EXHIBIT 10.15
▇▇▇▇▇▇▇.▇▇▇, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
July 1, 1999
Table of Contents
1. Purchase and Sale of Preferred Stock........................................................... 1
1.1 Sale and Issuance of Series B Preferred Stock.............................................. 1
1.2 Closing; Delivery.......................................................................... 1
2. Representations and Warranties of the Company.................................................. 2
2.1 Organization, Good Standing and Qualification.............................................. 2
2.2 Capitalization............................................................................. 2
2.3 Subsidiaries............................................................................... 3
2.4 Authorization.............................................................................. 3
2.5 Valid Issuance of Securities............................................................... 3
2.6 Governmental Consents...................................................................... 4
2.7 Litigation................................................................................. 4
2.8 Intellectual Property...................................................................... 4
2.9 Compliance with Other Instruments.......................................................... 5
2.10 Agreements; Action......................................................................... 5
2.11 No Conflict of Interest.................................................................... 6
2.12 Rights of Registration and Voting Rights................................................... 6
2.13 Title to Property and Assets............................................................... 6
2.14 No Financial Statements.................................................................... 7
2.15 Changes.................................................................................... 7
2.16 Employee Benefit Plans..................................................................... 8
2.17 Tax Returns and Payments................................................................... 8
2.18 Labor Agreements and Actions............................................................... 8
2.19 Confidential Information and Invention Assignment Agreements............................... 9
2.20 Permits.................................................................................... 9
2.21 Corporate Documents........................................................................ 9
2.22 Insurance Coverage......................................................................... 9
2.23 Qualified Small Business Stock............................................................. 9
2.24 Disclosure................................................................................. 9
2.25 Year 2000 Compatibility.................................................................... 9
3. Representations and Warranties of the Purchasers............................................... 10
3.1 Authorization.............................................................................. 10
3.2 Purchase Entirely for Own Account.......................................................... 10
3.3 Disclosure of Information.................................................................. 10
3.4 Restricted Securities...................................................................... 10
3.5 No Public Market........................................................................... 11
3.6 Legends.................................................................................... 11
3.7 Accredited Investor........................................................................ 11
3.8 Foreign Investors.......................................................................... 11
4. Conditions of the Purchasers' 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 Opinion of Company Counsel................................................................. 12
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4.6 Board of Directors......................................................................... 12
4.7 Investors' Rights Agreement................................................................ 12
4.8 Co-Sale Agreement.......................................................................... 12
4.9 Voting Agreement........................................................................... 12
4.10 Restated Articles.......................................................................... 13
4.11 Confidential Information and Invention Assignment Agreement................................ 13
5. Conditions of the Company's Obligations at Closing............................................. 13
5.1 Representations and Warranties............................................................. 13
5.2 Performance................................................................................ 13
5.3 Qualifications............................................................................. 13
5.4 Investors' Rights Agreement................................................................ 13
5.5 Voting Agreement........................................................................... 13
6. Covenants of the Company....................................................................... 13
6.1 Use of Proceeds............................................................................ 13
6.2 Key Man Life Insurance..................................................................... 13
6.3 Qualified Small Business Stock............................................................. 13
6.4 Termination of Covenants................................................................... 14
7. Miscellaneous.................................................................................. 14
7.1 Survival of Warranties..................................................................... 14
7.2 Transfer; Successors and Assigns........................................................... 14
7.3 Governing Law.............................................................................. 14
7.4 Counterparts............................................................................... 14
7.5 Titles and Subtitles....................................................................... 14
7.6 Notices.................................................................................... 14
7.7 Finder's Fee............................................................................... 15
7.8 Fees and Expenses.......................................................................... 15
7.9 Attorney's Fees............................................................................ 15
7.10 Amendments and Waivers..................................................................... 15
7.11 Severability............................................................................... 15
7.12 Delays or Omissions........................................................................ 15
7.13 Entire Agreement........................................................................... 16
7.14 Corporate Securities Law................................................................... 16
7.15 Confidentiality............................................................................ 16
7.16 Exculpation Among Purchasers............................................................... 16
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▇▇▇▇▇▇▇.▇▇▇, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
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This Series B Preferred Stock Purchase Agreement (the "Agreement") is made
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as of July 1, 1999 by and between ▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation (the
"Company"), and each of the purchasers listed on the Schedule of Purchasers
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attached hereto as Exhibit A (the "Schedule of Purchasers") who are signatories
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to this Agreement, and any other person or persons who shall have executed this
Agreement in connection with the purchase of Additional Shares, as defined below
(the "Additional Purchasers"), which person or persons shall be added to a
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Supplemental Schedule of Purchasers, as defined below, at such time as they
shall purchase such Additional Shares pursuant hereto.
