MATRIDIGM CORPORATION
COMMON STOCK PURCHASE AGREEMENT
INTRODUCTION
This Common Stock Purchase Agreement (this "Agreement") is made by and
between MatriDigm Corporation, a California corporation ("MatriDigm" or the
"Company"), and BRC Holdings, Inc., a Delaware corporation ("Purchaser"). It is
effective as to the parties on the date executed by Purchaser as indicated under
Authorized Signatures below ("Effective Date").
RECITALS
In connection with engagement by the Company of Purchaser to perform
consulting services for the Company pursuant to a Consulting Agreement between
the Company and Purchaser dated effective October 1, 1996 (the "Consulting
Agreement"), Purchaser desires to purchase 2,000,000 shares of the Company's
Common Stock (the "Shares"), on the terms and conditions set forth in this
Agreement.
AGREEMENT
Based upon the facts and premises set forth above and the representations,
warranties, and covenants set forth below, the parties hereby agree as follows:
1. PURCHASE AND SALE OF THE SHARES.
Purchaser hereby agrees to purchase 2,000,000 Shares at the purchase
price of $0.75 per Share, by check payable to "MatriDigm Corporation" in the
amount of the purchase price (the "Check") delivered by Purchaser with this
Agreement. The Company shall promptly complete and execute certificates
representing the Shares, registered in the name of "BRC Holdings, Inc."
2. REPRESENTATIONS, WARRANTIES, AND COVENANTS.
(a) BY PURCHASER TO THE COMPANY. Purchaser hereby represents,
warrants, and covenants to the Company as of the Effective Date that:
(i) Purchaser has total assets in excess of $5,000,000.
Purchaser is a sophisticated investor in start-up stage companies in the
Company's industry and has received all necessary information on the basis of
which Purchaser can make an informed decision to make the investment hereunder
prior to the execution of this Agreement. The Chairman and Chief Executive
Officer of Purchaser is the Chairman of the Board of Directors of the Company.
As a result, Purchaser is fully informed as to the business affairs and
prospects of the Company.
(ii) Purchaser understands that, in reliance upon applicable
exemptions, the Company has not registered or qualified the Shares under the
Federal Securities Act of 1933 (the "1933 Act") or the California Corporate
Securities Law of 1968 (the "California Law") or the securities laws of any
other state. Purchaser understands that in order to fulfill the requirements of
these exemptions, the Company has satisfied certain investment suitability
requirements set by the Company, as indicated by Purchaser's representations
made herein.
(iii) Purchaser is acquiring the Shares for Purchaser's own
account, for investment only, and not with a view to or for sale in connection
with any distribution thereof or as a stand-in, proxy or nominee for anyone
else.
(iv) Purchaser recognizes that the Company has a limited
history of operations and earnings, and that there is a high risk of loss of
Purchaser's entire investment. Purchaser would have adequate means of
providing for Purchaser's anticipated needs and contingencies if Purchaser's
entire investment were lost. Purchaser recognizes that there is presently no
public market for the Shares, and that it is unlikely that any market will
exist in the future. Purchaser has no need for liquidity for Purchaser's
investment in the Shares. Purchaser is domiciled in the State of Texas.
(v) Purchaser has made such independent investigations as
Purchaser has deemed necessary for the purpose of making the decision to invest
in the Shares. Purchaser has had the opportunity to ask questions of and
receive answers from authorized officers of the Company concerning the
operations, affairs, and financial condition of the Company. Purchaser is
relying solely upon such review, investigations, and answers in making its
decision to invest in the Company, and has thereby acquired all of the
information Purchaser considers needed to make an informed decision to so
invest.
(vi) Purchaser is aware that Purchaser's rights to transfer the
Shares and Underlying Shares are restricted by the 1933 Act, the California Law,
the repurchase option referred to in Section 4 of this Agreement, the market
stand-off and right of first refusal referred to in Sections 8(b) and 9 of this
Agreement, and the absence of a market for the Shares. Purchaser understands
that the Shares are considered to be restricted securities by the Securities and
Exchange Commission under the 1933 Act and by the California Corporations
Department under the California Law, and may be so considered under the laws of
the state of Purchaser's domicile, and therefore may not be sold without
registration under the 1933 Act and qualification under the California Law
and/or registration or qualification under the law of the state of Purchaser's
domicile, or an opinion of counsel satisfactory to the Company that the sale or
transfer is exempt from such registration and qualification.
