Exhibit 10.3
INFLOW, INC.
STOCK PURCHASE AGREEMENT
AGREEMENT made as of this 15th of October, 1999 by and between InFlow,
Inc., a Delaware corporation (the "Corporation"), and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III (the
"Purchaser").
A. PURCHASE OF SHARES
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1. Purchase. Purchaser hereby purchases, and the Corporation hereby
sells to Purchaser, forty thousand (40,000) shares of the Corporation's Series A
Preferred Stock ( the "Purchased Shares") at a purchase price of $3.50 per share
(the "Purchase Price").
2. Payment. Concurrently with the execution of this Agreement,
Purchaser shall deliver to the Secretary of the Corporation: (i) the aggregate
Purchase Price payable for the Purchased Shares in the form of (A) fifty-two
thousand five hundred dollars ($52,500) cash and (B) a promissory note in the
amount of eighty-seven thousand five hundred dollars ($87,500), attached hereto
as Exhibit I and (ii) a duly-executed Assignment Separate from Certificate,
attached hereto as Exhibit II.
3. Delivery of Certificates. The certificates representing the
Purchased Shares shall be held in escrow by the Secretary of the Corporation as
provided in Article F.
4. Stockholder Rights. Until such time as the Corporation exercises
the Repurchase Right, Purchaser (or any successor in interest) shall have all
the rights of a stockholder (including voting, dividend and liquidation rights)
with respect to the Purchased Shares, including the Purchased Shares held in
escrow hereunder, subject, however, to the transfer restrictions of Articles B
and C.
B. SECURITIES LAW COMPLIANCE
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1. Restricted Securities. The Purchased Shares have not been
registered under the 1933 Act. Purchaser hereby confirms that Purchaser has
been informed that the Purchased Shares are restricted securities under the 1933
Act and may not be resold or transferred unless the Purchased Shares are first
registered under the Federal securities laws or unless an exemption from such
registration is available. Accordingly, Purchaser hereby acknowledges that
Purchaser is prepared to hold the Purchased Shares for an indefinite period and
that Purchaser is aware that SEC Rule 144 issued under the 1933 Act which
exempts certain resales of unrestricted securities is not presently available to
exempt the resale of the Purchased Shares from the registration requirements of
the 1933 Act.
2. Disposition of Purchased Shares. Purchaser shall make no
disposition of the Purchased Shares (other than a Permitted Transfer) unless and
until there is compliance with all of the following requirements:
(i) Purchaser shall have provided the Corporation with a written
summary of the terms and conditions of the proposed disposition.
(ii) Purchaser shall have complied with all requirements of this
Agreement applicable to the disposition of the Purchased Shares.
(iii) Purchaser shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that (a) the
proposed disposition does not require registration of the Purchased Shares under
the 1933 Act or (b) all appropriate action necessary for compliance with the
registration requirements of the 1933 Act or any exemption from registration
available under the 1933 Act (including Rule 144) has been taken.
The Corporation shall not be required (i) to transfer on its books any
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Purchased Shares which have been sold or transferred in violation of the
provisions of this Agreement or (ii) to treat as the owner of the Purchased
--
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.
3. Restrictive Legends. The stock certificates for the Purchased
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Shares shall be endorsed with the following restrictive legends:
(i) "The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be sold or
offered for sale in the absence of (a) an effective registration statement
for the shares under such Act, (b) a "no action" letter of the Securities
and Exchange Commission with respect to such sale or offer or (c)
satisfactory assurances to the Corporation that registration under such Act
is not required with respect to such sale or offer."
(ii) "The shares represented by this certificate are unvested and
are subject to certain repurchase rights granted to the Corporation and
accordingly may not be sold, assigned, transferred, encumbered, or in any
manner disposed of except in conformity with the terms of a written
agreement dated October 15, 1999 between the Corporation and the registered
holder of the shares (or the predecessor in interest to the shares). A
copy of such agreement is maintained at the Corporation's principal
corporate offices."
C. TRANSFER RESTRICTIONS
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1. Restriction on Transfer. Except for any Permitted Transfer,
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Purchaser shall not transfer, assign, encumber or otherwise dispose of any of
the Purchased Shares which are subject to the Repurchase Right. In addition,
Purchased Shares which are released from the Repurchase Right shall not be
transferred, assigned, encumbered or otherwise disposed of in contravention of
the Market Stand-Off.
