▇▇▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ AGREEMENT
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
TABLE OF CONTENTS
Page No.
RECITALS .........................................................................................1
SECTION 1. PURCHASE AND SALE...............................................................1
1.1 Authorization of Units..........................................................1
1.2 Sale and Purchase...............................................................1
1.3 Right of First Refusal..........................................................2
1.4 Bring-Along Rights..............................................................2
SECTION 2. CLOSING.........................................................................2
2.1 Closing.........................................................................2
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................3
3.1 Organization, Good Standing and Qualification...................................3
3.2 Capitalization..................................................................3
3.3 Authorization...................................................................3
3.4 Financial Statements............................................................4
3.5 Liabilities.....................................................................4
3.6 Changes.........................................................................4
3.7 Material Contracts..............................................................5
3.8 Obligations to Related Parties..................................................6
3.9 Assets..........................................................................6
3.10 Intellectual Property...........................................................7
3.11 Compliance with Other Instruments...............................................7
3.12 Litigation......................................................................8
3.13 Taxes...........................................................................8
3.14 Employees and Consultants.......................................................8
3.15 Employee Benefits Matters.......................................................9
3.16 Registration Rights.............................................................9
3.17 Governmental Approvals/Third Party Consents.....................................9
3.18 Compliance with Laws............................................................9
3.19 Environmental Matters...........................................................9
3.20 Offering Valid..................................................................9
3.21 Accuracy of Information Furnished...............................................9
3.22 Insurance......................................................................10
3.23 Investment Company Act.........................................................10
3.24 Accounts Receivable............................................................10
3.25 Relationships with Customers and Suppliers.....................................10
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER....................................10
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4.1 Requisite Power and Authority..................................................10
4.2 Investment Representations.....................................................11
(a) Purchaser Bears Economic Risk.........................................11
(b) Acquisition for Own Account...........................................11
(c) Purchaser Can Protect Its Interest....................................11
(d) Accredited Investor...................................................11
(e) Company Information...................................................11
(f) Rule 144..............................................................12
(g) Residence.............................................................12
4.3 Restrictive Legends...........................................................12
SECTION 5. CONDITIONS TO CLOSING..........................................................13
5.1 Conditions to Purchasers' Obligations at the Closing...........................13
(a) Representations and Warranties True; Performance of
Obligations...........................................................13
(b) Legal Investment......................................................13
(c) Consents, Permits, and Waivers........................................13
(d) Filing of Certificate.................................................13
(e) Corporate Documents...................................................13
(f) Reservation of Conversion Shares......................................13
(g) Certificates..........................................................13
(h) Investor Rights Agreement.............................................14
(i) Non-Competition Agreement.............................................14
(j) Proceedings and Documents.............................................14
5.2 Conditions to Obligations of the Company at Closing............................14
(a) Representations and Warranties True...................................14
(b) Performance of Obligations............................................14
(c) Filing of Certificate.................................................14
(d) Investor Rights Agreement. ...........................................14
(e) Consents, Permits, and Waivers........................................14
SECTION 6. COVENANTS OF THE COMPANY FOR THE PERIOD FOLLOWING CLOSING......................14
6.1 Use of Proceeds................................................................15
6.2 Maintenance of Corporate Status................................................15
6.3 Compliance with Governing Documents............................................15
6.4 Compliance with Laws, Licenses and Permits; No Infringement....................15
6.5 Discharge of Obligations.......................................................15
6.6 Maintenance of Properties......................................................15
6.7 Maintenance of Proprietary Information.........................................15
6.8 Compensation of Directors......................................................16
6.9 Books and Records..............................................................16
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6.10 Insurance......................................................................................16
6.11 Affiliated Transactions........................................................................16
6.12 Board Representation...........................................................................17
SECTION 7 MISCELLANEOUS..................................................................................17
7.1 Governing Law..................................................................................17
7.2 Survival.......................................................................................17
7.3 Assignment; Successors and Assigns.............................................................17
7.4 Entire Agreement...............................................................................17
7.5 Severability...................................................................................17
7.6 Amendment and Waiver...........................................................................17
7.7 Delays or Omissions............................................................................17
7.8 Notices........................................................................................18
7.9 Expenses.......................................................................................18
7.10 Indemnification by the Company.................................................................18
7.11 Indemnification by the Purchaser...............................................................18
7.12 Titles and Subtitles...........................................................................18
7.13 Counterparts...................................................................................18
7.14 Broker's Fees..................................................................................18
7.15 Arbitration....................................................................................19
7.16 Pronouns.......................................................................................19
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UNIT PURCHASE AGREEMENT
This Unit Purchase Agreement (the "AGREEMENT") is made and entered into
as of the 15th day of March 2000, between ▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC., a Delaware
corporation (the "COMPANY"), and The Financial Commerce Network, Inc. (the
"PURCHASER").
RECITALS
A. The Company has authorized the issuance and sale of a total of up to
four units ("Units"), each Unit consisting of 980,375 shares of Series A
Preferred Stock of the Company, par value $.0001 per share (the "PREFERRED
STOCK") and options to purchase 250,000 shares of the Preferred Stock (the
"OPTIONs") in the form attached hereto as EXHIBIT I, and has reserved 1,230,375
shares of Common Stock of the Company, par value $.0001 per share, issuable upon
conversion of the Preferred Stock and the Preferred Stock underlying the Options
(the "CONVERSION SHARES").
B. The Company desires to sell the Units to the Purchaser, and the
Purchaser desires to purchase the Units, on the terms and subject to the
conditions set forth below.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants, agreements,
conditions, representations, and warranties contained in this Agreement, the
Company and the Purchaser each agree as follows:
SECTION 1. PURCHASE AND SALE.
1.1 AUTHORIZATION OF UNITS. On or prior to the Initial Closing (as
defined in Section 1.2 below), the Company shall have authorized (i) the sale
and issuance to the Purchaser of the Units; and (ii) the reservation of the
Conversion Shares. The Units and the Conversion Shares shall have the rights,
preferences, privileges and restrictions set forth in the Certificate of
Designations, Preferences and Rights of Series A Preferred Stock of the Company
(the "CERTIFICATE OF DESIGNATIONS").
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof, at a
Closing the Company hereby agrees to issue and sell to the Purchaser, and the
Purchaser agrees to purchase from the Company, up to four Units for a total
purchase price of up to $2,000,000 in cash (excluding fees and commissions of
brokers or finders), to be used for the general corporate purposes of the
Company, as follows (each, a "CLOSING"): (i) $500,000 on the date of the signing
of the Agreement (the "INITIAL CLOSING"); (ii) $500,000 on the four month
anniversary of the Initial Closing (the "SECOND CLOSING"); (iii) $500,000 on the
eight month anniversary of the Initial Closing (the "THIRD CLOSING"); and (iv)
$500,000 on the twelve month anniversary of the Initial Closing (the "FOURTH
CLOSING").
1.3 RIGHT OF FIRST REFUSAL. Should the Company desire to offer to issue
securities to another purchaser (an "OFFER"), the Company shall, prior to
accepting an Offer, deliver to the Purchaser a written Notice of Bona Fide Offer
accompanied by a duplicate original of a written bona fide offer (the "BONA FIDE
OFFER") setting forth the name of the proposed purchaser, the purchase price or
other consideration for the Offer and all other terms and conditions of the
Offer signed by the proposed purchaser. For a period of five (5) business days
following delivery of the Notice of Bona Fide Offer, the Purchaser shall have
the right to accept such Offer by delivery of a written Notice of Acceptance to
the Company. If the Purchaser accepts such Offer, the Purchaser shall have
thirty (30) calendar days from the date of the receipt of the Notice of
Acceptance by the Company to consummate such transaction with the Company upon
the terms and conditions and at the price specified in the Bona Fide Offer. If
the Purchaser shall reject or not respond to the Bona Fide Offer within the time
period provided, the Company may accept such Offer.
1.4 BRING-ALONG RIGHTS. In the event the Company elects to sell their
capital stock to a third party acquiror ("THIRD PARTY ACQUIROR"), and the Third
Party Acquiror, as a condition of sale, requires a sale to it of all the capital
stock of the Company, the Company may require the Purchaser to participate in a
sale thereof to the Third Party Acquiror upon substantially the same terms and
conditions as the Company (based on a per share basis). Any sale by the Company
to a Third Party Acquiror will be subject to a fairness opinion from an
independent party chosen by the Purchaser and approved of in writing by the
Company regarding the fairness of such transaction. The costs related to such
fairness opinion will be divided equally between the Purchaser and the Company.
SECTION 2. CLOSING.
2.1 CLOSING. Each Closing of the sale and purchase of the Units under
this Agreement shall take place at the offices of Snow ▇▇▇▇▇▇ ▇▇▇▇▇▇ P.C., ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, or at such other place as the Company and the
Purchaser may mutually agree (each such date is hereinafter referred to as a
"CLOSING DATE"). At each such Closing, subject to the terms and conditions
hereof, the Company will deliver to the Purchaser certificates representing the
Preferred Stock and agreements for the Options, against payment of the purchase
price therefor in immediately available funds by check or wire transfer made
payable to the order of the Company. Each Closing after the Initial Closing will
be at the discretion of the Company. Upon the Company's decision not to proceed
with any Closing after the Initial Closing, the Company shall issue to the
Purchaser warrants to purchase 100,000 shares of the Company's Common Stock (the
"BUYER WARRANTS") at a price equal to the last sale price of the Common Stock
(the "LAST SALE PRICE") of the Company on the date of such Closing. Upon the
Purchaser's inability to pay, or cause to be paid, to the Company the purchase
price on each subsequent Closing after the Initial Closing, the Purchaser shall
issue to the Company warrants to purchase 100,000 shares of the Purchaser's
Common Stock (the "COMPANY WARRANTS") at an exercise price equal to the average
of the closing bid prices of the Purchaser's Common Stock on the principal
trading exchange or market (the "PRINCIPAL MARKET") for Purchaser's Common Stock
for the
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period of ten consecutive days during which the Principal Market shall be open
for business (the "TRADING DAYS") immediately prior to the date of issuance (the
"MARKET PRICE").
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth on the DISCLOSURE SCHEDULE attached hereto as
EXHIBIT II, the Company hereby represents and warrants to the Purchaser as
follows:
3.1 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 Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, the Investor Rights Agreement in the form attached hereto as
EXHIBIT III (the "INVESTOR RIGHTS AGREEMENT," and together with this Agreement
and the Certificate of Designations, the "FINANCING AGREEMENTS"), to issue and
sell the Units, and to carry out the provisions of the Financing Agreements, and
to carry on its business as presently conducted and as presently proposed to be
conducted. The Company is duly qualified and is authorized to do business and is
in good standing in each jurisdiction in which the nature of its activities and
of its properties (both owned and leased) makes such qualification necessary,
except for those jurisdictions in which failure to do so would not have a
material adverse effect on the Company or its business. The Company does not
own, directly or indirectly, equity securities of any other corporation, limited
partnership, limited liability company or other similar entity. The Company is
not a participant in any joint venture, partnership or similar arrangement.
3.2 CAPITALIZATION. The authorized capital stock of the Company as of
January 31, 1999 consisted of (a) 20,000,000 shares of Common Stock, of which
9,150,000 shares are issued and outstanding, and (b) immediately prior to the
Closing, 10,000,000 shares of Preferred Stock, of which 5,000,000 will be
designated Series A Preferred Stock. All issued and outstanding shares of the
Company's Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable. The rights, preferences, privileges and
restrictions of the Preferred Stock are as stated in the Certificate of
Designations. The Conversion Shares have been duly and validly reserved for
issuance. Except as may be granted pursuant to the Financing Agreements, there
are no outstanding options, warrants, rights (including conversion or preemptive
rights and rights of first refusal), proxy or shareholders agreements, or
agreements of any kind for the purchase or acquisition from the Company of any
of its securities. When issued in compliance with the provisions of this
Agreement and the Certificate of Designations, the Units and the Conversion
Shares will be validly issued, fully paid and nonassessable, and will be free of
any liens or encumbrances; PROVIDED, HOWEVER, that the Units and the Conversion
Shares may be subject to restrictions on transfer under state and/or federal
securities laws. A schedule describing the capitalization of the Company as of
the Closing is attached as EXHIBIT IV hereto.
3
3.3 AUTHORIZATION. All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization of this
Agreement and the Financing Agreements, the performance of all obligations of
the Company hereunder and thereunder at the Closing and the authorization, sale,
issuance and delivery of the Units pursuant hereto and the Conversion Shares
pursuant to the Articles of Incorporation has been taken or will be taken prior
to the Closing. The Agreement and the Financing Agreements, when executed and
delivered, will be valid and binding obligations of the Company enforceable in
accordance with their terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights; (ii) general principles of equity
that restrict the availability of equitable remedies; and (iii) to the extent
that the enforceability of any indemnification provisions may be limited by
applicable laws. The sale of the Units and the subsequent conversion of the
Units into Conversion Shares are not and will not be subject to any preemptive
rights or rights of first refusal that have not been properly waived or complied
with.
3.4 FINANCIAL STATEMENTS. The Company has provided to the Purchaser (i)
the unaudited consolidated balance sheet of the Company as of December 31, 1999
(the "Balance Sheet Date"), together with the unaudited consolidated statements
of operations, unaudited consolidated statements of shareholders' equity, and
unaudited consolidated statements of cash flows for the fiscal year then ended
(collectively, the "FINANCIAL STATEMENTS"). To the Company's knowledge, 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 after the Balance Sheet Date and (ii) obligations under contracts and
commitments incurred in the ordinary course of business 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 knows of no information or
fact which has or would have a material adverse effect on the financial
condition, business or business prospects of the Company which has not been
disclosed to the Purchasers.