The parties hereby agree as follows:
1. Purchase and Sale of Preferred Stock.
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1.1 Sale and Issuance of Series B Preferred Stock.
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(a) The Company shall adopt and file with the Secretary of State
of the State of Delaware on or before the Closing (as defined below) the Second
Amended and Restated Certificate of Incorporation in the form attached hereto as
Exhibit B (the "Restated Certificate").
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(b) Subject to the terms and conditions of this Agreement, each
Purchaser agrees to purchase at the Closing and the Company agrees to sell and
issue to each Purchaser at the Closing that number of shares of Series B
Preferred Stock set forth opposite each such Purchaser's name on Exhibit A
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attached hereto at a purchase price of $2.5852 per share (the "Original Purchase
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Price"). The shares of Series B Preferred Stock issued to the Purchasers
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pursuant to this Agreement shall be hereinafter referred to as the "Stock." The
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Stock and the Common Stock issuable upon conversion of the Stock shall be
collectively referred to herein as the "Securities."
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1.2 Closing; Delivery.
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(a) The purchase and sale of the Stock shall take place at the
offices of ▇▇▇▇▇▇▇ Coie LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, at 10:00 a.m., on July 1, 1999, or at such other time and place as
the Company and the Purchasers of a majority of the Stock mutually agree upon,
orally or in writing (which time and place are designated as the "Closing"). The
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closings of the purchase and sale of up to the authorized number of shares of
Series B Preferred Stock (the "Additional Shares") hereunder (the "Subsequent
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Closings") shall be held at the offices of ▇▇▇▇▇▇▇ Coie LLP at such times and
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dates as the Company and the Additional Purchasers shall specify, but in no
event shall an Subsequent Closing occur later than 30 days from the Closing.
(b) Subject to the terms of this Agreement, at the Closing, the
Company shall deliver to each Purchaser a certificate representing the Stock
being purchased hereby against payment of the purchase price therefor by check
payable to the Company, by wire
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transfer to the Company's bank account, by cancellation of indebtedness, or by
any combination thereof. At the Subsequent Closings, if any, a Supplemental
Schedule of Purchasers shall be added to this Agreement as Exhibit A.1 (the
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"Supplemental Schedule of Purchasers") and the Company will deliver to each
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Additional Purchaser who shall have executed this Agreement a certificate or
certificates representing the number of Additional Shares being purchased hereby
against (i) payment of the purchase price therefor by check payable to the
Company, by wire transfer to the Company's bank account, by cancellation of
indebtedness, or by any combination thereof, and (ii) delivery of signature
pages to this Agreement and each of the Related Agreements (as defined below).
2. Representations and Warranties of the Company. The Company hereby
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represents and warrants to each Purchaser that, except as set forth on a
Schedule of Exceptions attached hereto as Exhibit C (the "Schedule of
--------- -----------
Exceptions"), which exceptions shall be deemed to be representations and
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warranties as if made hereunder:
2.1 Organization, Good Standing and Qualification. The Company is a
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corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
own its properties and to carry on its business. The Company is duly qualified
to transact business and is in good standing as a foreign corporation in each
jurisdiction in which the failure to so qualify would have a material adverse
effect on its business or properties.
2.2 Capitalization. Immediately prior to the Closing, the authorized
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capital of the Company consists of:
(a) 25,000,000 shares of Preferred Stock, (i) 11,555,000 of
which have been designated Series A Preferred Stock, 9,755,000 of which are
issued and outstanding immediately prior to the Closing, and (ii) 8,000,000 of
which have been designated Series B Preferred Stock, none of which are issued
and outstanding immediately prior to the Closing. The rights, privileges and
preferences of the Series A and Series B Preferred Stock are as stated in the
Restated Certificate.
(b) 41,000,000 shares of Common Stock, 9,652,500 shares of which
are issued and outstanding immediately prior to the Closing. All of the
outstanding shares of Common Stock have been duly authorized and validly issued,
are fully paid and nonassessable, and were issued in compliance with all
applicable federal and state securities laws.
(c) The Company has reserved 5,062,500 shares of Common Stock
for issuance to officers, directors, employees and consultants of the Company
pursuant to its 1999 Stock Plan duly adopted by the Board of Directors and
approved by the Company's stockholders (the "Stock Plan"), of which options to
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purchase 2,017,125 shares of Common Stock are currently outstanding, options to
purchase 1,215,000 shares of Common Stock have been exercised and 1,830,375
shares are available for future issuance under the Stock Plan. The Company has
reserved 11,555,000 shares of Common Stock for issuance upon conversion of the
Series A Preferred Stock and warrants to purchase Series A Preferred Stock
("Series A Warrants") and 8,000,000 shares of Common Stock for issuance upon
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conversion of the Series B
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Preferred Stock. The Company has reserved 1,800,000 shares of its Series A
Preferred Stock for issuance upon exercise of the Series A Warrants and 585,000
shares of Common Stock for issuance upon the exercise of warrants to purchase
Common Stock issuable to the founders of Loveland Pet Products, Inc. ("Loveland
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Warrants").