2. Transferee Obligations. Each person (other than the Corporation)
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to whom the Purchased Shares are transferred by means of a Permitted Transfer
must, as a
2.
condition precedent to the validity of such transfer, acknowledge in
writing to the Corporation that such person is bound by the provisions of this
Agreement and that the transferred shares are subject to (i) the Repurchase
Right and (ii) the Market Stand-Off, to the same extent such shares would be so
subject if retained by Purchaser.
3. Market Stand-Off.
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(a) In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any Purchased Shares without the prior written consent of the
Corporation or its underwriters. Such restriction (the "Market Stand-Off")
shall be in effect for such period of time from and after the effective date of
the final prospectus for the offering as may be requested by the Corporation or
such underwriters. In no event, however, shall such period exceed one hundred
eighty (180) days.
(b) Owner shall be subject to the Market Stand-Off provided and only
if the officers and directors of the Corporation are also subject to similar
restrictions.
(c) Any new, substituted or additional securities which are by reason
of any Recapitalization or Reorganization distributed with respect to the
Purchased Shares shall be immediately subject to the Market Stand-Off, to the
same extent the Purchased Shares are at such time covered by such provisions.
(d) In order to enforce the Market Stand-Off, the Corporation may
impose stop-transfer instructions with respect to the Purchased Shares until the
end of the applicable stand-off period.
D. REPURCHASE RIGHT
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1. Grant. The Corporation is hereby granted the right (the
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"Repurchase Right"), exercisable at any time during the ninety (90)-day period
following the date Purchaser ceases for any reason to remain in Service, to
repurchase at the Purchase Price all or any portion of the Purchased Shares in
which Purchaser is not, at the time of his or her cessation of Service, vested
in accordance with the Vesting Schedule (such shares to be hereinafter referred
to as the "Unvested Shares").
2. Exercise of the Repurchase Right. The Repurchase Right shall be
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exercisable by written notice delivered to each Owner of the Unvested Shares
prior to the expiration of the ninety (90)-day exercise period. The notice
shall indicate the number of Unvested Shares to be repurchased and the date on
which the repurchase is to be effected, such date to be not more than thirty
(30) days after the date of such notice. The certificates representing the
Unvested Shares to be repurchased shall be delivered to the Corporation prior to
the close of business on the date specified for the repurchase. Concurrently
with the receipt of such stock certificates, the Corporation shall pay to Owner,
in cash or cash equivalents (including the cancellation of any purchase-money
indebtedness), an amount equal to the
3.
Purchase Price previously paid for the Unvested Shares which are to be
repurchased from Owner.
3. Termination of the Repurchase Right. The Repurchase Right shall
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terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph D.2. In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to any and all Purchased
Shares in which Purchaser vests in accordance with the following Vesting
Schedule:
(i) Purchaser shall be fully vested in 15,000 of the Shares
immediately upon execution of this Agreement.
(ii) Purchaser shall vest in the remaining 25,000 of the Shares
on October 15, 2002.
(iii) Purchaser shall vest in any Unvested Shares in the
event of a Corporate Transaction.
(iv) In no event shall any additional Unvested Shares vest
following the Purchaser's cessation of Service for any reason.
(v) Purchaser shall acquire a vested interest in the Unvested
Shares, and the Repurchase Right shall accordingly lapse with respect to
those Shares upon Purchaser's cessation of Service due to death or
Permanent Disability.
All Vested Shares as to which the Repurchase Rights lapse shall,
however, remain subject to the Market Stand-Off.
4. Recapitalization. Any new, substituted or additional securities
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or other property (including cash paid other than as a regular cash dividend)
which is by reason of any Recapitalization distributed with respect to the
Purchased Shares shall be immediately subject to the Repurchase Right, but only
to the extent the Purchased Shares are at the time covered by such right.
Appropriate adjustments to reflect such distribution shall be made to the number
and/or class of Purchased Shares subject to this Agreement and to the price per
share to be paid upon the exercise of the Repurchase Right in order to reflect
the effect of any such Recapitalization upon the Corporation's capital
structure; provided, however, that the aggregate purchase price shall remain the
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same.