3.5 LIABILITIES. The Company has no material liabilities and, to the
best of its knowledge, the Company knows of no material contingent liabilities,
not disclosed in the Financial Statements, except current liabilities incurred
in the ordinary course of business subsequent to the Balance Sheet Date which
have not been, either in any individual case or in the aggregate, materially
adverse.
3.6 CHANGES. Since the Balance Sheet Date, and excluding the
transactions contemplated by the Financing Agreements, there has not been:
(A) Any change in the assets, liabilities, financial condition
or operations of the Company from that reflected in the Financial Statements,
other than changes in the ordinary course of
4
business, none of which individually or in the aggregate has had or is expected
to have a material adverse effect on such assets, liabilities, financial
condition or operations of the Company.
(B) Any resignation or termination of any key officers 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;
(C) Any material change, except in the ordinary course of
business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty or otherwise;
(D) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, business or
prospects or financial condition of the Company;
(E) Any waiver by the Company of a valuable right or of a
material debt owed to it;
(F) Any direct or indirect loans made by the Company to any
stockholder, employee, officer or director of the Company, other than advances
made in the ordinary course of business;
(G) Any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder of the Company;
(H) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
(I) Any labor organization activity;
(J) Any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(K) Any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets of the Company;
(L) Any change in any material agreement to which the Company
is a party or by which it is bound which materially and adversely affects the
business, assets, liabilities, financial condition, operations or prospects of
the Company, including compensation agreements with the Company's employees; or
5
(M) Any other event or condition of any character that, either
individually or cumulatively, has materially and adversely affected the
business, assets, liabilities, financial condition, operations or prospects of
the Company.
3.7 MATERIAL CONTRACTS. "MATERIAL CONTRACTS" are any contracts,
agreements, leases, commitments, or proposed transactions, judgments, orders,
writs or decrees, written or oral, absolute or contingent, by which the Company
is bound, other than (i) contracts for the purchase of supplies and services
that were entered into in the ordinary course of business and that do not
involve more than $20,000, and do not extend for more than one year beyond the
date hereof; (ii) sales contracts entered into in the ordinary course of
business; and (iii) contracts terminable at will by the Company on no more than
30 days' notice without cost or liability to the Company and that do not involve
any employment or consulting arrangement and are not material to the conduct of
the Company's business. For the purpose of this paragraph, employment and
consulting contracts and contracts with labor unions, and license agreements and
any other agreements relating to the Company's acquisition or disposition of
patent, copyright, trade secret or other proprietary rights or technology (other
than standard end-user license agreements) shall not be considered to be
contracts entered into in the ordinary course of business. Each Material
Contract of the Company is a legal, valid and binding obligation, enforceable in
accordance with its terms with respect to the Company and any other parties
bound thereby, and true and complete copies of all Material Contracts have been
made available to Purchasers. The Company has not been given notice that any
other party is currently in breach of any of the terms of any Material Contract.
There is no default or event that, with notice or lapse of time, or both, would
conflict with or constitute a breach of any Material Contract or would result in
the creation or imposition of any lien or encumbrance on the Company, or any of
the Company's property. The Company has not received notice that any party to
any Material Contract intends to cancel, amend or terminate any such agreement.
3.8 OBLIGATIONS TO RELATED PARTIES. There are no obligations of the
Company to officers, directors, stockholders, or employees of the Company other
than (i) for payment of salary for services rendered since the commencement of
the Company's most recent payroll period; (ii) reimbursement for reasonable
expenses incurred on behalf of the Company; (iii) for other standard employee
benefits made generally available to all employees; and (iv) certain loans from
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ to the Company. Except as disclosed
on the Disclosure Schedule hereto, none of the officers, directors or
stockholders of the Company, or any members of their immediate families, are
indebted to the Company 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 publicly traded companies which may compete with the
Company. No officer, director or stockholder, or any member of their immediate
families, is, directly or indirectly, interested in any material contract with
the Company (other than such contracts as relate to any such person's ownership
of capital stock or other securities of the Company).
6
Except as may be disclosed in the Financial Statements, the Company is not a
guarantor or indemnitor of any indebtedness of any other person, firm or
corporation.
3.9 ASSETS. The Company has good and, with respect to real property,
marketable, title to all of its real and personal property, including all assets
reflected on the balance sheets included in the Financial Statements or acquired
by the Company since the Balance Sheet Date, all of which are in good operating
condition and free and clear of material restrictions on or conditions to
transfer or assignment, and free and clear of all liens, claims, mortgages,
pledges, charges, equities, easements, rights of way, covenants, conditions,
security interests, encumbrances, or restrictions, except for liens for current
taxes not yet due and payable or being contested in good faith. Set forth on
Item 3.9 of the Disclosure Schedule is a correct and complete list of all real
property owned by the Company, and a list (including the amount of annual rents
called for and a summary description of the leased property) of all leases under
which the Company is a lessee. The properties and leases listed on Item 3.9 of
the Disclosure Schedule are sufficient for the conduct of the Company's business
as now being and presently planned to be conducted. The Company holds a valid
leasehold interest in all leases listed on Item 3.9 of the Disclosure Schedule,
free of any liens, claims, or encumbrances granted by the Company, except for
those described in the first sentence of this Section 3.9, and is not in default
under any such lease. The Company enjoys peaceful and undisturbed possession of
all premises owned by them, or leased to them from others, and do not occupy any
real property in material violation of any law, regulations, or decree.
3.10 INTELLECTUAL PROPERTY. The Company owns rights to all intellectual
property necessary to conduct its business as now being conducted and as planned
to be conducted, including all such rights relating to patents, patent
applications, trademarks, service marks, copyrights, applications therefor,
trade names, trade secrets, export of technology and other information
(collectively "PROPRIETARY INFORMATION"). The Company possesses commercial
rights to all Proprietary Information and the Proprietary Information is not
subject to any kind of lien, judgment or other encumbrance. True and complete
copies of all papers and documents relating to the Proprietary Information have
been made available to Purchasers, including all patent application file
histories, trademark and service ▇▇▇▇ application file histories, copyright
registration file histories, license and option negotiation papers, purchase
negotiation papers, and all licenses, assignments and agreements relating to the
Proprietary Information. There is no pending or, to the knowledge of the
Company, threatened claim or litigation against the Company relating to the
Proprietary Information. To the Company's knowledge and belief, there is no
valid claim that can be asserted by or against a third party for infringement,
misappropriation, breach or otherwise relating to the Proprietary Information.
The Company has entered, or will promptly following the Closing, enter into
confidentiality agreements (the "EMPLOYEE CONFIDENTIALITY AGREEMENTS") with all
employees who have or are likely to have as part of their association with the
Company knowledge of the present Proprietary Information and any future
information that would be considered Proprietary Information hereunder, in
substantially the form attached hereto as EXHIBIT V. Except as set forth on Item
3.10 of the Disclosure Schedule, no employee has retained any ownership rights
in any Proprietary Information or any other intellectual
7
property rights related to the business, products or services of the Company.
Except as may be set forth on Item 3.10 of the Disclosure Schedule, no
shareholder, director, officer or employee of the Company has any right, title
or interest in or to any of the Proprietary Information. The Company has taken
reasonable measures to protect the secrecy and confidentiality of and its rights
in the Proprietary Information.
3.11 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation
or default of any term of its Articles of Incorporation or Bylaws, or of any
provision of any mortgage, indenture, contract, agreement, instrument or
contract to which it is party or by which it is bound or of any judgment,
decree, order, writ or, to its knowledge, any statute, rule or regulation
applicable to the Company which would materially and adversely affect the
business, assets, liabilities, financial condition, operations or prospects of
the Company. The execution, delivery, and performance of and compliance with
this Agreement, and the Financing Agreements, and the issuance and sale of the
Units pursuant hereto and of the Conversion Shares pursuant to the Articles of
Incorporation, will not, with or without the passage of time or giving of
notice, result in any such material violation, or be in conflict with or
constitute a default under any such term, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company or the suspension, revocation, impairment, forfeiture or
nonrenewal of any permit license, authorization or approval applicable to the
Company, their business or operations or any of their assets or properties.
3.12 LITIGATION. There are no actions, suits, or legal, administrative,
or other proceedings or investigations pending or, to the best of the Company's
knowledge, threatened before any court, agency, or other tribunal to which the
Company is a party or against or affecting any of the property, assets,
businesses, or financial condition of the Company. The Company is not in default
with respect to any order, writ, injunction, or decree of any federal, state,
local or foreign court, department, agency, or instrumentality to which it is a
party.
3.13 TAXES. The Company has timely filed all federal, state, county,
local and foreign tax returns and reports within the times and in the manner
prescribed by law and has paid (or made adequate provision in the Financial
Statements for) all taxes shown due on such returns, as well as all other
assessments and penalties which have become due and payable. The Company's
federal income and other tax returns have not been audited by the Internal
Revenue Service or any other taxing authority and no notice of audit has been
received. The Company has received no notice of any disputes, deficiency
assessments, or proposed adjustments to taxes payable by the Company.
3.14 EMPLOYEES AND CONSULTANTS. Except as set forth on Item 3.14 of the
Disclosure Schedule, the Company has not entered into any arrangement with any
present or former employee that will result in any obligation of the Company to
make any payment to such employee upon termination. To the Company's knowledge,
no employee of or consultant to the Company is in material violation of any term
of any employment contract or any other contract or agreement relating to the
relationship of any such employee or consultant with the Company. The Company
has not received notice that any
8
executive officer intends to terminate his employment with the Company, nor does
the Company have any present intention to terminate the employment of any
executive officer. To the Company's knowledge, none of its employees are
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/her
reasonable diligence 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, 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 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 obligated, which conflict, breach, or default would be materially adverse to
the Company.
3.15 EMPLOYEE BENEFITS MATTERS. The Company does not maintain or
contribute to any plan or arrangement that constitutes an "employee pension
benefit plan" as defined in Section 3(2) of ERISA, and is not obligated to
contribute to or accrue or pay benefits under any deferred compensation or
retirement funding arrangement.
3.16 REGISTRATION RIGHTS. Except as required pursuant to the Investor
Rights Agreement, the Company is presently not under any obligation, and has not
granted any rights, to register any of the Company's presently outstanding
securities or any of its securities that may hereafter be issued.
3.17 GOVERNMENTAL APPROVALS/THIRD PARTY CONSENTS. All consents,
approvals, or authorizations of, or registrations, qualifications, designations,
declarations, or filings with any federal or state governmental authority, and
all consents, approvals or authorizations of any third party required in
connection with the execution of the Financing Agreements and the performance of
the transactions contemplated hereby (including the issuance and sale of the
Units) have been obtained by the Company. The Company has, or has rights to
acquire, all licenses, permits, and other similar authority necessary for the
conduct of its business as now being conducted by it and as planned to be
conducted, the lack of which could materially and adversely affect the
operations or condition, financial or otherwise, of the Company, and it is not
in default in any material respect under any of such licenses, permits or other
similar authority.
3.18 COMPLIANCE WITH LAWS. (a) To the best of its knowledge, the
Company has complied with and is in compliance in all material respects with all
foreign, federal, state and local statutes, laws, ordinances, regulations,
rules, judgments, orders and decrees applicable to it and its assets, business
and operations, and (b) the Company has received no written notice of any claim
of default under or violation of any statute, law, ordinance, regulation, rule,
judgment, order or decree except for any such noncompliance or claim of default
or violation, if any, which in the aggregate do not and will not have a material
adverse effect on the property, operations, financial condition or prospects of
the Company.
9
3.19 ENVIRONMENTAL MATTERS. The Company is in compliance in all
material respects with all environmental and occupational health and safety laws
and, to its knowledge, no material expenditures are or will be required in order
to comply with any such laws.
3.20 OFFERING VALID. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 4 hereof, the offer, sale and
issuance of the Units and the Conversion Shares will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT") and will have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws.
3.21 ACCURACY OF INFORMATION FURNISHED. The Financing Agreements, as
well as any exhibit, certificate, written statement, material or information
furnished by or on behalf of the Company pursuant thereto or in connection with
the transactions contemplated thereby to the Purchasers, do not contain any
untrue statement of a material fact or omit to state any material fact that is
necessary to make the statements contained herein or therein not misleading.
3.22 INSURANCE. The Company maintains property and casualty, general
liability and other similar types of insurance with financially sound and
reputable insurers that is adequate, consistent with industry standards and the
Company's historical claims experience. The Company has not received notice
from, and has no knowledge of any threat by, any insurer (that has issued any
insurance policy to the Company) that such insurer intends to deny coverage
under or cancel, discontinue or not renew any insurance policy presently in
force.
3.23 INVESTMENT COMPANY ACT. The Company is not an "investment
company," or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
3.24 ACCOUNTS RECEIVABLE. All notes and accounts receivable of the
Company are reflected properly on its books and records, are valid receivables
subject to no setoffs or counterclaims, and are current and collectible in
accordance with their terms at their recorded amounts, except for the reserve
for bad debts set forth on the balance sheet included in the Financial
Statements as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company, which reserve has
been established and maintained in accordance with GAAP consistently applied.