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(d) Except for (i) the conversion privileges of the Series A
Preferred Stock, Series B Preferred Stock, Series A Warrants and Loveland
Warrants (ii) the rights of first refusal as set forth in the Investors' Rights
Agreement and the Co-Sale Agreement, (iii) the rights to participate in the
initial public offering as indicated in the IPO Allocation Agreement dated as of
May 4, 1999 between the Company and certain purchasers of Series A Preferred
Stock (the "IPO Allocation Agreement"), and (iv) 5,062,500 shares of Common
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Stock reserved for issuance pursuant to the Stock Plan, there are, to our
knowledge, no options, warrants, conversion privileges or other rights (or
agreements for any such rights) outstanding to purchase or otherwise obtain from
the Company any of the Company's securities except as set forth on the Schedule
of Exceptions.
2.3 Subsidiaries. The Company does not currently own or control,
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directly or indirectly, any interest in any other corporation, association, or
other business entity.
2.4 Authorization. All corporate action on the part of the Company,
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its officers, directors and stockholders necessary for the due authorization,
execution and delivery of this Agreement, the Amended and Restated Investors'
Rights Agreement in the form attached hereto as Exhibit D (the "Investors'
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Rights Agreement"), the Amended and Restated Co-Sale Agreement in the form
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attached hereto as Exhibit E (the "Co-Sale Agreement"), and the Amended and
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Restated Voting Agreement in the form attached hereto as Exhibit F (the "Voting
--------- ------
Agreement" and collectively with the Investors' Rights Agreement and the Co-Sale
---------
Agreement, the "Related Agreements"), and any other agreements or instruments
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executed by the Company in connection herewith or therewith, the performance of
all obligations of the Company hereunder and thereunder and the authorization,
issuance and delivery of the Securities has been taken or will be taken prior to
the Closing. This Agreement, the Related Agreements and the other agreements
and instruments executed by the Company in connection herewith or therewith,
when executed and delivered by the Company, shall constitute valid and legally
binding obligations of the Company, enforceable against the Company in
accordance with their terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, 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, or (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 Securities. The Stock being issued to the
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Purchasers hereunder, 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 free of restrictions on transfer other
than restrictions on transfer under this Agreement, the Co-Sale Agreement and
applicable state and federal securities laws. Based in part upon the
representations of the Purchasers in Section 3 hereof and subject to the
provisions of Section 2.6
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below, the Stock will be issued in compliance with all applicable federal and
state securities laws. The Common Stock issuable upon conversion of the Stock
(the "Conversion Stock") has been duly and validly reserved for issuance, and
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upon issuance in accordance with the terms of the Restated Certificate, shall be
duly and validly issued, fully paid and nonassessable and free of restrictions
on transfer other than restrictions on transfer under this Agreement, the Co-
Sale Agreement and applicable federal and state securities laws.
2.6 Governmental Consents. No consent, approval, order or
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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 and the Related Agreements and any other
agreements or instruments executed by the Company in connection herewith or
therewith, or in connection with the issuance of the Stock, except for filings
pursuant to Section 25102(f) of the California Corporate Securities Law of 1968,
as amended, and the rules thereunder, other applicable state securities laws and
Regulation D of the Securities Act of 1933, as amended (the "Securities Act").
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2.7 Litigation. There is no action, suit, proceeding or
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investigation pending or, to the Company's knowledge, currently threatened
against the Company or any of its subsidiaries that questions the validity of
this Agreement or the Related Agreements or the right of the Company to enter
into them, or to consummate the transactions contemplated hereby or thereby, or
that might result, either individually or in the aggregate, in any material
adverse change in the assets, condition or affairs 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. There is no
governmental investigation pending or, to the knowledge of the Company,
threatened against the Company or affecting any of the Company's properties or
assets, or against any officer, key employee or stockholder of the Company in
his or her capacity as such. Neither the Company, nor, to its knowledge, any
officer, key employee or stockholder of the Company, in his or her capacity as
such, is in default with respect to any order, writ, injunction, decree, ruling
or decision of any court, commission, board or other government agency which may
materially and adversely affect the business or assets of the Company. Neither
the Company nor any of its subsidiaries is a party or subject to the provisions
of any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality.