5. Fractional Shares. No fractional shares shall be repurchased
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by the Corporation. Accordingly, should the Repurchase Right extend to a
fractional share at the time of Purchaser's cessation of Service, then such
fractional share shall be added to any fractional share in which Purchaser is at
such time vested in order to make one whole vested share no longer subject to
the Repurchase Right.
6. Omitted.
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E. OMITTED
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4.
F. ESCROW
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1. Deposit. Upon issuance, the certificates for the Purchased Shares
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which are subject to the Repurchase Right shall be deposited in escrow with the
Corporation to be held in accordance with the provisions of this Article F.
Each deposited certificate shall be accompanied by a duly-executed Assignment
Separate from Certificate in the form of Exhibit II. The deposited
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certificates, together with any other assets or securities from time to time
deposited with the Corporation pursuant to the requirements of this Agreement,
shall remain in escrow until such time or times as the certificates (or other
assets and securities) are to be released or otherwise surrendered for
cancellation in accordance with Paragraph F.3. Upon delivery of the
certificates (or other assets and securities) to the Corporation, Owner shall be
issued a receipt acknowledging the number of Purchased Shares (or other assets
and securities) delivered in escrow.
2. Recapitalization/Reorganization. Any new, substituted or
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additional securities or other property which is by reason of any
Recapitalization or Reorganization distributed with respect to the Purchased
Shares shall be immediately delivered to the Corporation to be held in escrow
under this Article F, but only to the extent the Purchased Shares are at the
time subject to the escrow requirements hereunder. However, all regular cash
dividends on the Purchased Shares (or other securities at the time held in
escrow) shall be paid directly to Owner and shall not be held in escrow.
3. Release/Surrender. The Purchased Shares, together with any other
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assets or securities held in escrow hereunder, shall be subject to the following
terms relating to their release from escrow or their surrender to the
Corporation for repurchase and cancellation:
(i) Should the Corporation elect to exercise the Repurchase
Right with respect to any Unvested Shares, then the escrowed certificates
for those Unvested Shares (together with any other assets or securities
attributable thereto) shall be surrendered to the Corporation concurrently
with the payment to Owner of an amount equal to the aggregate Purchase
Price paid for those Unvested Shares, and Owner shall cease to have any
further rights or claims with respect to such Unvested Shares (or other
assets or securities attributable thereto).
(ii) Omitted.
(iii) Omitted.
(iv) As the Purchased Shares (or any other assets or securities
attributable thereto) vest in accordance with the Vesting Schedule, the
certificates for those vested shares (as well as all other vested assets
and securities) shall be released from escrow upon Owner's request, but not
more frequently than once every six (6) months.
(v) All Purchased Shares which vest (and any other vested
assets and securities attributable thereto) shall be released within thirty
(30) days after the Purchaser's cessation of Service.
5.
(vi) All Purchased Shares (or other assets or securities)
released from escrow shall nevertheless remain subject to the Market Stand-
Off, until such restriction terminates.
G. SPECIAL TAX ELECTION
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1. Section 83(b) Election . Under Code Section 83, the excess of the
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fair market value of the Purchased Shares on the date any forfeiture
restrictions applicable to such shares lapse over the Purchase Price paid for
such shares will be reportable as ordinary income on the lapse date. For this
purpose, the term "forfeiture restrictions" includes the right of the
Corporation to repurchase the Purchased Shares pursuant to the Repurchase Right.
Purchaser may elect under Code Section 83(b) to be taxed at the time the
Purchased Shares are acquired, rather than when and as such Purchased Shares
cease to be subject to such forfeiture restrictions. Such election must be
filed with the Internal Revenue Service within thirty (30) days after the date
of this Agreement. Even if the fair market value of the Purchased Shares on the
date of this Agreement equals the Purchase Price paid (and thus no tax is
payable), the election must be made to avoid adverse tax consequences in the
future. THE FORM FOR MAKING THIS ELECTION IS ATTACHED AS EXHIBIT III HERETO.
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PURCHASER UNDERSTANDS THAT FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE
THIRTY (30)-DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME AS THE
FORFEITURE RESTRICTIONS LAPSE.
