholder of InterTrust, and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, who holds options
to purchase 25,000 shares of the Company's Common Stock, is an InterTrust
executive.
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Section 2.14 Permits
The Company has determined that certain of its software licenses are not
current. The Company estimates that it is delinquent on these licenses and that
the Company will be required to make payments aggregating approximately $40,000
to bring all software licenses current.
Section 2.16 Manufacturing and Marketing Rights
The Company has entered into a reseller agreement with Earthlink, and
reseller agreements with a number of corporations are pending.
Section 2.20 Title to Property and Assets
As disclosed above, the Company leases substantially all of its
equipment pursuant to leases with Sun Microsystems Finance and LINC Capital
Management.
Section 2.23 Employee Benefit Plans
The Company has established a 401(k) plan.
Section 2.25 Employee Compensation
Certain officers of the Company have received a salary reduction as a
cash conservation measure. The Company has made oral representations that the
salary reductions will be made up through the payment of cash or stock upon the
closing of the Series C Preferred Stock financing. The total amount of the
deficit is approximately $35,000 to $50,000.
Since the date of incorporation, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ has not received a
salary or any other direct compensation in return for his duties as Chairman and
Chief Executive Officer of the Company. While no compensation is due or payable
for ▇▇. ▇▇▇▇▇▇▇▇▇'▇ services to date, this arrangement will not continue
indefinitely, and the Company expects that the Board of Directors will develop
an appropriate compensation plan in the future.