2.8 Intellectual Property. 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, except, in either case, for 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, would violate any of the patents, trademarks,
service marks, trade names, copyrights, trade secrets or other proprietary
rights or processes of any other person or entity. To the knowledge of the
Company, the use of any trade names, trademarks, copyrights, software,
technology, know-how or processes by the Company in its business does not
infringe on the rights of any proprietary information or intangible property
right of any third person or entity, including, without
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limitation, any patent, trade secret, copyright, trademark or trade name. 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 such employee's best efforts to
promote the interest of the Company or that would conflict with the Company's
business. The Company does not believe it is or will be necessary to use any
inventions of any of its employees (or persons it currently intends to hire)
made prior to their employment by the Company. The Company has at all times used
commercially reasonable efforts to treat its trade secrets as confidential and
has not disclosed or otherwise dealt with such items in such a manner as to
cause the loss of such trade secrets by release into the public domain.
2.9 Compliance with Other Instruments.
---------------------------------
(a) The Company is not in violation or default of any provisions
of (i) its Restated Certificate or Bylaws, (ii) any instrument, judgment, order,
writ, decree or contract to which it is a party or by which it is bound, (iii)
any mortgage, indenture, lease, license, other agreement or instrument by which
it is bound or to which it or any of its properties are subject or (iv) to its
knowledge, of any provision of federal or state statute, rule or regulation
applicable to the Company. The execution, delivery and performance of the
Agreement and the Related Agreements and the consummation of the transactions
contemplated hereby or 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 which results in the creation of any lien,
charge or encumbrance upon any assets of the Company.
(b) To its knowledge, the Company has avoided every condition,
and has not performed any act, the occurrence of which would result in the
Company's loss of any right granted under any license, distribution agreement or
other agreement to which the Company is a party.
2.10 Agreements; Action.
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(a) All agreements, understandings, instruments or contracts to
which the Company or any of its subsidiaries is a party or by which it is bound
that involve (i) obligations (contingent or otherwise) of, or payments to, the
Company or any of its subsidiaries in excess of $15,000, (ii) the license of any
patent, copyright, trade secret or other proprietary right to or from the
Company or any of its subsidiaries, or (iii) the grant of rights to manufacture,
produce, assemble, license, market, or sell its products to any other person or
affect the Company's exclusive right to develop, manufacture, assemble,
distribute, market or sell its products, and all agreements between the Company
and its officers, directors, consultants and employees (collectively, the
"Contracts") are set forth in Section 2.10 of the Schedule of Exceptions. All
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of the Contracts are valid and binding obligations of the Company and in full
force and effect in all material respects and enforceable by the Company in
accordance with their respective terms in all material respects, subject to the
effect of applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium, usury or other laws of general
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application relating to or affecting enforcement of creditors' rights and rules
or laws concerning equitable remedies. The Company is not in material default
under any of such Contracts.
(b) Neither the Company nor any of its subsidiaries has (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 individually
in excess of $15,000 or in excess of $25,000 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.
2.11 No Conflict of Interest. The Company is not indebted, directly
-----------------------
or indirectly, to any of its officers or directors or to their respective
spouses or children, in any amount whatsoever other than in connection with
expenses or advances of expenses incurred in the ordinary course of business or
relocation expenses of employees. To the Company's knowledge, none of the
Company's officers or directors, or any members of their immediate families,
are, directly or indirectly, indebted to the Company (other than in connection
with purchases of the Company's stock) or have 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 which
competes with the Company except that officers, directors and/or stockholders of
the Company may own stock in (but not exceeding two percent of the outstanding
capital stock of) any publicly traded company that may compete with the Company.
To the Company's knowledge, none of the Company's officers or directors or any
members of their immediate families are, directly or indirectly, interested in
any material contract with the Company. The Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation.
2.12 Rights of Registration and Voting Rights. Except as contemplated
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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. To the Company's knowledge, except as contemplated in the Voting
Agreement, no stockholder of the Company has entered into any agreements with
respect to the voting of capital shares of the Company.
2.13 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 which arise in the ordinary course of business and
do not materially impair the Company's ownership or use of such property or
assets, and, to the knowledge of the Company, there exists no material violation
by the Company of any law, regulation or ordinance (including, without
limitation, laws, regulations or ordinances relating to zoning, environmental,
city planning or similar matters) relating to any real property owned, leased or
subleased by the Company. With respect to the property and assets it leases,
the Company is in material compliance with such leases and, to its knowledge,
holds a valid leasehold interest free of any liens, claims or encumbrances.
There are no defaults by the Company or, to the knowledge of the Company, by any
other party thereto, which might curtail in any material respect the current use
of the Company's property. The performance by the Company of this Agreement and
the Related
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Agreements will not result in the termination of, or in any increase of any
amounts payable under, any lease listed in the Schedule of Exceptions.