2. FILING RESPONSIBILITY. PURCHASER ACKNOWLEDGES THAT IT IS
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PURCHASER'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY
ELECTION UNDER CODE SECTION 83(b), EVEN IF PURCHASER REQUESTS THE CORPORATION OR
ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
H. GENERAL PROVISIONS
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1. Assignment. The Corporation may assign the Repurchase Right to
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any person or entity selected by the Board, including (without limitation) one
or more stockholders of the Corporation.
2. No Employment or Service Contract. Nothing in this Agreement or
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in the Plan shall confer upon Purchaser any right to continue in Service for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Parent or Subsidiary employing or
retaining Purchaser) or of Purchaser, which rights are hereby expressly reserved
by each, to terminate Purchaser's Service at any time for any reason, with or
without cause.
3. Notices. Any notice required to be given under this Agreement
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shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this paragraph
to all other parties to this Agreement.
6.
4. No Waiver. The failure of the Corporation in any instance to
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exercise the Repurchase Right shall not constitute a waiver of any other
repurchase rights that may subsequently arise under the provisions of this
Agreement or any other agreement between the Corporation and Purchaser. No
waiver of any breach or condition of this Agreement shall be deemed to be a
waiver of any other or subsequent breach or condition, whether of like or
different nature.
5. Cancellation of Shares. If the Corporation shall make available,
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at the time and place and in the amount and form provided in this Agreement, the
consideration for the Purchased Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such shares shall be deemed
purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.
6. Purchaser Undertaking. Purchaser hereby agrees to take whatever
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additional action and execute whatever additional documents the Corporation may
deem necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either Purchaser or the Purchased Shares
pursuant to the provisions of this Agreement.
I. Governing Law. This Agreement shall be governed by, and construed in
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accordance with, the laws of the State of Colorado, as such laws are applied to
contracts entered into and performed in such State without resort to that
State's conflict-of-laws provisions.
J. Successors and Assigns. The provisions of this Agreement shall inure
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to the benefit of, and be binding upon, the Corporation and its successors and
assigns and Purchaser and Purchaser's legal representatives, heirs, legatees,
distributees, assigns and transferees by operation of law, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms and conditions hereof.
K. Counterparts. This Agreement may be executed in one or more
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counterparts. Each such counterpart shall be deemed to be an original and all
such counterparts shall together constitute one and the same instrument.
7.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
INFLOW, INC.
By: /s/ Art Zeile
_____________________________________
Art Zeile, President
PURCHASER
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
8.
EXHIBIT I
PROMISSORY NOTE
EXHIBIT II
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III hereby sell(s), assign(s) and
transfer(s) unto InFlow, Inc. (the "Corporation"),
_________________(____________) shares of the Series A Preferred Stock of the
Corporation standing in ________________________name on the books of the
Corporation represented by Certificate No. ___________________ herewith and do
hereby irrevocably constitute and appoint _______________________________
Attorney to transfer the said stock on the books of the Corporation with full
power of substitution in the premises.
Dated: ______________________
Signature ____________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III
Instruction: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Corporation to exercise its
Repurchase Right set forth in the Agreement without requiring additional
signatures on the part of Purchaser.
EXHIBIT III
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Taxpayer Ident. No.: ###-##-####
(2) The property with respect to which the election is being made is 25,000
shares of the Series A Preferred Stock of InFlow, Inc.
(3) The property was issued on October 15, 1999.
(4) The taxable year in which the election is being made is the calendar year
1999.
(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's service with the issuer is terminated. Such
repurchase right will lapse October 15, 2002.
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $3.50 per share.
(7) The amount paid for such property is $3.50 per share.
(8) A copy of this statement was furnished to InFlow, Inc. for whom taxpayer
rendered the services underlying the transfer of property.
(9) This statement is executed as of: November 12, 1999.
________________________________________________________
Spouse (if any) Taxpayer
This form must be filed with the Internal Revenue Service Center with which
taxpayer files his or her federal income tax returns. The filing must be made
within thirty (30) days after the execution date of the Stock Issuance Agreement
and should be made by registered or certified mail, return receipt requested.