(vii) Purchaser has read the legends set forth below and
understands and agrees that the certificates representing the Shares will bear
restrictive legends in the forms set forth below in addition to any other
legends required by applicable law until such legends are no longer applicable;
and that the Company has made a notation in its records concerning the
restrictions indicated therein, and will not allow any transfer or sale in
violation thereof.
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED
2
("ACT") IN RELIANCE IN PART ON THE EXEMPTION PROVIDED BY RULE 506, OR
QUALIFIED UNDER THE CALIFORNIA CORPORATE SECURITIES LAW OF 1968, AS
AMENDED (THE "CALIFORNIA LAW"), OR QUALIFIED OR REGISTERED UNDER THE
SECURITIES LAW OF ANY OTHER STATE (THE "LAWS"). THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND CONSTITUTE RESTRICTED SECURITIES FOR PURPOSES
OF RULE 144. NEITHER SAID SHARES NOR ANY INTEREST THEREIN MAY BE
TRANSFERRED, SOLD, OR OFFERED FOR SALE IN THE ABSENCE OF (1) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT AND QUALIFICATION
AND/OR REGISTRATION UNDER THE CALIFORNIA LAW AND ANY OTHER APPLICABLE
LAWS, OR (2) OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION AND/OR QUALIFICATION IS NOT REQUIRED AS TO SAID TRANSFER,
SALE, OR OFFER AS A RESULT OF RULE 144 OR OTHERWISE.
"A STATEMENT OF THE RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS
GRANTED TO OR IMPOSED UPON EACH CLASS OR SERIES AND THE NUMBER OF SHARES IN
AND DESIGNATION OF EACH CLASS OR SERIES OF SHARES WILL BE FURNISHED TO ANY
SHAREHOLDER UPON REQUEST AND WITHOUT CHARGE FROM THE OFFICE OF THE
SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICE OF THE
CORPORATION, WHICH AT THE DATE OF ISSUANCE OF THIS CERTIFICATE WAS LOCATED
AT ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
"THE HOLDER OF RECORD OF THESE SHARES, AND SUCH HOLDER'S AGENTS AND
ATTORNEYS, MAY BE REQUIRED TO EXECUTE NON-DISCLOSURE STATEMENTS PRIOR TO
BEING PERMITTED TO INSPECT CERTAIN RECORDS OF THE CORPORATION AS DESCRIBED
BY ARTICLE 8 OF THE CORPORATION'S BY-LAWS.
"THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE TERMS AND CONDITIONS OF A COMMON STOCK PURCHASE AGREEMENT BY
AND BETWEEN THE REGISTERED HOLDER (OR ITS PREDECESSOR IN INTEREST) AND THE
CORPORATION (THE "AGREEMENT"), INCLUDING A REPURCHASE OPTION, A MARKET
STAND-OFF AGREEMENT AND A RIGHT OF FIRST REFUSAL. A COPY OF THE AGREEMENT
IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY."
(viii) Purchaser has reviewed the federal, state and local tax
aspects and consequences of this investment to Purchaser's satisfaction with
Purchaser's own tax advisors, and is not relying upon any statements,
representations or advice of the Company or any of its agents as to such
matters.
(b) BY THE COMPANY TO PURCHASER. The Company hereby represents and
warrants to Purchaser, as of the date of the Company's acceptance hereof, that:
3
(i) The Company is a corporation duly incorporated, validly
existing, and in good legal standing under the laws of the State of California,
and has the corporate power and authority to enter into this Agreement and to
issue and deliver the Shares and to carry out the transactions herein
contemplated.
(ii) The execution, delivery and performance by the Company of
this Agreement and all related transactions have been duly authorized by all
necessary corporate action, and this Agreement constitutes a legal, valid and
binding obligation of the Company, enforceable in accordance with its terms,
except as may be limited by bankruptcy, insolvency or other laws affecting
enforcement of creditor's rights, or by the application of customary principles
of equity when equitable remedies are sought.
(iii) The capitalization of the Company is as follows:
(A) AUTHORIZED AND DESIGNATED STOCK. The Company's
authorized capital stock consists of 100,000,000 shares of Common Stock and
30,000,000 shares of Preferred Stock. Of the Preferred Stock, 9,600,000 are
designated Series A Preferred Stock; 2,000,000 shares are designated Series B
Preferred Stock; 1,500,000 are designated Series C Preferred Stock; and
16,900,000 shares remain as yet undesignated by the Board of Directors. The
Board of Directors is authorized to determine or alter the rights, preferences,
privileges and restrictions granted to or imposed upon any wholly unissued
series of Preferred Stock and to increase or decrease (but not below the
number of shares then outstanding) the number of shares of any such series
subsequent to the issuance of share in the series. The Company is currently
contemplating the amendment and restatement of the Articles of Incorporation
to designate 6,666,666 shares of Series D Preferred Stock and to make certain
other changes in the rights of the various classes and series of shares, in a
form which has been provided to and reviewed by the Purchaser.