2.14 Financial Statements. Attached hereto as Exhibit I is a copy of
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the Company's most recent regularly prepared unaudited balance sheet and related
income statement (the "Unaudited Financial Statements"). The Unaudited
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Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis, except for the absence of
normal audit adjustments and the absence of other supporting statements,
schedules and footnotes, and were prepared in accordance with the books and
records of the Company and fairly present the financial position of the Company
as of the date of such Unaudited Financial Statements (the "Balance Sheet
-------------
Date").
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2.15 Changes. Since the Balance Sheet Date, there has not been:
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(a) any change in the assets, liabilities, financial condition
or operating results of the Company from that reflected in the Unaudited
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 business, properties,
prospects, or financial condition of the Company;
(c) any waiver or compromise 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 business, properties,
prospects or financial condition of the Company;
(e) any material change to a material contract or agreement by
which the Company or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder;
(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 officer
or key employee of the Company; and the Company, is not aware of any impending
resignation or termination of employment of any such officer or key employee;
(i) 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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(j) 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;
(k) any declaration, setting aside or payment or other
distribution in respect to 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;
(l) to the Company's knowledge, any other event or condition of
any character that might materially and adversely affect the business,
properties, prospects or financial condition of the Company; or
(m) any arrangement or commitment by the Company to do any of
the things described in this Section 2.15.
2.16 Employee Benefit Plans. The Company does not have any "Employee
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Benefit Plan" as such term is defined in the Employee Retirement Income Security
Act of 1974.
2.17 Tax Returns and Payments. The Company has filed all tax returns
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and reports as required by law. These returns and reports are true and correct
in all material respects and were filed within the applicable periods for such
filings. The Company has paid all taxes and other assessments due. The Company
has established adequate reserves (net of estimated tax payments already made)
for the payment of all taxes payable in respect of the period subsequent to the
last periods covered by such returns. There is no pending dispute with any
taxing authority relating to any of such returns and the Company has not
received notice of any proposed liability for any tax to be imposed upon the
properties or assets of the Company. No deficiencies for any tax are currently
assessed against the Company, and no tax returns of the Company have ever been
audited, and, to the knowledge of the Company, there is no such audit pending or
threatened. There is no tax lien, whether imposed by any federal, state or
local taxing authority, outstanding against the assets, properties or business
of the Company. The Company has no liabilities for taxes that are accrued
whether or not yet due and payable. For the purposes of this Agreement, the
term "tax" shall include all federal, state and local taxes, including income,
franchise, property, sales, withholding, payroll and employment taxes.
2.18 Labor Agreements and Actions. The Company is not bound by or
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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 knowledge of the
Company, 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 knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company, nor is the Company aware of any
labor organization activity involving its employees. The employment of each
officer and employee of the Company is terminable at the will of the Company.
To its knowledge, the Company is in compliance in all material respects with all
applicable state and federal equal employment opportunity laws and regulations
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and with other laws and regulations related to employment, labor, terms and
conditions of employment, and wages and hours.
2.19 Employee Matters. Each employee, director, consultant and
----------------
officer of the Company has executed an agreement with the Company regarding
confidentiality and proprietary information substantially in the form attached
hereto as Exhibit G. The Company is not aware that any of its employees or
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consultants is in violation thereof. Except as set forth on the Schedule of
Exceptions, the Company does not have in effect, and its assets are not subject
to, any employment agreements, consulting agreements, deferred compensation,
pension or retirement agreements or arrangements, bonus, incentive or profit-
sharing plans or arrangements, or labor or collective bargaining agreements,
written or oral.
2.20 Permits. The Company has all franchises, permits, licenses and
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any similar authority necessary for the conduct of its business, the lack of
which could materially and adversely affect the business, properties, or
financial condition of the Company. The Company is not in default in any
material respect under any of such franchises, permits, licenses or other
similar authority and, to the knowledge of the Company, no suspension or
cancellation of any of them is threatened.
2.21 Corporate Documents. The Restated Certificate and Bylaws of the
-------------------
Company are in the form provided to counsel for the Purchasers. The copy of the
minute books of the Company provided to the Purchasers' counsel contains minutes
of all meetings of directors and stockholders and all actions by written consent
without a meeting by the directors and stockholders since the date of
incorporation and reflects all actions by the directors (and any committee of
directors) and stockholders with respect to all transactions referred to in such
minutes accurately in all material respects.
2.22 Insurance Coverage. The Schedule of Exceptions contains an
------------------
accurate summary of the insurance policies currently maintained by the Company,
if any. There are currently no claims pending against the Company under any
insurance policies currently in effect and covering the property, business or
employees of the Company, and all premiums due and payable with respect to the
policies maintained by the Company have been paid to date.