Purchaser must retain two (2) copies of the completed form for filing with his
or her federal and state tax returns for the current tax year and an additional
copy for his or her records.
APPENDIX
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The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Stock Purchase Agreement.
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B. Board shall mean the Corporation's Board of Directors.
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C. Code shall mean the Internal Revenue Code of 1986, as amended.
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D. Common Stock shall mean the Corporation's common stock.
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E. Corporate Transaction shall mean any of the following
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transactions:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities
immediately prior to such transaction,
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets or capital stock, or
(iii) a tender or exchange offer in which, after the consummation of
the offer, the offeror is the beneficial owner (as determined pursuant
to Section 13(d) of the Securities Exchange Act of 1934, as amended),
directly or indirectly, of at least 15 percent of the outstanding
Common Stock.
F. Corporation shall mean InFlow, Inc., a Delaware corporation.
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G. Disability shall mean the inability of an individual to engage in
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any substantial gainful activity by reason of any medically determinable
physical or mental impairment and shall be determined by the Plan Administrator
on the basis of such medical evidence as the Plan Administrator deems warranted
under the circumstances. Disability shall be deemed to constitute Permanent
Disability in the event that such Disability is expected to result in death or
has lasted or can be expected to last for a continuous period of twelve (12)
months or more.
H. Disposition Notice shall have the meaning assigned to such term in
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Paragraph E.2.
I. Exercise Notice shall have the meaning assigned to such term in
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Paragraph E.3.
J. Fair Market Value of a share of Common Stock on any relevant date
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prior to the initial public offering of the Common Stock shall be determined by
the Corporation's
i.
stock option plan administrator after taking into account such factors as it
shall deem appropriate.
K. Omitted.
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L. Market Stand-Off shall mean the market stand-off restriction
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specified in Paragraph C.3.
M. 1933 Act shall mean the Securities Act of 1933, as amended.
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N. Owner shall mean Purchaser and all subsequent holders of the
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Purchased Shares who derive their chain of ownership through a Permitted
Transfer from Purchaser.
O. Parent shall mean any corporation (other than the Corporation) in
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an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
P. Purchaser shall mean the person to whom shares are issued pursuant
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to this Agreement.
Q. Permitted Transfer shall mean (i) a gratuitous transfer of the
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Purchased Shares, provided and only if Purchaser obtains the Corporation's prior
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written consent to such transfer, (ii) a transfer of title to the Purchased
Shares effected pursuant to Purchaser's will or the laws of intestate succession
following Purchaser's death or (iii) a transfer to the Corporation in pledge as
security for any purchase-money indebtedness incurred by Purchaser in connection
with the acquisition of the Purchased Shares.
R. Omitted.
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S. Omitted.
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T. Purchase Price shall have the meaning assigned to such term in
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Paragraph A.1.
U. Purchased Shares shall have the meaning assigned to such term in
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Paragraph A.1.
V. Recapitalization shall mean any stock split, stock dividend,
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recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration.
W. Reorganization shall mean any of the following transactions:
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(i) a merger or consolidation in which the Corporation is not the
surviving entity,
ii.
(ii) a sale, transfer or other disposition of all or
substantially all of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the surviving
entity but in which the Corporation's outstanding voting securities are
transferred in whole or in part to a person or persons different from the
persons holding those securities immediately prior to the merger, or
(iv) any transaction effected primarily to change the state in
which the Corporation is incorporated or to create a holding company
structure.
X. Repurchase Right shall mean the right granted to the Corporation
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in accordance with Article D.
Y. SEC shall mean the Securities and Exchange Commission.
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Z. Service shall mean the Purchaser's performance of services to the
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Corporation (or any Parent or Subsidiary) in the capacity of an employee,
subject to the control and direction of the employer entity as to both the work
to be performed and the manner and method of performance, a non-employee member
of the board of directors or a consultant or independent advisor.
AA. Omitted.
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BB. Subsidiary shall mean any corporation (other than the
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Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
CC. Target Shares shall have the meaning assigned to such term in
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Paragraph E.2.
DD. Vesting Schedule shall mean the vesting schedule specified in
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Paragraph D.3.
EE. Unvested Shares shall have the meaning assigned to such term in
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Paragraph D.1.
iii.