(B) OUTSTANDING AND RESERVED STOCK. As of the date of
this Agreement, there are outstanding 16,000,000 shares of Common Stock;
9,600,000 shares of Series A Preferred Stock; and 2,000,000 shares of Series B
Preferred Stock. 6,400,000 shares of Common Stock are reserved for issuance
upon exercise of options granted or available for grant pursuant to the
Company's 1996 Stock Option Plan (the "Stock Option Plan"), and 1,500,000
Shares of Series C Preferred Stock are reserved for issuance upon exercise of
an outstanding warrant to purchase Series C Preferred Stock.
(c) SURVIVAL. All representations and warranties made by the Company
and Purchaser hereunder shall survive the execution of this Agreement, and any
investigation at any time made by or on behalf of either party shall not
diminish the party's right to rely upon the other's representations and
warranties.
3. CONFIDENTIALITY OF CORPORATE RECORDS.
Purchaser agrees to abide by the provisions of Article 8 of the Bylaws of
the Company pertaining to confidentiality of corporate records of the Company to
which Purchaser
4
may obtain access as a shareholder of the Company. The Secretary of the
Company will provide Purchaser a copy of the Company's Bylaws upon request.
4. REPURCHASE OPTION.
(a) INITIATION OF OPTION. The purchase hereunder is made in
connection with the consulting engagement between Purchaser and the Company
pursuant to the Consulting Agreement, which provides, among other things, for
the services of Purchaser's Chairman and Chief Executive Officer, ▇. ▇.
▇▇▇▇▇▇ ("▇▇▇▇▇▇"), to the Company as the Company's Chairman of the Board of
Directors ("Chairman"). If, prior to three (3) years after July 1, 1996, the
date upon which ▇▇▇▇▇▇ began to act as the Company's Chairman (the "Start
Date"), the consulting engagement is terminated for any reason set forth in
clauses (i) through (vi) of Section 2(A) of the Consulting Agreement, then,
effective upon such termination, the Company and its designees shall have the
right and option ("Repurchase Option") to repurchase, pursuant to the terms
and conditions set forth below, the "Percentage" (as defined in subsection
4(b) below) of the Shares (as adjusted for any stock split, reverse stock
split, stock dividend, or any other recapitalization subsequent to the date
hereof) at a price per share equal to the purchase price hereunder of $0.75
per Share (as correspondingly adjusted).
Notwithstanding the foregoing, the Repurchase Option shall
terminate in the event the Company terminates the aforesaid consulting
engagement for any reason other than one set forth in clauses (i) through
(vi) of Section 2(A) of the Consulting Agreement. Moreover, the Repurchase
Option shall not be effective if the termination of the consulting engagement
shall be occasioned by the resignation of ▇▇▇▇▇▇ or Purchaser resulting from
breach of the Consulting Agreement by the Company. Any dispute regarding
whether such resignation is the result of breach of the Consulting Agreement
by the Company shall be resolved by arbitration as provided in Section 8 of
the Consulting Agreement; provided that pending such resolution by arbitration,
the Percentage of the Shares that otherwise would have been subject to the
Repurchase Option upon such termination shall remain in Escrow under Section 5
hereof, and shall remain subject to the Repurchase Option should the Company
prevail in showing that the resignation did not result from breach of the
Consulting Agreement by the Company.
(b) THE PERCENTAGE. The Percentage shall be sixty percent (60%),
less one and two thirds percent (1 2/3%) for each month elapsed from the Start
Date to the date that the termination of the consulting engagement becomes
effective (the "Termination Date"), until the Percentage is zero (0) on the
third anniversary of the Start Date.
(c) EXERCISE OF OPTION BY THE COMPANY. The Repurchase Option shall
be exercised by the Company and/or its designee(s) within sixty (60) days after
the Termination Date by the Company giving written notice ("Triggering Notice")
to the Shareholder (as defined in Section 5 below) and to the Escrow Holder
(as defined in Section 5 below) stating the number of shares as to which the
Repurchase Option is exercised.