2.23 Qualified Small Business Stock. As of the Closing, the Company
------------------------------
will meet the requirement to be a "Qualified Small Business" as defined in
Section 1202(d) of the Internal Revenue Code (the "Code").
----
2.24 Disclosure. The Company has fully provided each Purchaser with
----------
all the information that such Purchaser has requested for deciding whether to
purchase the Stock. To its knowledge, neither this 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.
2.25 Year 2000 Compatibility. To the Company's knowledge, all of the
-----------------------
Company's and any of its subsidiary's products (including products currently
under development) record, store, process, calculate and present calendar dates
falling on or after
-9-
January 1, 2000, and calculate any information dependent on or relating to such
dates in the same manner and with the same functionality, data, integrity and
performance as the products record, store, process, calculate and present
calendar dates on or before December 31, 1999, or calculate any information
dependent on or relating to such dates (collectively, "Year 2000 Compliant").
-------------------
3. Representations and Warranties of the Purchasers. Each Purchaser
------------------------------------------------
hereby represents and warrants to the Company that:
3.1 Authorization. Such Purchaser has full power and authority to
-------------
enter into this Agreement. This Agreement, the Related Agreements, and any
other agreements or instruments executed by the Purchaser in connection herewith
or therewith, when executed and delivered by the Purchaser, will constitute
valid and legally binding obligations of the Purchaser, enforceable in
accordance with their terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and any other
laws of general application affecting enforcement of creditors' rights
generally, and as limited by laws relating to the availability of a specific
performance, injunctive relief, or other equitable remedies, or (b) to the
extent the indemnification provisions contained in the Investors' Rights
Agreement may be limited by applicable federal or state securities laws.
3.2 Purchase Entirely for Own Account. This Agreement is made with
---------------------------------
the Purchaser in reliance upon the Purchaser's representation to the Company,
which by the Purchaser's execution of this Agreement, the Purchaser hereby
confirms, that the Securities to be acquired by the Purchaser will be acquired
for investment for the Purchaser'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 the
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, the Purchaser
further represents that the Purchaser does not presently 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. The Purchaser has not been formed for the specific purpose of
acquiring the Securities.
3.3 Disclosure of Information. The Purchaser has had an opportunity
-------------------------
to discuss the Company's business, management, financial affairs and the terms
and conditions of the offering of the Securities with the Company's management
and has had an opportunity to review the Company's facilities. The Purchaser
understands that such discussions, as well as the Business Plan and any other
written information delivered by the Company to the Purchaser, were intended to
describe the aspects of the Company's business which it believes to be material.
3.4 Restricted Securities. The Purchaser understands that the
---------------------
Securities have not been, and will not be, registered under the Securities Act,
by reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Purchaser's representations as
expressed herein. The Purchaser understands that the Securities are "restricted
securities" under applicable U.S. federal and state securities laws and that,
pursuant to these laws, the Purchaser must hold the Securities indefinitely
unless they are registered with the Securities and Exchange Commission and
qualified by state authorities, or an exemption from such registration
-10-
and qualification requirements is available. The Purchaser acknowledges that the
Company has no obligation to register or qualify the Securities for resale
except as set forth in the Investors' Rights Agreement. The Purchaser further
acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Securities,
and on requirements relating to the Company which are outside of the Purchaser's
control, and which the Company is under no obligation and may not be able to
satisfy.
3.5 No Public Market. The Purchaser understands that no public
----------------
market now exists for any of the securities issued by the Company, and that the
Company has made no assurances that a public market will ever exist for the
Securities.
3.6 Legends. The Purchaser understands that the Securities, and any
-------
securities issued in respect of or exchange for the Securities, may bear one or
all of the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933."
(b) Any legend set forth in the Related Agreements.
(c) Any legend required by the Blue Sky laws of any state to the
extent such laws are applicable to the shares represented by the certificate so
legended.
3.7 Accredited Investor. The Purchaser is an accredited investor as
-------------------
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
3.8 Foreign Investors. If the Purchaser is not a United States
-----------------
person (as defined by Section 7701(a)(30) of the Code), such Purchaser hereby
represents that it has satisfied itself as to the full observance of the laws of
its jurisdiction in connection with any invitation to subscribe for the
Securities or any use of this Agreement, including (a) the legal requirements
within its jurisdiction for the purchase of the Securities, (b) any foreign
exchange restrictions applicable to such purchase, (c) any governmental or other
consents that may need to be obtained, and (d) the income tax and other tax
consequences, if any, that may be relevant to the purchase, holding, redemption,
sale, or transfer of the Securities. Such Purchaser's subscription and payment
for and continued beneficial ownership of the Securities, will not violate any
applicable securities or other laws of the Purchaser's jurisdiction.