3.25 RELATIONSHIPS WITH CUSTOMERS AND SUPPLIERS. The Company believes
that the relationships of the Company with its existing customers and suppliers
are sound, and there is no basis to believe that any of the primary customers or
suppliers of the Company will materially and adversely change the manner in
which they currently conduct business with the Company. The Company does not
know of any written or oral communication, fact, event or action which exists or
has occurred
10
within 120 days prior to the date of this Agreement which would indicate that
any of the following shall terminate or materially reduce its business with the
Company:
(a) any customer of the Company which accounted for over one
percent of total net sales of the Company for its most recently completed fiscal
year; or
(b) any supplier to the Company of items essential to the
conduct of the business, which items cannot be replaced at comparable cost and
the loss of which could reasonably be expected to have a material adverse effect
on the Company.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
The Purchaser makes the following representations and warranties to the
Company that:
4.1 REQUISITE POWER AND AUTHORITY. Purchaser is an individual, or a
corporation, limited liability company, or limited partnership duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
formation, and has all requisite partnership or corporate power and authority to
own its assets and operate its business. Purchaser has all necessary corporate
or partnership power and authority under all applicable provisions of law to
execute and deliver this Agreement and the Financing Agreements and to carry out
their provisions. All action on Purchaser's part required for the lawful
execution and delivery of this Agreement and the Financing Agreements have been
or will be effectively taken prior to the Closing Date. Upon their execution and
delivery, this Agreement and the Financing Agreements will be valid and binding
obligations of Purchaser, enforceable in accordance with their terms, except (i)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors' rights;
(ii) general principles of equity that restrict the availability of equitable
remedies; and (iii) to the extent that the enforceability of any indemnification
provisions may be limited by applicable laws.
4.2 INVESTMENT REPRESENTATIONS. Purchaser understands that the Units
have not been registered under the Securities Act. Purchaser also understands
that the Units are being offered and sold pursuant to an exemption from
registration contained in the Securities Act based in part upon Purchaser's
representations contained in this Agreement. Purchaser hereby represents and
warrants as follows:
(A) PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment indefinitely unless the Units are registered pursuant to the
Securities Act, or an exemption from registration is available. Purchaser
understands that there is no assurance that any exemption from registration
under the Securities Act will be available and that, even if available, such
exemption may not
11
allow Purchaser to transfer all or any portion of the Units under the
circumstances, in the amounts or at the times Purchaser might propose.
(B) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the
Units for Purchaser's own account for investment only, and not with a view
toward their distribution.
(C) PURCHASER CAN PROTECT ITS INTEREST. Purchaser represents
that by reason of his business or financial experience, Purchaser has the
capacity to protect its own interests in connection with the transactions
contemplated in this Agreement and the Financing Agreements.
(D) ACCREDITED INVESTOR. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
(E) COMPANY INFORMATION. Purchaser has received and read the
Financial Statements and has had an opportunity to discuss the Company's
business, management and financial affairs with directors, officers and
management of the Company and has had the opportunity to review the Company's
operations and facilities. Purchaser also has had the opportunity to ask
questions of and receive answers from, the Company and its management regarding
the terms and conditions of this investment.
(F) RULE 144. Purchaser acknowledges and agrees that the Units
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
has been advised or is aware of the provisions of Rule 144 promulgated under the
Securities Act, which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things: the availability of certain current public information about the
Company, the resale occurring not less than one year after a party has purchased
and paid for the security to be sold, the sale being through an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934) and the number of
shares being sold during any three-month period not exceeding specified
limitations.
(G) RESIDENCE. The office or offices of the Purchaser in which
its investment decision was made is located at the address or addresses of the
Purchaser as stated on the signature pages to this Agreement.
4.3 RESTRICTIVE LEGENDS. Purchaser agrees to the imprinting, so long as
required by law, of a legend on certificates representing all of the Preferred
Stock or the Conversion Shares to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
12
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF
SUCH ACT OR SUCH LAWS."
SECTION 5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE CLOSING. Purchasers'
obligations to purchase the Units at a Closing are subject to the satisfaction,
at or prior to the Closing, of the following conditions:
(A) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in Section 3
hereof shall be true and correct in all material respects as of each Closing
Date with the same force and effect as if they
had been made as of the Closing Date, and the Company shall have performed all
obligations and conditions herein required to be performed or observed by it on
or prior to the Closing.
(B) LEGAL INVESTMENT. On the Closing Date, the sale and
issuance of the Units shall be legally permitted by all laws and regulations to
which the Purchaser and the Company are subject.
(C) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and the Financing
Agreements (except for such as may be properly obtained subsequent to the
Closing).
(D) FILING OF CERTIFICATE. The Certificate of Designations
shall have been filed with the Secretary of State of the State of Delaware.
(E) CORPORATE DOCUMENTS. The Company shall have delivered to
the Purchaser or their counsel, copies of all corporate documents of the Company
as the Purchaser shall reasonably request.
(F) RESERVATION OF CONVERSION SHARES. The Conversion Shares
issuable upon conversion of the Units shall have been duly authorized and
reserved for issuance upon such conversion.
(G) CERTIFICATES. The Company shall have delivered to the
Purchaser:
(1) a certificate, as of the most recent practical
date, of the Secretary of State of Delaware as to the Company's good standing;
13
(2) a certificate of the Secretary of the Company
dated as of each Closing Date, certifying as to (i) the incumbency of officers
of the Company executing the Financing Agreements and all other documents
executed and delivered in connection therewith; (ii) a copy of the Articles of
Incorporation, as amended, in effect on the Closing Date; (iii) a copy of the
Bylaws of the Company, in effect on the Closing Date; and (iv) a copy of the
resolutions or consents of the Board of Directors of the Company authorizing and
approving the Company's execution, delivery and performance of the Financing
Agreements; and
(3) a certificate, executed by the President of the
Company as of each Closing Date, certifying to the fulfillment of all of the
conditions of the Purchasers' obligations under this Agreement, as set forth in
this Section 5.
(H) INVESTOR RIGHTS AGREEMENT. The Investor Rights Agreement
substantially in the form attached hereto as EXHIBIT III shall have been
executed and delivered by the parties thereto.
(I) NON-COMPETITION AGREEMENT. The founders of the Company
will enter into non-competition agreements in the form attached hereto as
EXHIBIT VI.
(J) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchaser and its special
counsel, and the Purchaser and its special counsel shall have received all such
counterpart originals or certified or other copies of such documents as they may
reasonably request.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY AT CLOSING. The Company's
obligation to issue and sell the Units at the Closing is subject to the
satisfaction, on or prior to the Closing, of the following conditions:
(A) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties made by the Purchaser in Section 4 hereof shall be true and
correct in all material respects at each Closing Date, with the same force and
effect as if they had been made on and as of said date.
(B) PERFORMANCE OF OBLIGATIONS. The Purchaser shall have
performed and complied with all agreements and conditions herein required to be
performed or complied with by the Purchaser on or before the Closing.
(C) FILING OF CERTIFICATE. The Certificate of Designations
shall have been filed with the Secretary of State of the State of Delaware.
(D) INVESTOR RIGHTS AGREEMENT. The Investor Rights Agreement
substantially in the form attached hereto as EXHIBIT III shall have been
executed and delivered by the parties thereto.
14
(E) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and the Financing
Agreements (except for such as may be properly obtained subsequent to the
Closing).
SECTION 6. COVENANTS OF THE COMPANY FOR THE PERIOD FOLLOWING CLOSING.
Until the date upon which all Units held by the Purchaser (including
any capital stock of the Company issued upon conversion of the Series A
Preferred Stock) are no longer outstanding, the Company covenants to the
Purchaser and agrees as follows:
6.1 USE OF PROCEEDS. The Company shall use all proceeds from the sale
of the Units to Purchasers pursuant to this Agreement for financing of
expenditures related to general working capital.
6.2 MAINTENANCE OF CORPORATE STATUS. The Company shall maintain, and
shall cause each affiliate to maintain, its corporate or partnership existence
in good standing or effective under the laws of its jurisdiction of organization
and any other states or jurisdictions in which its failure to qualify as a
foreign corporation or entity would have a material adverse effect on its
operations or financial condition.
6.3 COMPLIANCE WITH GOVERNING DOCUMENTS. The Company shall comply, and
shall cause each affiliate to comply, in all material respects with its Articles
of Incorporation, Bylaws or other governing documents.
6.4 COMPLIANCE WITH LAWS, LICENSES AND PERMITS; NO INFRINGEMENT. The
Company shall comply with all applicable federal, state, local, foreign and
other laws, regulations and ordinances, and with all applicable federal, state,
local and foreign governmental licenses and permits necessary for conducting its
business, except to the extent that any noncompliance would not have a material
adverse effect upon the Company. The Company shall not knowingly engage in any
activities that infringe upon the intellectual property rights of any other
person, corporation, partnership or other entity which could have a material
adverse effect upon the Company.
6.5 DISCHARGE OF OBLIGATIONS. The Company shall pay and discharge all
taxes, assessments, and governmental charges lawfully levied or imposed upon it
(in each case before they become delinquent and before penalties accrue), all
lawful claims for labor, materials, supplies and rents, and all other debts and
liabilities that if unpaid would by law be a lien or charge upon any of the
asserts or properties of the Company or lead to suspension of the business of
the Company (except to the extent contested in good faith by the Company and for
which adequate reserves are established).
6.6 MAINTENANCE OF PROPERTIES. The Company shall maintain all real and
personal property used in the business of the Company in good operating
condition, and shall make all repairs,
15
renewals, replacements, additions and improvements to those properties as are
necessary or appropriate in the ordinary course of business.
6.7 MAINTENANCE OF PROPRIETARY INFORMATION. The Company shall maintain
all Proprietary Information, and all applications and registrations therefor
owned or held by the Company, in full force and effect, except as otherwise
determined in the ordinary course of business. The Company shall not encumber
its Proprietary Information owned by it except in the ordinary course of the
Company's business, and shall maintain the confidentiality and trade secret
status of all Proprietary Information that is confidential except where
disclosure is necessary to obtain copyright registrations or patents, or is
necessary or desirable in the ordinary course of the Company's business. The
Company shall enter into and maintain a Confidential Information Agreement, in
the form attached at EXHIBIT V, with each employee and, as appropriately
modified, each consultant to the Company who has or is likely to have as part of
their employment or association with the Company knowledge of the present
Proprietary Information and any future information that would be considered
Proprietary Information hereunder, and shall enter into and maintain a
Noncompete Agreement, in the form attached at EXHIBIT VI with each key
management employee of the Company.
6.8 COMPENSATION OF DIRECTORS. The Company shall endeavor to hold
meetings of its Board of Directors at least four times each year and at
intervals of not more than three months. The Articles of Incorporation or
By-Laws of the Company shall at all times during which any nominee of the
Investors serves as director of the Company provide for indemnification of the
directors and limitations on the liability of the directors to the fullest
extent permitted under applicable state law. Each member of the Board of
Directors shall be entitled to reimbursement by the Company for all
out-of-pocket expenses, including, without limitation, travel expenses, incurred
by such director in connection with the performance of such directors duties,
subject to approval by the Board of Directors, such approval not to be
unreasonably withheld.
6.9 BOOKS AND RECORDS. The Company shall, and shall cause each
affiliate to, keep proper books of records and account, in which full and
correct entries shall be made of all financial transactions and the assets and
business of the Company and each affiliate in accordance with GAAP. The Company
shall provide the Purchaser with access to all such books and records and allow
the Purchaser to make copies and abstracts thereof at reasonable times.
6.10 INSURANCE. The Company will keep its insurable properties insured
by financially sound and reputable insurers against the perils of liability,
casualty, fire and extended coverage in amounts of coverage at least equal to
those customarily maintained by companies in the same or a similar business of
similar size. The Company will also maintain with such insurers insurance
against other hazards and risks and liability to persons and property to the
extent and in the manner customary for corporations engaged in the same or a
similar business of similar size.
16
6.11 AFFILIATED TRANSACTIONS. All material transactions by and between
the Company and any director, officer, key employee or shareholder of the
Company, or persons controlled by or affiliated with such director, officer, key
employee or shareholder, shall be conducted on an arm's-length basis, shall be
on terms and conditions no less favorable to the Company than could be obtained
from nonrelated persons and shall be approved in advance by the Board of
Directors after full disclosure of the terms thereof, for which purpose the
interested party, if a Director, and any affiliate of the interested party who
is a Director shall not be entitled to vote.
6.12 BOARD REPRESENTATION. The Company shall cause one designee of the
Purchaser to be nominated and elected as a Director, or as an observer to the
Board of Directors, of the Company.
SECTION 7 MISCELLANEOUS.
7.1 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New York.
7.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by any Purchaser and the
closing of the transactions contemplated hereby. All statements as to factual
matters contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
7.3 ASSIGNMENT; SUCCESSORS AND ASSIGNS. Upon written notice to the
Company, the Units issued hereunder may be sold, transferred, assigned or
hypothecated at any time and the term the "Purchaser" as used herein shall
include any transferee to whom the Units are transferred. Except as otherwise
expressly provided herein, the provisions hereof shall inure to the benefit of,
and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto and shall inure to the benefit of and be
enforceable by each person who shall be a holder of the Units from time to time.
7.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, the Financing Agreements and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and no party shall be liable or bound
to any other in any manner by any representations, warranties, covenants and
agreements except as specifically set forth herein and therein.
7.5 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
7.6 AMENDMENT AND WAIVER. This Agreement may be amended or modified
only upon the written consent of the Company, and the holders of at least
sixty-six percent (66%) of the Units.
17
7.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, the Financing
Agreements or the Certificate, shall impair any such right, power or remedy, nor
shall it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent or approval of any kind or character on any Purchaser's
part of any breach, default or noncompliance under this Agreement, the Financing
Agreements or under the Certificate or any waiver on such party's part of any
provisions or conditions of the Agreement, the Financing Agreements, or the
Certificate must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, the Financing Agreements, the Certificate, by law, or otherwise
afforded to any party, shall be cumulative and not alternative.