Within thirty (30) days after the effective date of the
Triggering Notice, the Company and/or its designee(s) shall deliver to the
Escrow Holder full payment of the repurchase price for the account of the
Shareholder, and the Escrow Holder, subject to the provisions of
5
Section 5 below, shall deliver to the Company and/or its designees, as
appropriate, the certificate(s) representing the Shares repurchased.
(d) FAILURE BY COMPANY TO FULLY EXERCISE THE REPURCHASE OPTION. Any
shares as to which the Company and/or its designee(s) have failed to exercise
the Repurchase Option as provided above shall, subject to the provisions of
Section 5 below, be delivered to the Shareholder free of escrow but subject,
however, to all other restrictions against transfer of the Shares as set forth
in this Agreement, including, without limitation, those contained in the Market
Stand Off and Right of First Refusal as set forth in Sections 8(b) and 9 below.
(e) MERGERS, ETC. In the event of any merger of the Company (except
with a subsidiary) or any acquisition of eighty percent (80%) or more of its
gross assets or stock, or any reorganization or liquidation of the Company, the
Board of Directors of the Company shall have power to make arrangements which
shall be binding on the Shareholder for the continuation of the Repurchase
Option with respect to the stock, funds, or other property exchanged for the
Shares or for the termination of the Repurchase Option upon such event.
(f) TRANSFER AUTHORIZATION. The Purchaser for itself and for any
Permitted Transferee hereby irrevocably authorizes and directs the Secretary or
transfer agent of the Company or the Escrow Holder to transfer the Shares as
prescribed above in this Section 4 (and in Sections 5 and 9 below) and hereby
irrevocably appoints and constitutes same as attorney-in-fact and agent to
execute any and all documents necessary or appropriate to effectuate such
transfers. The Company agrees to issue or cause its transfer or other agent to
issue any share certificates required in connection with the Repurchase Option
or Right of First Refusal as set forth in Section 9 below.
5. ESCROW.
(a) ESCROW HOLDER. The stock certificate(s) representing the Shares
subject to the Repurchase Option (the "Certificate(s)") shall be deposited with
an escrow holder designated by the Company (the "Escrow Holder"), together with
a stock power attached hereto as EXHIBIT A executed in blank as security for the
Repurchase Option. The Shares may not be sold, pledged, or otherwise
transferred as long as they remain subject to the Repurchase Option except as
provided in Section 4 above, and any transfer or purported transfer in violation
thereof shall be null and void, except that Purchaser may transfer the Shares to
any purchaser of all or substantially all of the assets of Purchaser or any
Company controlled by or under common control with Purchaser ("Permitted
Transferee"), provided the Permitted Transferee(s) agree in writing to be bound
by the Repurchase Option and all other restrictions against transfer of the
Common Shares as set forth in this Agreement, including, without limitation,
those contained in the Right of First Refusal (as defined in Section 9 below).
The Purchaser and any Permitted Transferees, as applicable, are referred to
collectively as the "Shareholder."
(b) TERMINATION OF ESCROW. The Company, by written resolution
adopted by its Board of Directors, may terminate the escrow and direct the
Escrow Holder to deliver the Certificate(s) to the Shareholder, provided,
however, that the Escrow Holder shall not be required to deliver such
Certificate(s) unless, at its discretion, it has received satisfactory
releases, indemnify, and security against claims. Shares so delivered free
of escrow shall nevertheless
6
remain subject to the Repurchase Option and all other restrictions against
transfer of the Shares as set forth in this Agreement, including, without
limitation, those contained in the Right of First Refusal.
(c) LAPSE OF REPURCHASE OPTION. Upon the exercise by the Company of
the Repurchase Option, or upon the failure of the Company to exercise the
Repurchase Option, the Escrow Holder shall deliver the Certificate(s) for the
applicable Shares free of escrow to the Company (and/or its designees) and/or to
the Shareholder, as appropriate. Otherwise, the Escrow Holder shall deliver the
Certificate(s) to the Shareholder free of escrow after termination of the
Repurchase Option. Also, upon written request by the Shareholder, the Escrow
Holder shall deliver Certificate(s) representing those Shares no longer
repurchasable pursuant to the Repurchase Option free of escrow to Shareholder.
Any of the Shares so delivered free of escrow shall remain subject to all other
restrictions against transfer of the Shares as set forth in this Agreement,
including, without limitation, those contained in the Right of First Refusal.