-11-
4. Conditions of the Purchasers' Obligations at Closing. The obligations
----------------------------------------------------
of each Purchaser to the Company under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
4.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true and correct in
all material respects on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the date of the
Closing.
4.2 Performance. The Company shall have performed and complied with
-----------
all covenants, agreements, obligations and conditions contained in this
Agreement and the Related Agreements that are required to be performed or
complied with by it on or before the Closing.
4.3 Compliance Certificate. The Chief Executive Officer of the
----------------------
Company shall deliver to the Purchasers at the Closing a certificate certifying
that the conditions specified in Sections 4.1, 4.2 and 4.10 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 obtained and effective as of
the Closing.
4.5 Opinion of Company Counsel. The Purchasers shall have received
--------------------------
from ▇▇▇▇▇▇▇ Coie LLP, counsel for the Company, an opinion, dated as of the
Closing, in substantially the form of Exhibit H.
---------
4.6 Board of Directors. As of the Closing, the Board shall be
------------------
comprised of (i) two directors nominated by the holders of Common Stock, one of
whom shall be ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and the other seat which shall be vacant (the
"Common Stock Directors"), (ii) two directors nominated by a majority of the
----------------------
holders of Series A Preferred Stock (the "Series A Directors"), who shall be ▇▇▇
------------------
▇. ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and (iii) one director mutually agreeable to the
holders of Common Stock and Series A Preferred Stock, who shall be A. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ (the "Outside Director").
----------------
4.7 Investors' Rights Agreement. The Company, each Purchaser, a
---------------------------
majority of the holders of the Series A Preferred Stock and a majority of the
holders of the Common Stock shall have executed and delivered the Investors'
Rights Agreement.
4.8 Co-Sale Agreement. The Company, a majority of the Founders (as
-----------------
defined in the Co-Sale Agreement), a majority of the holders of the Series A
Preferred Stock and each Purchaser shall have executed and delivered the Co-Sale
Agreement.
4.9 Voting Agreement. The Company, the Founders, a majority of the
-----------------
holders of the Series A Preferred Stock and each Purchaser shall have executed
and delivered the Voting Agreement.
-12-
4.10 Restated Certificate. The Company shall have filed the Restated
--------------------
Certificate with the Secretary of State of Delaware on or prior to the date of
the Closing, which shall continue to be in full force and effect as of the date
of the Closing.
4.11 Confidential Information and Invention Assignment Agreement. The
-----------------------------------------------------------
Company and each of its employees, consultants and officers shall have entered
into the Company's standard form Confidential Information and Invention
Assignment Agreement, in substantially the form attached hereto as Exhibit G.
---------
5. Conditions of the Company's Obligations at Closing. The obligations
--------------------------------------------------
of the Company to each Purchaser under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
5.1 Representations and Warranties. The representations and
------------------------------
warranties of each Purchaser contained in Section 3 shall be true and correct in
all material respects on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the Closing.
5.2 Performance. All covenants, agreements and conditions contained
-----------
in this Agreement and the Related Agreements to be performed by the Purchasers
on or prior to the Closing shall have been performed or complied with in all
material respects.
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 obtained and effective as of
the Closing.
5.4 Investors' Rights Agreement. The Company, each Purchaser, a
---------------------------
majority of the holders of the Series A Preferred Stock and a majority of the
holders of the Common Stock shall have executed and delivered the Investors'
Rights Agreement.
5.5 Voting Agreement. The Company, the Founders and each Purchaser
-----------------
shall have executed and delivered the Voting Agreement.
6. Covenants of the Company.
-------------------------
6.1 Use of Proceeds. The proceeds from the sale of the Stock shall
---------------
be used by the Company for working capital and general corporate purposes.
6.2 Key Man Life Insurance. The Company will use best efforts to
----------------------
obtain and maintain term life insurance in the amount of $2,000,000 on the
Company's Chief Executive Officer ("Key Man Life Insurance"). The beneficiary
----------------------
of the Key Man Life Insurance shall be the Company.
6.3 Qualified Small Business Stock. The Company covenants that so
------------------------------
long as the Securities are held by a Purchaser (or a transferee in whose hands
the Securities are eligible to qualify as Qualified Small Business Stock as
defined in Section 1202(c) of the Code), it will use
-13-
its best efforts to cause the Securities to qualify as Qualified Small Business
Stock. In addition, the Company shall submit to the Purchaser and to the
Internal Revenue Service any reports that may be required under Section
1202(d)(1)(C) of the Code and any related Treasury Regulations. In addition,
after any Purchaser has delivered to the Company a written request therefor (a
"QSBS Certificate"), the Company shall deliver to such Purchaser a QSBS
----------------
Certificate informing the Purchaser whether such Purchaser's interest in the
Company constitutes "qualified small business stock" as defined in Section
1202(c) of the Code. The Company's obligation to furnish this QSBS Certificate
shall continue notwithstanding the fact that a class of the Company's stock may
be traded on an established securities market.