7.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) when sent by confirmed facsimile if sent during
normal business hours of the recipient, if not, then on the next business day;
(iii) three (3) business days after having been sent by registered or certified
mail, return receipt requested, postage prepaid; or (iv) one (1) day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be sent
to the Company at the address as set forth on the signature page hereof and to
Purchaser at the address set forth on the signature pages hereto or at such
other address as the Company or Purchaser may designate by ten (10) days advance
written notice to the other parties hereto.
7.9 EXPENSES. Except as otherwise specifically provided in this
Agreement, the parties hereto shall bear their respective expenses incurred in
connection with the preparation, execution and performance of this Agreement.
7.10 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify
and hold the Purchaser harmless against any loss, liability, damage or expense
(including reasonable legal fees and costs) which Purchaser may suffer, sustain
or become subject to as a result of or in connection with the breach by the
Company of any representation, warranty, covenant or agreement of the Company
contained in this Agreement or the Financing Agreements, PROVIDED, HOWEVER that
the maximum amount for which the Purchaser shall be liable pursuant to this
Section 7.10 shall equal the amount paid for the Purchaser's Units.
7.11 INDEMNIFICATION BY THE PURCHASER. Purchaser agrees to indemnify
and hold the Company harmless against any loss, liability, damage or expense
(including reasonable legal fees and costs) which the Company may suffer,
sustain or become subject to as a result of or in connection with the breach by
the Purchaser of any representation, warranty, covenant or agreement of the
Purchaser contained in this Agreement or the Financing Agreements, PROVIDED,
HOWEVER that the maximum amount
18
for which the Purchaser shall be liable pursuant to this Section 7.11 shall
equal the amount paid for the Purchaser's Units.
7.12 TITLES AND SUBTITLES. The titles of the sections and subsections
of the Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
7.13 COUNTERPARTS. This Agreement may be delivered via facsimile and
may be executed in any number of counterparts, each of which shall be an
original, but all of which together shall constitute one instrument.
7.14 BROKER'S FEES. Other than as set forth on the Disclosure Schedule,
each party hereto represents and warrants that no agent, broker, investment
banker, person or firm acting on behalf of or under the authority of such party
hereto is or will be entitled to any broker's or finder's fee or any other
commission directly or indirectly in connection with the transactions
contemplated. Each party hereto further agrees to indemnify each other party for
any claims, losses or expenses incurred by such other party as a result of the
representation in this Section 7.14 being untrue.
7.15 ARBITRATION. The parties hereby covenant and agree that any legal
suit, dispute, claim, demand, controversy or cause of action of every kind and
nature whatsoever, known or unknown, fixed or contingent, that any party may now
have or at any time in the future claim to have based in whole or in part, or
arising from or out of or that in any way is related to the negotiations,
execution, interpretation or enforcement of this Agreement (collectively, the
"DISPUTES") shall be completely and finally settled by submission of any such
Disputes to arbitration under the rules of the American Arbitration Association
("AAA") then in effect. There shall be one arbitrator, and such arbitrator shall
be chosen by mutual agreement of the parties in accordance with AAA rules.
Unless the parties agree otherwise, the arbitration proceedings shall take place
in New York, New York. The arbitrator shall apply New York law to all issues in
dispute, in accordance with Section 7.1 above. Notice of demand for arbitration
shall be filed in writing with the other party to this Agreement and with the
AAA. In no event shall the demand for arbitration be made after the date when
institution of legal or equitable proceedings based on such Dispute would be
barred by the applicable statute of limitations. The findings of the arbitrator
shall be final and binding on the parties. Judgment on such award may be entered
in any court of competent jurisdiction, or application may be made to that court
for a judicial acceptance of the award and an order or enforcement, as the party
seeking to enforce that award may elect. The prevailing party in any such action
shall be entitled to receive from the losing party all reasonable costs and
expenses, including the reasonable fees of attorneys, accountants, and other
experts, incurred by the prevailing party in investigating and prosecuting (or
defending) such action, together with any such fees which may be incurred in
enforcing any award of judgment.
7.16 PRONOUNS. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as the identity of the parties hereto may require.
19
[SIGNATURE PAGES FOLLOW]
20
IN WITNESS WHEREOF, the parties hereto have executed the UNIT PURCHASE
AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY:
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By:___________________________________
Name:
Title:
PURCHASER:
THE FINANCIAL COMMERCE NETWORK, INC.
By: __________________________________
Name:
Title:
21
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made as of this ___ day of March 2000, by and between
▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation (the "Grantor") having its
principal office at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, and The
Financial Commerce Network, Inc. (the "Optionee").
W I T N E S S E T H :
WHEREAS, the Grantor and the Optionee have entered into a Unit Purchase
Agreement, dated as of March __, 2000 (the "Unit Purchase Agreement"); and
WHEREAS, pursuant to the Unit Purchase Agreement, the Grantor has
agreed to grant the Optionee an option (the "Option") to purchase shares of the
Grantor's Series A Convertible Preferred Stock, $___ par value per share (the
"Preferred Stock").
NOW, THEREFORE, in consideration of the Unit Purchase Agreement, and
for other good and valuable consideration, the Grantor hereby grants the
Optionee the option on the following terms and conditions:
1. OPTION.
Pursuant to the resolutions passed by the Board of Directors of the
Company on March __, 2000 (the "Resolutions"), the Grantor hereby grants to the
Optionee an option , not qualified as described in Section 422(b) of the
Internal Revenue Code of 1986, as amended (the "Code"), to purchase, at any time
and from time to time prior to 5:00 p.m. (East Coast time) on March __, 2005 up
to an aggregate of Two Hundred Fifty Thousand (250,000) fully paid and
non-assessable shares of Preferred Stock (the "Shares"), subject to the terms
and conditions set forth below.
2. PURCHASE PRICE.
The purchase price shall be $[INSERT PRICE OF THE PREFERRED STOCK IN
THE CERTIFICATE OF DESIGNATIONS] per Share. The Grantor shall pay all original
issue or transfer taxes on the exercise of this option and all other fees and
expenses necessarily incurred by the Grantor in connection therewith.
3. EXERCISE OF OPTION.
(a) The Optionee shall notify the Grantor by registered or certified
mail, return receipt requested, addressed to its principal office as to the
number of Shares which Optionee desires to purchase under the option herein
granted, which notice shall be accompanied by payment (by cash or certified
check) of the option price therefor as specified in Paragraph 2 above. As soon
as practicable thereafter, the Grantor shall cause to be delivered to the
Optionee certificates issued in the Optionee's name evidencing the Shares
purchased by the Optionee.
(b) The option granted hereunder may be exercised by the Optionee on
the date of this Agreement until March __, 2005;
4. BRING-ALONG RIGHTS.
In the event the Grantor elects to sell their shares of Preferred Stock
to a third party acquirer ("Third Party Acquirer"), and the Third Party
Acquirer, as a condition of sale, requires a sale to it of all the capital stock
of the Grantor, the Grantor may require the Optionee to participate in a sale
thereof to the Third Party Acquirer upon substantially the same terms and
conditions as the Grantor (based on a per share basis).
22
5. DIVISIBILITY AND ASSIGNABILITY OF THE OPTION.
(a) The Optionee may exercise the option herein granted from time to
time subject to the provisions of Section 3 above with respect to any whole
number of Shares included therein, but in no event may an option be exercised as
to less than ten thousand (10,000) Shares at any one time, or the remaining
Shares covered by the option if less than ten thousand (10,000).
(b) Upon written notice to the Company, the Optionee may give, grant,
sell, exchange, transfer legal title, pledge, assign or otherwise encumber or
dispose of the options herein granted or any interest therein.
6. STOCK AS INVESTMENT.
(a) By accepting this option, the Optionee agrees for himself, his
heirs and legatees that any and all Shares purchased hereunder shall be acquired
for investment purposes only and not for sale or distribution, and upon the
issuance of any or all of the Shares issuable under the option granted
hereunder, the Optionee, or his heirs or legatees receiving such Shares, shall
deliver to the Grantor a representation in writing, that such Shares are being
acquired in good faith for investment purposes only and not for sale or
distribution. Grantor may place a "stop transfer" order with respect to such
Shares with its transfer agent and place an appropriate restrictive legend on
the stock certificate(s) evidencing such Shares.
(b) Unless a registration statement is filed with the Securities and
Exchange Commission covering the Shares issuable upon the exercise of the
option, such Shares will be restricted securities. Sales of such restricted
securities may be made only in compliance with an available exemption from such
registration.
7. RESTRICTION ON ISSUANCE OF SHARES.
The Grantor shall not be required to issue or deliver any certificate
for unrestricted Shares purchased upon the exercise of any option granted
hereunder unless (a) the issuance of such Shares has been registered with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
or counsel to the Grantor shall have given an opinion that such registration is
not required; (b) approval, to the extent required, shall have been obtained
from any state regulatory body having jurisdiction thereof; and (c) permission
for the listing of such Shares, if required, shall have been given by any
national securities exchange on which the Common Shares of the Grantor are at
the time of issuance listed.
8. ADJUSTMENT IN EVENT OF CHANGE IN PREFERRED STOCK.
(a) In the event of any stock dividends, stock splits,
recapitalizations, reorganizations, mergers, consolidations, reclassifications,
combinations of shares, rights offerings, split-ups or extraordinary dividends
(including spin-offs), divestiture, liquidations, or any other change in the
corporate structure of Shares, an appropriate adjustment shall be made pursuant
to the Certificate of Designations, Preferences and Rights of the Series A
Convertible Preferred Stock or by the Board of Directors, as the case may be, as
determined by the Board of Directors and/or any authorized committee thereof, in
the aggregate number of shares of Preferred Stock issuable upon exercise of the
outstanding Options, and the purchase price per share.
(b) No adjustment shall be made with respect to stock dividends or
splits which do not exceed 5% in any fiscal year, cash dividends or the issuance
to shareholders of the Grantor of rights to subscribe for additional Shares or
other securities.
23
(c) Any adjustment in the number of Shares shall apply proportionately
to only the unexercised portion of the option granted hereunder. If fractions of
a Share would result from any such adjustment, the adjustment shall be revised
to the next lower whole number of Shares.
9. BINDING EFFECT.
Except as herein otherwise expressly provided, this Agreement shall be
binding upon and inure to the benefit of the parties hereto, their successors,
legal representatives and assigns.
10. NO RIGHTS IN OPTION STOCK.
Optionee shall have no rights as a shareholder in respect of Shares as
to which the option granted hereunder shall not have been exercised and payment
made as herein provided.
11. MISCELLANEOUS.
This Agreement shall be construed under the laws of the State of New
York, without application to the principles of conflicts of law. Headings have
been included herein for convenience of reference only, and shall not be deemed
a part of this Agreement. References in this Agreement to the pronouns "him,"
"he" and "his" are not intended to convey the masculine gender alone and are
employed in a generic sense and apply equally to the feminine gender or to an
entity.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By:__________________________________
▇▇▇▇▇ ▇▇▇▇
President
ACCEPTED AND AGREED TO:
THE FINANCIAL COMMERCE NETWORK, INC.
By:____________________________________
Name:
Title:
24
Schedule 3.1
ORGANIZATION, GOOD STANDING AND QUALIFICATION
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
NONE
25
SCHEDULE 3.3
Authorization
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
NONE
26
SCHEDULE 3.2
CAPITALIZATION
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
1. Investor subscriptions for Common Stock of the Company for $1.00 per
share up to $500,000.
2. 5,000 Warrants exercisable at $1.00 per share to be issued to ▇▇▇▇▇▇
▇▇▇▇▇▇ related to purchase of EnviroNetwork, Inc. (see Schedule 3.7).
3. 20,000 Warrants per Unit exercisable at $1.00 per share to be issued to
▇▇▇▇▇▇▇ ▇▇▇▇▇ (see Schedule 3.7).
27
SCHEDULE 3.4
FINANCIAL STATEMENTS
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
NONE
28
SCHEDULE 3.5
LIABILITIES
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
NONE
29
SCHEDULE 3.6
CHANGES
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
NONE
30
SCHEDULE 3.7
MATERIAL CONTRACTS
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
1. Investor Subscription Documents (see Schedule 3.2)
2. Lease for ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇.
3. Lease Agreements with Alexander, ▇▇▇▇▇▇▇▇ Leasing Co.
4. ▇▇▇▇▇▇▇ ▇▇▇▇▇ Finders Fee Agreement
5. Partnership Agreements
▇▇▇▇▇▇.▇▇▇
▇▇▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇▇▇▇.▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇▇.▇▇▇
PlanetRx
▇▇▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇.▇▇▇
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
World Food ▇▇▇▇▇▇.▇▇▇
6. Acquisition Agreement between the Company and EnviroNetwork, Inc.
7. Letter Agreement relating to license and acquisition with Outdoors
Network, Inc.
31
SCHEDULE 3.8
OBLIGATIONS TO RELATED PARTIES
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
1. Reflected in Financial Statements.
32
SCHEDULE 3.9
ASSETS
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
1. Lease for ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ (see Schedule
3.7).
2. Lease Agreements with Alexander, Wescott Leasing Co. (see Schedule
3.7).
3. Fixed Assets (included in Financial Statements).
33
SCHEDULE 3.10
Intellectual Property
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
1. Pending Trademark Application with Mr. ▇▇▇▇▇▇▇▇▇.▇▇▇ to all on-line
rights to Naturalist.
34
SCHEDULE 3.11
COMPLIANCE WITH OTHER INSTRUMENTS
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
NONE
35
SCHEDULE 3.12
LITIGATION
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
NONE
36
SCHEDULE 3.13
Taxes
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
NONE
37
SCHEDULE 3.14
Employees and Consultants
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
1. Public Relations consulting Agreement for ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
38
SCHEDULE 3.15
Employee Benefit Matters
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
NONE
39
SCHEDULE 3.16
Registration Rights
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
NONE
40
SCHEDULE 3.18
Compliance with Laws
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
NONE
41
SCHEDULE 3.19
Environmental Matters
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
NONE
42
SCHEDULE 3.20
Offering Valid
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
NONE
43
SCHEDULE 3.21
Accuracy of Information Furnished
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
NONE
44
SCHEDULE 3.22
Insurance
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
NONE
45
SCHEDULE 3.23
Investment Company Act
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
NONE
46
SCHEDULE 3.24
Accounts Receivable
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
NONE
47
SCHEDULE 3.25
Relationships with Customers and Suppliers
OF THE UNIT PURCHASE AGREEMENT MADE EFFECTIVE AS OF MARCH 15,2000
BETWEEN
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. AND THE FINANCIAL COMMERCE NETWORK, INC.
NONE
48
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
INVESTOR RIGHTS AGREEMENT
49
TABLE OF CONTENTS Page No.
RECITALS ......................................................................................1
1. DEFINITIONS...........................................................................1
2. REGISTRATION RIGHTS...................................................................3
2.1 Request for Registration.....................................................3
2.2 Piggyback Registration.......................................................5
2.3 Expenses of Registration.....................................................5
2.4 Obligations of the Company...................................................5
2.5 Furnish Information..........................................................8
2.6 Underwriting Requirements....................................................8
2.7 Delay of Registration........................................................9
2.8 Indemnification..............................................................9
2.9 Reports Under Exchange Act..................................................12
2.10 Assignment of Registration Rights...........................................12
2.11 "Market Stand-Off" Agreement................................................12
2.12 Covenants of the Company with Respect to Registered Securities..............13
2.13 Termination of Registration Rights..........................................13
3. OTHER COVENANTS OF THE COMPANY.......................................................14
3.1 Basic Financial Information and Reporting Obligations.......................14
3.2 Inspection; Confidentiality.................................................14
3.3 Adverse Changes.............................................................15
3.4 SEC Filings.................................................................15
3.5 Assignment of Rights........................................................15
4. MISCELLANEOUS........................................................................15
4.1 Modifications and Waivers...................................................15
4.2 Rights and Obligations of Third Parties.....................................15
4.3 Notices.....................................................................15
4.4 Entire Agreement............................................................16
4.5 Severability................................................................16
4.6 Headings....................................................................16
4.7 Counterparts................................................................16
4.8 Governing Law...............................................................16
4.9 Delays or Omissions.........................................................16
4.10 Arbitration.................................................................16
4.11 No Inconsistent Agreements..................................................17
-i-
INVESTOR RIGHTS AGREEMENT
This INVESTOR RIGHTS AGREEMENT is entered into as of the 15th day of
March, 2000, by and between ▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC., a Delaware corporation (the
"COMPANY"), and THE FINANCIAL COMMERCE NETWORK, INC. (the "INVESTOR").
RECITALS
A. The Company and the Investor has entered into that certain Unit
Purchase Agreement, dated of even date herewith (the "PURCHASE AGREEMENT"),
pursuant to which the Company will issue and sell, and the Investors will
purchase, up to four units (the "UNITS"), each Unit consisting of 930,375 shares
of the Company's Series A Preferred Stock (the "SERIES A PREFERRED STOCK") and
options to purchase 250,000 shares of the Series A Preferred Stock (the
"OPTIONS").
B. As a condition to the closing of the purchase of the Units under the
Purchase Agreement, the Company has agreed to provide registration and certain
other rights to the Investors, and certain registration rights to the Common
Stockholders, all as more particularly described herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements herein contained and other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereby agree
as follows:
1. DEFINITIONS
Certain capitalized terms used in this Agreement are defined in the
heading and the recitals hereof. The following additional terms have the
meanings specified for purposes of this Agreement:
(A) "AS CONVERTED BASIS" shall mean, with reference to
convertible securities of the Company, the number of shares of Common Stock into
which such securities may be converted while giving effect to the exercise of
comparable conversion rights held by others.
(B) "COMMON STOCK" shall mean (i) the common stock of the
Company, $0.0001 par value per share; (ii) any other capital stock of the
Company into which such common stock is converted, exchanged, reclassified or
reconstituted; (iii) any warrants or options exercisable for any of the
foregoing; and (iv) any right to receive any of the foregoing other than upon
conversion of any security convertible into any of the foregoing.
(C) "CONTROL" means the possession, directly or indirectly, of
the power to direct or cause direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise.
(D) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, and the rules and regulations thereunder, as amended from time to time.
(E) "EXCLUDED REGISTRATION" shall mean (i) a registration
statement on Form S-8 (or successor form) relating to the sale of securities to
employees, directors or consultants of the Company pursuant to a stock option,
stock purchase or similar employee benefit plan; (ii) a registration statement
relating to a business combination within the meaning of Rule 145 of the Act;
and (iii) a registration statement covering an underwritten offering of
convertible debt securities, unless the managing underwriters or agent expressly
consents thereto.
(F) "HOLDER" shall mean an Investor who holds Registrable
Securities and their Permitted Transferees in accordance with Section 2.11
hereof at such time as such Persons shall own Registrable Securities.
1
(G) "PERSON" shall mean any natural person, incorporated
entity, limited or general partnership, business trust, association, joint
venture, limited liability company, agency (government or private), division,
political sovereign, or subdivision or instrumentality, or any other entity of
any kind, including those groups identified as "persons" in ▇▇.▇▇. 13(d)(3) and
14(d)(2) of the Exchange Act, and any successor, by merger or otherwise, of such
entity.
(H) The terms "REGISTER", "REGISTERED", and "REGISTRATION"
refer to a registration effected by preparing and filing a registration
statement or similar document pursuant to and in compliance with the Securities
Act, and the declaration or ordering of effectiveness by the SEC of such
registration statement or document.
(I) "REGISTRABLE SECURITIES" shall mean any of the following:
(i) all shares of Common Stock owned now or in the future by any Holder; (ii)
any shares of Common Stock issued or issuable upon conversion of the Series A
Preferred Stock or the Series A Preferred Stock underlying the Options; (iii)
any shares of Common Stock or other securities issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of the shares referenced in clause (ii) above; and (iv) any
securities issued in exchange for the Common Stock referenced in clause (iii) in
any merger or reorganization of the Company excluding in all cases, however, any
Registrable Securities sold or transferred by a person in a transaction in which
rights are not assigned under Section 2.11. Securities will cease to be
Registrable Securities when (a) they have been effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them; (b) they are transferred pursuant to Rule 144 (or any similar
provision then in effect) under the Securities Act; or (c) they have been
otherwise transferred and new certificates for them not bearing a restrictive
legend have been issued by the Company and the Company shall not have "stop
transfer" instructions against them.
(J) "REQUIRED CONSENT" means the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the
outstanding Units, voting separately as a class.
(K) "SEC" shall mean the Securities and Exchange Commission.
(L) "SECURITIES ACT" shall mean the Securities Act of 1933,
and the rules and regulations thereunder, as amended from time to time.
2. REGISTRATION RIGHTS
2.1 REQUEST FOR REGISTRATION.
(A) If the Company shall receive at any time after the
effective date of an initial public offering ("IPO") a written request from the
Holders of at least 50% the Registrable Securities that the Company file a
registration statement under the Securities Act covering the registration of the
number of Registrable Securities set forth in such notice held by such Holders,
the Company shall within ten days of the receipt thereof, give written notice,
in accordance with Section 5.3 hereof, of such request to all Holders of then
outstanding Registrable Securities and take the actions set forth in Section
2.5. Each Holder that desires to include Registrable Securities in the
registration statement shall notify the Company of the number of Registrable
Securities to be so included within ten days following the receipt of such
notice. The Company shall use its best efforts to have the Registration
Statement declared effective by the SEC as soon as practicable, but in no event
later than 120 days after the receipt of such notice.
(B) Notwithstanding the foregoing, if the Company shall
furnish to the Holders a certificate signed by the Chief Executive Officer or
President of the Company stating that, in the good faith judgment of the
Company's Board of Directors (the "BOARD OF DIRECTORS"), such registration of
Registrable Securities would interfere materially with, or require premature
disclosure of, any financing, acquisition or reorganization involving the
Company or any of its wholly-owned subsidiaries or would otherwise have a
material adverse effect on the Company or the selling Holders if undertaken at
the time requested, the Company shall have the right to defer taking action with
respect to such filing for a period of not more than 180 days after receipt of
the request of the Holders; PROVIDED, HOWEVER, that the Company may not utilize
this right more than once in any twelve month period.
2
(C) In addition, the Company shall not be obligated to effect,
or to take any action to effect, any registration pursuant to this Section 2.1:
(I) After the Company has effected one registration
pursuant to this Section 2.1 requested by the Holders and such prior
registration has been declared or ordered effective. For purposes of the
preceding sentence, a registration shall not be deemed to have been effective
(A) if after the applicable registration statement has become effective, such
registration or the related offer, sale or distribution of Registrable
Securities thereunder is interfered with by any stop order, injunction or other
order or requirement of the SEC or other governmental agency or court for any
reason not attributable to the selling Holders and such interference is not
thereafter eliminated; or (B) if the conditions to closing specified in the
underwriting agreement, if any, entered into in connection with such
registration are not satisfied or waived, other than by reason of a failure on
the part of the selling Holders;
(II) During the period starting with the date 90 days
prior to the Company's good faith estimate of the date of filing of, and ending
180 days after the effective date of, any registration statement for a public
offering as to which registration rights may be available to Holders of
Registrable Securities pursuant to Section 2.2 hereof; provided that the Company
is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective;
(III) If, within 30 days of receipt of a written
request from the Holder or Holders pursuant to Section 2.1(a), the Company gives
notice to such Holder or Holders of the Company's intention to make a public
offering within 30 days.
2.2 PIGGYBACK REGISTRATION. If at any time the Company proposes to
register (including for this purpose a registration effected by the Company for
shareholders other than the Holders, and a registration under section 2.1) any
of its stock or other securities under the Securities Act (other than in
connection with an IPO or other than an Excluded Registration), the Company
shall promptly give each Holder written notice of such proposed registration
(which shall include, to the extent known at the time, a list of the
jurisdictions in which the Company intends to qualify such securities under the
applicable blue sky or other state securities laws, the proposed offering price
or the range thereof, and the plan of distribution). Upon the written request of
each Holder within 30 days after such notice is given by the Company to such
Holder, the Company shall take the actions set forth in Section 2.5 to cause to
be registered under the Securities Act all of the Registrable Securities that
each such Holder has requested to be registered in accordance with this Section
2.2. Neither the giving of any notice nor the making of any request hereunder
shall impose any obligation on a Holder or Common Holder to sell any shares. The
inclusion of Registrable Securities in the registration of an underwritten
offering under this Section 2.2 shall be subject tothe approval of such
underwriter and the provisions of Section 2.7.
2.3 EXPENSES OF REGISTRATION. All expenses, other than underwriting
discounts and selling commissions incurred in connection with registration,
filing or qualifications pursuant to Sections 2.1 or 2.2, including all
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company and the reasonable fees and
disbursements of one counsel for all Holders exercising registration rights
pursuant to Section 2.1 shall be borne by the Company. Underwriting discounts
and selling commissions shall be borne by the Holders.
2.4 OBLIGATIONS OF THE COMPANY. Whenever required under this Section 2
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(A) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and employ in good faith reasonable
efforts to cause such registration statement to become effective, and keep such
registration statement effective for a period of up to 120 days or until the
distribution contemplated in the Registration Statement has been completed,
whichever first occurs; PROVIDED, HOWEVER, that before filing a registration
statement or prospectus or any amendments or supplements thereto, including
documents incorporated by reference after the initial filing of the registration
statement and prior to effectiveness thereof, the Company shall furnish to
counsel for the selling Holders copies of all such documents in the form
substantially as proposed to be filed with the SEC at least four business days
prior to filing for review by such counsel.
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(B) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement necessary to comply, in all material respects,
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(C) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(D) Employ in good faith reasonable efforts to register and
qualify the securities covered by such registration statement under such
securities or blue sky laws of such jurisdictions as shall be reasonably
requested by the Holders or managing underwriter or agent, if applicable;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act.
(E) In the event of any underwritten or agented public
offering, enter into and perform its obligations (including indemnification and
contribution obligations) under an underwriting or agency agreement, in usual
and customary form, with the managing underwriter or agent of such offering.
Each Holder participating in such underwriting shall also enter into and perform
its obligations under such an agreement.
(F) Notify each Holder of Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon the Company's discovery
that, or upon the happening of any event as a result of which, the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, and at the request of
any such Holder promptly prepare and furnish to such Holder and each
underwriter, if any, a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein in the
light of the circumstances under which they were made not misleading; PROVIDED,
HOWEVER, that, except in the case of an underwritten offering as to which
Registrable Securities have been sold thereunder, the Company may delay
effecting or causing to be effected a supplement or post-effective amendment to
the registration statement or the related prospectus for a period not to exceed
90 days in any 365-day period.