6.4 Termination of Covenants. Except for Section 6.3, the covenants
------------------------
contained in this Section 6 will terminate upon the effectiveness of the
Company's registration statement under the Securities Act in connection with its
initial public offering of securities.
7. Miscellaneous.
-------------
7.1 Survival of Warranties. Unless otherwise set forth in this
----------------------
Agreement, the warranties, representations and covenants of the Company and the
Purchasers contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing.
7.2 Transfer; 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. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.3 Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
7.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
7.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 Notices. Any notice required or permitted by this Agreement
-------
shall be in writing and shall be deemed sufficient upon delivery, when delivered
personally or by overnight courier or sent by telegram or fax, addressed to the
party to be notified at such party's address as set forth on the signature page
or Exhibit A hereto, or as subsequently modified by written notice, and (a) if
---------
to the Company, with a copy to ▇▇▇▇▇▇▇ Coie LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
-▇▇-
▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, or (b) if to the Purchasers,
to the address of record provided to the Company by each Purchaser.
7.7 Finder's Fee. Each party represents that it neither is nor will
------------
be obligated for any finder's fee or commission in connection with this
transaction. Each Purchaser agrees to indemnify and to 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 each Purchaser or any of its officers, employees,
or representatives is responsible. The Company agrees to indemnify and hold
harmless each Purchaser 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.
7.8 Fees and Expenses. The Company shall pay the reasonable,
-----------------
itemized fees and expenses of Wilson, Sonsini, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, PC, the
counsel for the Purchasers, incurred with respect to this Agreement, the
documents referred to herein and the transactions contemplated hereby and
thereby, not to exceed $10,000 in the aggregate for all such costs and expenses.
7.9 Attorney's Fees. If any action at law or in equity (including
---------------
arbitration) is necessary to enforce or interpret the terms of any of this
Agreement or the Related Agreements, the prevailing party shall be entitled to
reasonable attorney's fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
7.10 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended or waived only with the written consent of the Company and the holders
of at least a majority of the Common Stock issued or issuable upon conversion of
the Stock. Any amendment or waiver effected in accordance with this Section
7.10 shall be binding upon the Purchasers and each transferee of the Stock (or
the Common Stock issuable upon conversion thereof), each future holder of all
such securities, and the Company.
7.11 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
7.12 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party under this Agreement, upon any breach or
default of any other party under this Agreement, shall impair any such right,
power or remedy of such non-breaching or non-defaulting party nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on
-15-
the part of any party of any provisions or conditions of this Agreement, must be
in writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement or by law or otherwise
afforded to any party, shall be cumulative and not alternative.
7.13 Entire Agreement. This Agreement, the Related Agreements and the
----------------
documents and instruments referred to herein constitute the entire agreement
between the parties hereto pertaining to the subject matter hereof, and any and
all other written or oral agreements relating to the subject matter hereof
existing between the parties hereto are expressly canceled.
7.14 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 THE SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON THE QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.
7.15 Confidentiality. Each party hereto agrees that, except with the
---------------
prior written permission of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement, discussions or negotiations
relating to this Agreement, the performance of its obligations hereunder or the
ownership of the Securities purchased hereunder. The provisions of this Section
7.15 shall be in addition to, and not in substitution for, the provisions of any
separate nondisclosure agreement executed by the parties hereto with respect to
the transactions contemplated hereby.
7.16 Exculpation Among Purchasers. Each Purchaser acknowledges that
----------------------------
it is not relying upon any person, firm or corporation, other than the Company
and its officers and directors, in making its investment or decision to invest
in the Company. Each Purchaser agrees that no Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
Purchaser shall be liable to any other Purchaser for any action heretofore or
hereafter taken or omitted to be taken by any of them in connection with the
purchase of the Securities.
[Remainder of page intentionally left blank]
-16-
The parties have executed this Series B Preferred Stock Purchase Agreement
as of the date first written above.
COMPANY:
▇▇▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: Chief Executive Officer
PURCHASERS:
ARKARO HOLDING, B.V.
By: /s/ ▇▇▇▇▇ ▇. van der Sluijs-▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇. van der Sluijs-▇▇▇▇▇▇
Title: Managing Director
Mailing Address:
Locatellikade 1
Parnassustoren
1076 AZ Amsterdam
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. van der Sluijs-▇▇▇▇▇▇
Phone: ▇▇-▇▇-▇▇-▇▇-▇▇▇
Fax: ▇▇-▇▇-▇▇-▇▇-▇▇▇