(G) Cause all such Registrable Securities covered by such
registration statement to be listed on each securities exchange, if any, or
National Association of Securities Dealers Automatic Quotation System (NASDAQ),
on which similar securities issued by the Company are then listed. If no similar
securities issued by the Company are then listed on an exchange, facilitate
listing the Registrable Securities on NASDAQ.
(H) Provide a transfer agent and registrar for all Registrable
Securities registered hereunder and a CUSIP number for all such Registrable
Securities, in each case not later than the effective date of such registration.
(I) Promptly notify each selling Holder of any stop order
issued or threatened in writing to be issued by the SEC in connection therewith
and take all reasonable actions required to prevent the entry of such stop order
or to remove it if entered.
(J) Make available to the Company's security holders upon
request copies of all periodic reports, proxy statements, and other information
referred to in Section 2.13 and an earnings statement satisfying the provisions
of Section 11(a) of the Securities Act no later than 90 days following the end
of the 12-month period beginning with the first month of the Company's first
fiscal quarter commencing after the effective date of each registration
statement filed pursuant to this Agreement.
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(K) Take all other reasonable actions necessary to expedite
and facilitate disposition by the Holders of the Registrable Securities pursuant
to the registration statement. Each Holder of Registrable Securities agrees
that, upon receipt of any notice from the Company of the occurrence of any event
of the kind described in Section 2.4(f), such Holder shall forthwith discontinue
such Holder's disposition of Registrable Securities pursuant to the registration
statement relating to such Registrable Securities until such Holder's receipt of
the copies of the supplemented or amended prospectus contemplated by Section
2.4(f) and, if so directed by the Company, shall deliver to the Company (at the
Company's expense) all copies, other than permanent file copies, then in such
Holder's possession of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice. In the event the Company shall
give any such notice, the period of time for which the Company shall be required
to keep the applicable registration statement effective under Section 2.4(a)
shall be extended by the length of the period from and including the date when
each Holder of any Registrable Securities covered by such registration statement
shall have been given such notice to the date on which each such Holder has
received the copies of the supplemented or amended prospectus contemplated by
Section 2.4(f). The Company agrees to use its best efforts to minimize the
duration and frequency of any periods during which Holders are required to
discontinue their disposition of Registrable Securities under Section 2.4(f) to
those where distributing a supplement or filing a post-effective amendment would
materially interfere with, or require premature disclosure of, any financing,
acquisition or reorganization involving the Company or any of its wholly-owned
subsidiaries or would otherwise have a material adverse effect on the Company.
2.5 FURNISH INFORMATION.
(A) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Section 2 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
(B) The Company shall have no obligation with respect to
Registrable Securities requested to be registered pursuant to Section 2.1 if,
due to the operation of Section 2.6(a), the Holders requesting registration is
less than the amount required to originally trigger the Company's obligation to
initiate such registration as specified in Section 2.1(a).
2.6 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock or, if the
managing underwriter or agent expressly consents to the inclusion of Registrable
Securities in such underwriting, other securities under the Securities Act, the
Company shall not be required under Section 2 to include any of a Holder's
Registrable Securities in such underwriting unless such Holder accepts the terms
of the underwriting as agreed upon between the Company and the underwriters
selected by it. If the managing underwriter advises the selling Holders that
marketing factors require any limitation as to the Registrable Securities
included in such offering, subject to Section 2.6(b), the Registrable Securities
to be included in such registration shall be allocated among all selling Holders
of Registrable Securities which would otherwise be underwritten pursuant hereto
in proportion (as nearly as practicable) to the amount of Registrable Securities
owned by each selling Holder or as shall mutually be agreed to by the Company
and the selling Holders.
2.7 DELAY OF REGISTRATION. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Agreement.
2.8 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 2:
(A) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the officers and directors of each Holder
participating in such registration, and each person, if any, who Controls such
Holder within the meaning of the Securities Act or the Exchange Act, against any
losses, expenses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Securities Act, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any of the following statements, omissions or violations
(collectively a "VIOLATION"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such
5
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto; (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading; or (iii) any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any applicable state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any applicable state
securities law; and the Company will pay to each such Holder or controlling
person, as incurred, any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, expense, claim,
damage, liability, or action; PROVIDED, HOWEVER, that the indemnity agreement
contained in this Section 2.8(a) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability, or action if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case for any
such loss, expense, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished to the Company by the otherwise
indemnified party expressly for use in connection with such registration, nor
shall the Company be liable in any such case for any such loss, expense, claim,
damage, liability, or action to the extent that it arises out of or is based
upon any untrue statement or alleged untrue statement, or omission or alleged
omission made in a preliminary prospectus, if the final prospectus (or the final
prospectus as amended or supplemented if the Company shall have filed with the
SEC any amendment or supplement thereto) available for delivery to the purchaser
corrected such untrue statement or alleged untrue statement, or omission or
alleged omission. With respect to any untrue statement or alleged untrue
statement made in, or omission or alleged omission from, any preliminary
prospectus or prospectus, the indemnity agreement contained in this Section
2.8(a) with respect to such preliminary prospectus or prospectus, to the extent
it is based on the claim of a person who purchased any Registrable Securities
directly from a Holder shall not inure to the benefit of such Holder (or to the
benefit of any of its officers and directors or any person Controlling such
Holder) if the prospectus (or the prospectus as amended or supplemented if the
Company shall have filed with the SEC any amendment or supplement thereto) shall
not have been sent or given to such person by the Holder (and the Holder shall
have been obligated so to furnish such a prospectus) and such person shall not
otherwise have received a copy thereof at or prior to the written confirmation
of such sale to such person.
(B) To the extent permitted by law, each selling Holder will,
severally but not jointly, indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the registration statement, each
person, if any, who Controls the Company within the meaning of the Securities
Act, any other Holder selling securities in such registration statement and any
Controlling person of any such other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject under the Securities Act, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Holder expressly for use in
connection with such registration; and each such Holder will pay, as incurred,
any legal or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this Section 2.8(b), in connection with investigating or
defending any such loss, claim, damage, liability, or action; PROVIDED, HOWEVER,
that the indemnity agreement contained in this Section 2.8(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder (which consent
shall not be unreasonably withheld); provided, that, in no event shall any
selling Holder's liability under this Section 2.8(b) exceed the proceeds
received by such Holder from the offering (net of any underwriting discounts and
commissions).
(C) Promptly after receipt by an indemnified party under this
Section 2.8 of notice of the commencement of any action, suit, proceeding,
investigation or written threat thereof (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 2.8, deliver to the indemnifying party
a written notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties. The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.8, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.8.
Any
6
reasonable fees and expenses incurred by the indemnified party (including any
fees and expenses incurred in connection with investigating or preparing to
defend such action or proceeding) shall be paid to the indemnified party, as
incurred, within 30 days of written notice thereof to the indemnifying party,
such expenses to be reimbursed within 30 days of determination by a court or
arbitrator, that an indemnified party is not entitled to indemnification
hereunder). Any such indemnified party shall have the right to employ separate
counsel in any such action, claim or proceeding and to participate in the
defense thereof, but the fees and expenses of such counsel shall be the expenses
of such indemnified party unless (i) the indemnifying party has agreed to pay
such fees and expenses; (ii) the indemnifying party shall have failed to
promptly assume the defense of such action, claim or proceeding; or (iii) the
named parties to any such action, claim or proceeding (including any impleaded
parties) include both such indemnified party and the indemnifying party, and
such indemnified party shall have been advised by counsel that there may be one
or more legal defenses available to it which are different from or in addition
to those available to the indemnifying party and that the assertion of such
defenses would create a conflict of interest such that counsel employed by the
indemnifying party could not faithfully represent the indemnified party (in
which case, if such indemnified party notifies the indemnifying party in writing
that it elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such action, claim or proceeding on behalf of such indemnified party, it being
understood, however, that the indemnifying party shall not, in connection with
any one such action, claim or proceeding or separate but substantially similar
or related actions, claims or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all such indemnified parties. No
indemnifying party shall be liable to an indemnified party for any settlement of
any action, proceeding or claim without the written consent of the indemnifying
party, which consent shall not be unreasonably withheld. Any separate counsel
employed by an indemnified party pursuant to this Section 2.8(c) shall be
approved by the indemnifying party, such approval not to be unreasonably
withheld.
(D) If the indemnification provided for in this Section 2.8 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether any Violation has been committed by, or relates to information supplied
by, the indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information, and opportunity to correct or prevent
such Violation. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in subparagraphs (a) and (b) of
this Section 2.8, any legal or other fees or expenses reasonably incurred by
such party in connection with any investigation or proceeding. The parties
hereto agree that it would not be just and equitable if contribution pursuant to
this Section 2.8(d) were determined by pro rata allocation or by any other
method of allocation which does not take into account the equitable
considerations referred to in the first sentence of this Section 2.8(d). No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(E) If indemnification is available under this Section 2.8,
the indemnifying parties shall indemnify each indemnified party to the full
extent provided in this Section 2.8 without regard to the relative fault of such
indemnifying party or indemnified party or any other equitable consideration
referred to in Section 2.8(d).
(F) The obligations of the Company and selling Holders under
this Section 2.8 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 2, and otherwise.
2.9 REPORTS UNDER EXCHANGE ACT. With a view to making available to the
Holders the benefits of Rule 144 promulgated under the Securities Act and any
other rule or regulation of the SEC that may at any time permit a Holder to sell
securities of the Company to the public without registration, the
7
Company agrees (a) to make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after 90 days after the
effective date of the first registration statement filed under the Securities
Act by the Company for the offering of its securities to the general public; and
(b) to file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act pursuant
to Section 2.12(a).
2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Section 2 may be assigned
(but only with all related obligations) by a Holder to a Person (a "PERMITTED
TRANSFEREE"), provided: (a) the Company is, within ten business days of such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; (b) such transferee or assignee agrees
in writing to be bound by and subject to the terms and conditions of this
Agreement, including without limitation the provisions of Section 2.11 below;
(c) such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act; and (d) the number of shares of
Registrable Securities to be held by such transferee is at least five percent of
the outstanding capital stock of the Company on a fully diluted basis (adjusted
for stock dividends, stock splits, reverse stock splits, combinations and the
like).
2.11 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees, if so
requested in writing by the managing underwriter or agent in connection with a
registration pursuant to an underwritten offering, to enter into an agreement
with such managing underwriter, in form reasonably acceptable to such managing
underwriter or agent, limiting the sale or distribution such Holder may make of
shares of Common Stock or any securities convertible or exchangeable or
exercisable for such shares of the Company, including a sale pursuant to Rule
144 under the Securities Act for six months, except as part of such registration
during such period as the managing underwriter or agent requests in the written
notice specified above. The Company may impose stop-transfer instructions with
respect to the Registrable Securities of each Holder until the end of the six
month period in order to enforce the foregoing covenant.
2.12 COVENANTS OF THE COMPANY WITH RESPECT TO REGISTERED SECURITIES.
The Company hereby agrees and covenants as follows:
(A) The Company shall file as and when applicable, on a timely
basis, all reports required to be filed by it under the Exchange Act. If the
Company is not required to file reports pursuant to the Exchange Act, upon the
request of any Holder or Common Holder of Registrable Securities, the Company
shall make publicly available the information specified in subparagraph (c)(2)
of Rule 144 of the Securities Act, and take such further action as may be
reasonably required from time to time and as may be within the reasonable
control of the Company, to enable the Holders and Common Holders to transfer
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 under the Securities Act or
any similar rule or regulation hereafter adopted by the SEC.
(B) (I) The Company shall not effect any registration under
the Securities Act of any shares of Common Stock or any securities convertible
into or exchangeable or exercisable for shares of Common Stock, during the five
business days prior to, and during the 90-day period beginning on, the
commencement of a public distribution of the Registrable Securities pursuant to
any registration statement prepared pursuant to Section 2.1 of this Agreement,
except for Excluded Registrations, until the earlier of (x) 90 days following
the date as of which all securities covered by such demand registration
statement shall have been sold or distributed, and (y) 90 days following the
effective date of such demand registration statement.
(II) Any agreement entered into after the date of
this Agreement pursuant to which the Company issues or agrees to issue any
privately placed Common Stock or securities of the Company convertible or
exchangeable for Common Stock that have registration rights shall contain a
provision whereby holders of such securities agree not to effect any public sale
or distribution of any such securities during the periods described in Section
2.11, in each case including a sale pursuant to Rule 144 under the Securities
Act (unless such Person is prevented by applicable statute or regulation from
entering into such an agreement).
8
(C) The Company shall not, directly or indirectly, enter into
any merger, consolidation or reorganization in which the Company shall not be
the surviving corporation, unless prior to such merger, consolidation, or
reorganization, the surviving corporation shall have agreed in writing to assume
the obligations of the Company under this Agreement, and for that purpose
references hereunder to "Registrable Securities" shall be deemed to include the
securities that the Holders and Common Holders of Registrable Securities would
be entitled to receive in exchange for Registrable Securities pursuant to any
such merger, consolidation or reorganization.
3. OTHER COVENANTS OF THE COMPANY
The Company shall comply with the following covenants until the
conversion of the Investor's Series A Preferred Stock into Common Stock:
3.1 BASIC FINANCIAL INFORMATION AND REPORTING OBLIGATIONS.
(A) The Company shall provide to each Holder: (i) within 45
days of the end of each fiscal quarter, an unaudited, internally generated
statement of profit or loss for such quarter and for the current fiscal year to
date and an unaudited, internally generated balance sheet as of the end of each
such quarter; and (ii) within 90 days of each fiscal year-end, audited financial
statements for the prior fiscal year, together with the accounting firm's annual
management letter to the Board of Directors, any additional reports, management
letters, or other reports concerning significant aspects of the Company's
operations or financial affairs given to the Company by its independent
accountants (to the extent not otherwise provided hereunder). All financial
statements furnished hereunder shall fairly present the financial condition and
results of operations of the Company in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis; PROVIDED, HOWEVER,
that such financial statements are subject to normal and customary year-end
audit adjustments and do not contain all the footnotes required by GAAP, and all
such financial statements shall be accompanied by a certificate of the Company's
Chief Financial Officer to that effect.
(B) Within 30 days of each fiscal year-end, the Company shall
prepare and submit to the Board of Directors an operating plan and budget for
the next fiscal year. The budget shall contain estimated statements of monthly
revenues, expenses, and cash flows.
3.2 INSPECTION; CONFIDENTIALITY. The Company shall permit each Holder
at such Holder's expense to visit and inspect their facilities, assets,
properties, financial and accounting records, and corporate books and documents
at such reasonable times and for such proper purposes as may be requested by
Holders. The Company shall also make available to Holders such executive or
management personnel and the Company's independent public accountants, with whom
Holders may discuss the affairs of the corporation at reasonable length. At the
Company's request, Holders shall enter into the Company's standard-form
confidentiality agreements in order to maintain the confidentiality of any
confidential information may be acquired in the course of any such inspection.
The rights of Holders hereunder shall be in addition to any rights of inspection
available to the Holders, as shareholders, under the Delaware Business
Corporation Act.
3.3 ADVERSE CHANGES. The Company will promptly advise the Holders of
any event which represents a material adverse change in the condition or
business, financial or otherwise, of the Company. The Company shall notify each
Holder and member of the Board of Directors of any litigation, arbitration or
proceedings before any governmental or regulatory body or arbitration forum to
which the Company is a party which, if adversely decided, would have a material
adverse impact on the Company's assets, properties, or results of operations.
The Company will also promptly notify the Holders of any facts or transactions
arising other than in the ordinary course of business which, if such facts or
transactions had existed at the Closing of the Purchase Agreement, would have
constituted a material breach of the representations and warranties contained
herein.
3.4 SEC FILINGS. The Company shall deliver to each Holder and each
member of the Board of Directors a copy of any filings made by or one behalf of
the Company with the Securities and Exchange Commission, within fifteen days of
any such filing.
9
3.5 ASSIGNMENT OF RIGHTS. Any Holder may assign the right to receive
the benefit of any of the covenants contained in Sections 3.2 through 3.5 either
(i) to any affiliate of such Holder, or (ii) to any transferee who acquires from
such Holder securities representing five percent or more of the votes of the
Common Stock, on an As Converted Basis, provided such transfer is otherwise in
accordance with this Agreement.
4. MISCELLANEOUS
4.1 MODIFICATIONS AND WAIVERS. This Agreement may not be amended or
modified, nor may the rights of any party be waived, except by a written
document that is executed by the Required Consent of the Holders and the
Company.
4.2 RIGHTS AND OBLIGATIONS OF THIRD PARTIES. Nothing in this Agreement,
whether express or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on any persons other than the parties to it and
their respective successors and permitted assigns, nor is anything in this
Agreement intended to relieve or discharge the obligation or liability of any
third parties to any party to this Agreement, nor shall any provision give any
third party any right of subrogation or action against any party to this
Agreement.
4.3 NOTICES. Any notice, request, consent, or other communication
hereunder shall be in writing, and shall be sent by one of the following means:
(i) by registered or certified first class mail, postage prepaid, return receipt
requested; (ii) by facsimile transmission with confirmation of receipt; (iii) by
overnight courier service; or (iv) by personal delivery, and shall be properly
addressed to the appropriate party at the address on signature page hereto, or
to such other address or addresses as the Company or Holders shall hereafter
designate to the other parties in writing. Notices sent by mail or by courier
shall be effective seven days after they are sent, and notices delivered
personally by facsimile shall be effective at the time of delivery thereof.
4.4 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto in relation to the subject matter hereof. Any prior
written or oral negotiations, correspondence, or understandings relating to the
subject matter hereof shall be superseded by this Agreement and shall have no
force or effect.
4.5 SEVERABILITY. If any provision that is not essential to the
effectuation of the basic purpose of this Agreement is determined by a court of
competent jurisdiction to be invalid and contrary to any existing or future law,
such invalidity shall not impair the operation of the remaining provisions of
this Agreement.
4.6 HEADINGS. The headings of the Sections of this Agreement are
inserted for convenience of reference only and shall not affect the construction
or interpretation of any provisions hereof.
4.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be an original,
but all of which together shall constitute one and the same instrument.
4.8 GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the laws of the State of Delaware.
4.9 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power, or remedy accruing to either party, upon any breach or default of the
other party under this Agreement, shall impair any such right, power, or remedy,
nor shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach of 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 on the part of either party of any breach
or default by the other party under this Agreement, or any waiver of any
provisions or conditions of this Agreement must be made in writing signed by the
parties 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 either party, shall be cumulative and not alternative.
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4.10 ARBITRATION. The parties hereby covenant and agree that any legal
suit, dispute, claim, demand, controversy or cause of action of every kind and
nature whatsoever, known or unknown, fixed or contingent, that either a Holder
or the Company may now have or at any time in the future claim to have based in
whole or in part, or arising from or out of or that in any way is related to the
negotiations, execution, interpretation or enforcement of this Agreement
(collectively, the "DISPUTES") shall be completely and finally settled by
submission of any such Disputes to arbitration under the rules of the American
Arbitration Association ("AAA") then in effect. There shall be one arbitrator,
and such arbitrator shall be chosen by mutual agreement of the parties in
accordance with AAA rules. Unless the parties agree otherwise, the arbitration
proceedings shall take place in New York, New York. The arbitrator shall apply
New York law to all issues in dispute. Notice of demand for arbitration shall be
filed in writing with the other parties to this Agreement and with the AAA. In
no event shall the demand for arbitration be made after the date when
institution of legal or equitable proceedings based on such Dispute would be
barred by the applicable statute of limitations. The findings of the arbitrator
shall be final and binding on the parties. Judgment on such award may be entered
in any court of competent jurisdiction, or application may be made to that court
for a judicial acceptance of the award and an order or enforcement, as the party
seeking to enforce that award may elect. The prevailing party in any such action
shall be entitled to receive from the losing party all reasonable costs and
expenses, including the reasonable fees of attorneys, accountants, and other
experts, incurred by the prevailing party in investigating and prosecuting (or
defending) such action, together with any such fees which may be incurred in
enforcing any award of judgment.
4.11 NO INCONSISTENT AGREEMENTS. The Company will not on or after the
date of this Agreement enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof
or impairs the rights granted hereunder. The Company has not previously entered
into any agreement with respect to its securities granting any registration
rights to any person which has not been terminated on or prior to the date
hereof.
[SIGNATURE PAGE FOLLOWS]
11
IN WITNESS WHEREOF, the parties have executed this Investor Rights
Agreement as of the date first above written.
COMPANY:
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By:____________________________________
▇▇▇▇▇ ▇▇▇▇, President
INVESTOR:
THE FINANCIAL COMMERCE NETWORK,
INC.
By:____________________________________
Name:
Title:
12
CONFIDENTIALITY AND INVENTIONS AGREEMENT
This Confidentiality and Inventions Agreement (this "Agreement"), by and between
▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation (the "Company"), and
_________________, an individual ("Employee"), is executed to be effective as of
the "Effective Date" set forth in Section 3(i) below.
As a condition to, and in consideration of Employee's employment or continued
employment (as the case may be) with the Company, and in consideration of the
mutual covenants and agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
▇.▇▇▇▇▇▇▇▇▇▇ OF TRADE SECRETS AND CONFIDENTIAL INFORMATION.
(A) DEFINITION OF "CONFIDENTIAL INFORMATION." As used
in this Agreement, the term "Confidential Information" shall include all
information concerning or arising from the Company's business, including,
without limitation, trade secrets used or developed by the Company in connection
with its business; information concerning the manner and details of the
Company's operation, organization and management; financial information and/or
documents and nonpublic policies, procedures and other printed or written
material generated or used in connection with the Company's business; the
Company's business plans and strategies; the identities of the Company's
customers and the specific individual customer representatives with whom the
Company works and details of the Company's relationship with such customers and
customer representatives; the identities of other persons or companies utilized
in the Company's business and details of the Company's relationship with such
persons or companies; the nature of fees and charges made to the Company's
customers; nonpublic forms, contracts and other documents used in the Company's
business; the nature and content of computer software used in the Company's
business, whether proprietary to the Company or used by the Company under
license from a third party; and/or other information concerning know-how,
research, inventions, copyrights, trademarks, patent applications, patents,
processes, designs, technical specifications, methods, concepts, prospects,
customers, employees, contractors, earnings, products, services, formulas,
compositions, machines, equipment, systems, and/or prospective and executed
contracts and other business arrangements. As used in this Agreement, "Company"
includes any direct or indirect subsidiary or affiliate of the Company.
Confidential Information under this agreement shall
not include information which (i) Employee can demonstrate was in Employee's
possession prior to employment with the Company (unless such information is
assigned to, or otherwise becomes the property of, the Company or (ii) is now in
the public domain, or hereafter enters the public domain through no violation by
Employee of the obligations hereunder or any other obligation of
confidentiality, or (iii) is lawfully obtained from a source (other than the
Company, its affiliates or representatives) in accordance with the terms and
conditions, if any, imposed upon Employee by such source respecting the use and
disclosure thereof; provided, however, that such source was not at the time
bound by a confidentiality agreement with the Company or any of its affiliates
or representatives. Confidential Information shall also not include generic
information, knowledge or skill which Employee reasonably would have learned or
acquired in the course of similar employment or work elsewhere in the trade.
(B) RESTRICTIONS ON EMPLOYEE'S USE OF CONFIDENTIAL
INFORMATION. Except in connection with and in furtherance of Employee's official
duties with and on behalf of the Company, Employee shall not at any time or in
any manner use, copy, disclose, divulge, transmit, convey, transfer or otherwise
communicate any Confidential Information to any person or entity, either
directly or indirectly, without the Company's prior written consent.
(C) ACKNOWLEDGMENT. Employee acknowledges that during
the term of this Agreement, Employee will have access to Confidential
Information, all of which shall be made accessible to Employee only in strict
confidence; that unauthorized disclosure of Confidential Information will damage
the Company's business; that Confidential Information would be susceptible to
immediate competitive application by a competitor of the Company; that the
Company's business is substantially dependent on access to and the continuing
secrecy of Confidential Information; that Confidential Information is unique and
proprietary to the Company and known only to Employee, the
13
Company and certain key employees and contractors of the Company; and that
title, ownership, possession and control of Confidential Information shall at
all times remain vested in the Company. Consequently, Employee acknowledges that
the restrictions contained in this Section 1 are reasonable and necessary for
the protection of the Company's business.
(D) DOCUMENTS AND OTHER RECORDS CONTAINING
CONFIDENTIAL INFORMATION. All documents or other records containing or alluding
to Confidential Information that are prepared by or provided to Employee during
the term of this Agreement or that come into Employee's possession in connection
with Employee's performance of services for the Company are and shall remain the
Company's property. Employee shall not copy or use any such documents or
Confidential Information for any purpose not relating directly to Employee's
performance of services for the Company, nor shall Employee market or in any way
provide or make available to any party other than the Company any of the
Confidential Information, except pursuant to prior written authorization from
the Company. Upon the termination of this Agreement for any reason and
regardless of the circumstances of such termination or the existence of any
dispute between Employee and the Company following or concerning the termination
of Employee's employment, or upon the request of the Company, its successors or
assigns, Employee shall immediately deliver to the Company or its designee (and
will not keep in Employee's possession or deliver to anyone else, including any
copies) any and all devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned
items belonging to the Company, its successors or assigns. Notwithstanding any
other provision of this Agreement, this Agreement shall not bar Employee from
complying with any subpoena or court order, provided that prior to doing so
Employee shall give the Company written notice, at the Company's principal place
of business, of Employee's receipt of any such subpoena or court order as far as
possible in advance of the appearance time set forth in the subpoena or court
order.
(E) THIRD-PARTIES' CONFIDENTIAL INFORMATION. Employee
acknowledges that the Company has received and in the future will receive from
third parties confidential or proprietary information, and that the Company must
maintain the confidentiality of such information and use it only for proper
purposes. Employee shall not use or disclose any such information except as
permitted by the Company or the third party to whom the information belongs.
(F) OTHER AGREEMENTS. Employee represents to the
Company that, except as identified on Schedule A hereto, Employee is not bound
by any agreement or any other previous or existing business relationship which
conflicts with or prevents the full performance of any of Employee's obligations
to the Company. During Employee's employment with the Company, Employee agrees
not to improperly use or disclose any proprietary information or trade secrets
of any former or concurrent employer, or any other person or entity with whom
Employee has an agreement or to whom Employee owes a duty to keep such
information in confidence. Any such persons or entities with whom Employee has
such agreements or to whom Employee owes such a duty are identified on Schedule
A.
2. INVENTIONS.
(A) DISCLOSURE. Employee agrees to disclose promptly
to the Company the full details of any and all ideas, processes, trademarks and
service marks, technical data, know-how, works, inventions, discoveries,
marketing and business ideas, and improvements or enhancements to any of the
foregoing, including all information necessary to enable the Company to
reproduce any of the foregoing, (collectively, "Inventions"), that Employee
conceives, develops or creates alone or with the aid of others during the term
of Employee's employment with the Company (whether or not conceived, developed
or created during regular working hours) that: (i) relate to the Company's
business; (ii) result from any work performed by Employee for the Company; (iii)
involve the use of the Company's equipment, supplies, facilities, or trade
secret information; (iv) result from or are suggested by any work done at the
Company's request or by any Company employee other than Employee, or relate to
any problems specifically assigned to Employee; or (v) result from Employee's
access to any of the Company's memoranda, notes, records, drawings, sketches,
models, maps, customer lists, research results, data, formula, specifications,
inventions, processes, equipment, or the like.
14
Inventions under this Agreement shall not include any
invention that i) was developed on Employee's own time; ii) was developed
without the use of the Company's equipment, supplies, facilities, or
Confidential Information; and iii) does not relate to the business of the
Company.
(B) ASSIGNMENT. Employee shall assign to the Company,
without further consideration, Employee's entire right to any Invention which
shall be the sole and exclusive property of the Company whether or not
patentable. Employee acknowledges also that all Inventions which are made by
Employee (solely or jointly with others), within the scope of Employee's
employment, and which are protectable by copyright, are "works made for hire,"
as that term is defined in the United States Copyright Act (17 U.S. C. ss. 101).
To the extent that any such Inventions, by operation of law, cannot be "works
made for hire," Employee hereby assigns to the Company all right, title, and
interest in and to such Inventions and to any related copyrights.
3. GENERAL PROVISIONS.
(A) ADDITIONAL INSTRUMENTS. Employee shall execute,
acknowledge and deliver any additional instruments or documents that the Company
deems necessary to carry out the intentions of this Agreement, including such
instruments as may be required by the laws of any jurisdiction, now in effect or
hereinafter enacted, that may affect the Company's property rights relating to
the rights and obligations created by this Agreement. Employee further agrees,
as to all the Inventions, to assist the Company in every way (at the Company's
expense) to obtain and, from time to time, enforce patents on the Inventions in
any and all countries. To that end, by way of illustration but not limitation,
Employee will testify in any suit or other proceeding involving any of the
Inventions, execute all documents which the Company reasonably determines to be
necessary or convenient for use in applying for and obtaining patents thereon
and enforcing same, and execute all necessary assignments thereof to the Company
or persons designated by it. Employee's obligation to assist the Company in
obtaining and enforcing patents for the Inventions in any and all countries
shall continue beyond the termination of Employee's employment, but the Company
shall compensate Employee at a reasonable rate after such termination for time
actually spent by Employee at the Company's request on such assistance. In the
event the Company is unable, after reasonable effort, to secure Employee's
signature on any document or documents needed to apply for or prosecute any
patent, copyright or other right or protection relating to any Invention,
whether because of Employee's physical or mental incapacity or for any other
reason whatsoever, Employee hereby irrevocably designates and appoints the
Company and its duly authorized officers and agents as Employee's agent and
attorney-in-fact, to act for and in Employee's behalf and stead to execute and
file any such application or applications and to do all other lawfully permitted
acts to further the prosecution and issuance of patents, copyrights or similar
protections thereon with the same legal force and effect as if executed by
Employee.
(B) REMEDIES. Employee acknowledges that upon a
breach of this Agreement the Company will suffer immediate and irreparable harm
and damage for which money alone cannot fully compensate the Company. Employee
therefore agrees that upon such breach or threat of imminent breach of this
Agreement, the Company shall be entitled to a temporary restraining order,
preliminary injunction, permanent injunction or other injunctive relief, without
posting any bond or other security, barring Employee from violating any
provision of this Agreement. At the Company's option, any action to enforce this
Agreement shall be brought in or transferred to the state or federal court
situated in New York, . Nothing in this Agreement shall be construed as an
election of any remedy, or as a waiver of any right available to the Company
under this Agreement or the law, including the right to seek damages from
Employee for a breach of any provision of this Agreement.
(C) NON-SOLICITATION OF EMPLOYEES. Employee agrees
that during the term of employment and for a period of two years after the
termination or cessation of employment for any reason, Employee shall not
directly or indirectly recruit, solicit or hire any employee of the Company, or
induce or attempt to induce any employee of the Company to discontinue his or
her employment relationship with the Company.
(D) NOT AN EMPLOYMENT CONTRACT. Employee agrees and
understands that nothing in this Agreement shall confer any right with respect
to continuation of employment
15
by the Company, nor shall it interfere in any way with Employee's right or the
Company's right to terminate Employee's employment at any time, with or without
cause.
(E) GOVERNING LAW; CONSENT TO PERSONAL JURISDICTION.
This Agreement will be governed by and construed according to the laws of the
State of . Employee hereby expressly consents to the personal jurisdiction of
the state and federal courts located in for any lawsuit filed there against
Employee by the Company arising from or relating to this Agreement.
(F) ENTIRE AGREEMENT. This Agreement sets forth the
final, complete and exclusive agreement and understanding between the Company
and Employee relating to the subject matter hereof. No modification of or
amendment to this Agreement, nor any waiver of any rights under this Agreement,
will be effective unless in writing signed by the party to be charged. No
subsequent change or changes in Employee's duties, salary or compensation will
affect the validity or scope of this Agreement.
(G) SEVERABILITY. If one or more of the provisions in
this Agreement are deemed unenforceable by law, then the remaining provisions
will continue in full force and effect.
(H) SURVIVAL. The provisions of this Agreement shall
survive the termination of Employee's employment for any reason and the
assignment of this Agreement by the Company to any successor in interest or
other assignee.
(I) WAIVER. No waiver by the Company of any breach of
this Agreement shall be a waiver of any preceding or succeeding breach. No
waiver by the Company of any right under this Agreement shall be construed as a
waiver of any other right.
(J) EFFECTIVE DATE. This Agreement is effective as of
the first day of Employee's employment with the Company. Employee understands
that this Agreement affects Employee's rights to works and inventions Employee
develops during Employee's employment with the Company and restricts Employee's
ability to disclose or use Confidential Information.
[signature page follows]
16
IN WITNESS WHEREOF, the parties have executed this agreement on the dates set
forth below, to be effective as of the Effective Date.
DATED: February __, 2000 COMPANY:
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: ____________________________
Name: __________________________
Title: ___________________________
DATED: February __, 2000 EMPLOYEE:
By: ______________________________
Print Name: ______________________
17
NON-COMPETITION AGREEMENT
NON-COMPETITION AGREEMENT (the "Agreement") dated as
of February __, 2000 by and between ▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC., a Delaware corporation
(the "Company") and __________ ("Founder").
W I T N E S S E T H:
WHEREAS, the Company and The Financial Commerce Network, Inc. have entered
into a Unit Purchase Agreement (the "Purchase Agreement") dated February __,
2000; and
WHEREAS, the Company conducts its business on a national and international
basis; and
WHEREAS, under the Purchase Agreement, Founder agreed not to compete with the
Company in accordance with the terms of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and
the terms, conditions and mutual covenants appearing in this Agreement, the
parties hereto hereby agree as follows:
SECTION 1. Founder covenants as a condition of
employment:
(a) Founder alone for his own account, or as an
officer, director or shareholder shall not, directly or indirectly, within the
Territory (as defined below), manage, operate, establish or lend his name to any
business or enterprise that is the same as the operations offered by the Company
at the date first written above to anyone within the Territory (as defined
below). The preceding sentence shall not be deemed to prohibit Founder from
owning or acquiring securities issued by any corporation which directly or
indirectly competes with the Company provided such corporation's securities are
listed with a national securities exchange or are traded in the NASDAQ stock
market.
(b) Founder shall not induce or encourage, or assist
or participate in any way in inducing or encouraging, any employee, officer,
director or independent contractor to resign from, terminate or cease any
position, agreement, employment or relationship with the Company and shall not
in any way interfere with or induce or encourage any breach of any such
agreement, employment or relationship; nor shall he hire, retain or employ any
person who is an employee or officer of the Company.
(c) Founder shall not knowingly or intentionally
damage or destroy the reputation or goodwill of the Company or any regard for
the Company among its suppliers, employees, independent contractors, customers
or others that have acquired goods or services from the Company, or that have
engaged in any transaction with the Company.
(d) Founder acknowledges that the Company possesses
and will continue to develop or acquire certain Proprietary Information (as
defined below), that Founder has or may have access to certain Proprietary
Information, that the Company may disclose and has disclosed certain Proprietary
Information to Founder by reason of his employment by and ownership interest in
the Company and his continued retention by the Company and that the Company has
an important interest in protecting the confidentiality of its Proprietary
Information and providing for the ownership of proprietary rights in that
information.
(e) Except and as expressly authorized by the Company
or as the Company may consent to in writing, Founder shall not disclose or use
any Proprietary Information of the Company or its customers, affiliates,
subsidiaries, partners, joint ventures, licensors, licensees or distributors. As
used in this Agreement, "Proprietary Information" shall include all information
contained in patents, patent applications, renewals or continuations, or other
technical disclosures held or filed by the Company, copyrights and copyright
applications, trademarks and trademark applications, writings and designs, as
well as all information protectable as trade secrets.
(f) This Agreement shall encompass any country in
which the Company conducts business at the date first written above (the
"Territory").
SECTION 2. Subject to Section 5 hereunder, this
Agreement shall inure to the benefit of and be binding upon the parties and
their respective successors and assigns, heirs, executors, administrators,
legatees and legal representatives.
SECTION 3. Should any part of this Agreement, for any
reason whatsoever, be declared invalid, illegal or incapable of being enforced
in whole or in part, such decision shall not affect the validity of any
remaining portion, which remaining portion shall remain in full force and effect
as if this Agreement had been executed with the invalid portion thereof
eliminated, and it is hereby declared the intention of the parties hereto that
they would have executed the remaining portion of this Agreement without
including therein any portion which may for any reason be declared invalid.
SECTION 4. This Agreement and all rights hereunder
are personal to the parties and shall not be assignable, and any purported
assignment in violation hereof shall be null and void.
SECTION 5.
(a) All notices, requests, consents and demands by
the parties hereunder shall be delivered by hand, by telecopier at the
applicable telecopier numbers designated below (with confirmation received), by
recognized national overnight courier or by deposit in the United States mail,
postage prepaid, by registered or certified mail, return receipt requested,
addressed to the party to be notified at the addresses set forth below:
(i) if to Founder to:
[Name]
[Address]
(ii) if to the Company to:
▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (212)
Attention: ▇▇▇▇▇ ▇▇▇▇
with a copy to:
Snow ▇▇▇▇▇▇ ▇▇▇▇▇▇ P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) Notices given by mail shall be deemed effective
on the earlier of the date shown on the proof of receipt of such mail or, unless
the recipient proves that the notice was received later or not received, three
(3) business days after the date of mailing thereof. Other notices shall be
deemed given on the date of receipt. Any party hereto may change the address
specified in Section 7(a) by written notice to the other parties hereto.
SECTION 6. The failure of either party to insist upon
the strict performance of any of the terms, conditions and provisions of this
Agreement shall not be construed as a waiver or relinquishment of future
compliance therewith or with any other term, condition or provision, and
-19-
said terms, conditions and provisions shall remain in full force and effect. No
waiver of any term condition or provision of this Agreement on the part of
either party shall be effective for any purpose whatsoever unless such waiver is
in writing and signed by such party.
SECTION 7. In connection with any arbitration arising
out of this Agreement, the prevailing party shall be entitled to recover its
reasonable attorney's fees and costs.
SECTION 8. This Agreement shall be construed in accordance
with the laws of the State of Delaware without regard to the conflict of laws
principles.
SECTION 9. Subject to Section 2 above, controversies between
the Company on one hand and Founder on the other shall be resolved, to the
extent possible, by informal meetings and discussions in good faith between the
parties.
(a) ARBITRATION. If a dispute between the parties
cannot be resolved by informal meetings and discussions, the dispute shall be
settled by binding arbitration, and, at such time as a breach is deemed to
occurred under subsection (b) of this Section 11, a corresponding judgment may
be entered in a court of competent jurisdiction. Arbitration of any dispute may
be initiated by one party by sending a written demand for arbitration to the
other party, which demand will preclude any party hereto from initiating an
action in any court. This demand will specify the matter in dispute and request
the appointment of an arbitration panel. The arbitration panel will consist of
one arbitrator named by the Company, one arbitrator named by Founder and a third
arbitrator named by the two arbitrators so chosen. The arbitration hearing will
be conducted in accordance with the procedural rules set forth in the commercial
arbitration rules of the American Arbitration Association. The situs of the
arbitration will be New York, New York. The arbitrators shall not be empowered
to award punitive or exemplary damages to either party.
(b) CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.
Without in any way limiting (a) above, in the event that an action is brought to
enforce any Arbitration award, each of the parties hereto (i) consents to submit
itself to the personal jurisdiction of the Courts of the State of New York,
located in New York County, or the United States District Court for the Southern
District of New York, to the extent that such court would have subject matter
jurisdiction with respect to such dispute; (ii) agrees that it will not attempt
to deny or defeat such personal jurisdiction or venue by motion or other request
for leave from any such court; (iii) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any Court other than such courts; (iv) agrees that service of
process in any such action or proceeding may be effected by mailing a copy
thereof by registered or certified mail (or any substantially similar form of
mail), postage prepaid, to a party at its address set forth in Section 6 or at
such other address of which a party shall have been notified pursuant thereto;
(v) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law; and (vi) waives the right to a
jury trial.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first written above.
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: __________________________________
Name: ▇▇▇▇▇ ▇▇▇▇
Title: President
AGREED AND ACCEPTED:
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-----------------------------
Print Name:
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