(d) SUCCESSION OF ESCROW HOLDER. The Escrow Holder may resign at any
time, provided that (i) its duties are undertaken by a successor escrow holder,
or (ii) the Certificate(s) are deposited with any court of competent
jurisdiction. Any bank doing business in California under due legal authority
is deemed to be a suitable successor. There shall be applied such additional
terms of escrow as any such successor Escrow Holder may at its discretion
require as a condition to its assuming the duties of Escrow Holder. The
original Escrow Holder is authorized to execute as agent for each party an
escrow agreement or instructions containing such additional terms.
(e) INDEMNITY OF ESCROW HOLDER. The Escrow Holder shall in no event
be liable for damages to any party resulting from the exercise of its duties
hereunder, or for any other reason, except gross negligence or willful
misconduct. The Company shall pay all fees and expenses of the Escrow Holder
and shall hold the Escrow Holder harmless against all claims arising out of its
performance hereunder.
(f) VOTING RIGHTS. The Shareholder shall have full voting rights and
shall be entitled to dividends, if any, with respect to the escrowed shares.
6. TAX ELECTIONS.
Each of Purchaser and ▇▇▇▇▇▇ has completed a tax election in the form
attached as EXHIBIT B and hereby authorizes and directs the Company to file it
with the Internal Revenue Service ("IRS"), as a protective election only, within
thirty (30) days after the Effective Date. Purchaser understands that the
purpose of these elections is to choose to be taxed on the excess of the fair
market value per Share of the Shares and their per Share purchase price of $0.75
as of the Effective Date rather than as of the dates that the Repurchase Option
at $0.75 per Share lapses, even though the Shares are subject to substantial
risk of forfeiture until such lapse. Purchaser understands that the Company's
Board of Directors has determined that the present fair market value per Share
is $0.80, resulting in ordinary income which must be recognized upon the filing
of the aforementioned elections, which tax Purchaser and/or ▇▇▇▇▇▇ otherwise
would not incur until the Repurchase Option lapsed as to the Shares. In
addition, although the Company's Board of Directors has determined that the
present fair market value per Share is $0.80, the IRS
7
nevertheless could contend that the present fair market value per Share
exceeds $0.80. Purchaser further understands that if the IRS were to take
that position and prevail, then Purchaser and/or ▇▇▇▇▇▇, by filing the tax
elections, would incur taxes as of the Effective Date for additional ordinary
income on the excess of the IRS fair market value determination over $0.80 on
each Share, which tax Purchaser and/or ▇▇▇▇▇▇ otherwise would not incur until
the Repurchase Option lapsed as to the Shares. The Company represents that
its Board of Directors has determined that the fair market value of each
Share is $0.80 but gives no warranty or guarantee that the fair market value
of each Share is indeed $0.80. Purchaser and ▇▇▇▇▇▇ agree not to ▇▇▇ or
otherwise seek redress from the Company's Board of Directors or the Company
for any tax liability either of them incurs due to their reliance on such
fair market value determination.
7. CONSULTING ENGAGEMENT.
Except as specifically agreed in the Consulting Agreement between the
Company and Purchaser, nothing in this Agreement or in the transactions taken
pursuant hereto shall be construed to constitute or evidence any agreement or
understanding, express or implied, on the part of the Company or its
subsidiaries to retain Purchaser or employ ▇▇▇▇▇▇ for any specific period of
time. Purchaser hereby agrees that as of the date of this Agreement the Company
has accrued no liability to it for any compensation other than for unpaid
reimbursement of expenses incurred.
8. REGISTRATION RIGHTS.
(a) PIGGYBACK REGISTRATION RIGHTS.
(i) NOTICE OF REGISTRATION. If (but without any obligation to
do so) the Company proposes to register any of its stock or other securities
under the federal Securities Act of 1993 ("Act") in connection with the public
offering of such securities solely for cash (other than (A) a registration
relating solely to the sale of securities to employees of the Company pursuant
to a stock option, stock purchase or similar plan, (B) a registration on any
form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Shares, or (C) a registration relating solely to Securities and Exchange
Commission Rule 145), the Company shall, each such time,
(1) promptly give Purchaser written notice of
registration; and
(2) include in the registration and in any underwriting
involved therein any of the Shares specified in a written request or requests
of Purchaser made within thirty (30) days after the written notice was given
by the Company to Purchaser.
(ii) UNDERWRITING REQUIREMENTS. If the registration of which
the Company gives notice pursuant to Section 8(a)(i) above is for a registered
public offering involving an underwriting, the Company shall so advise Purchaser
as part of the written notice. In connection with any offering involving an
underwriting of shares initiated by the Company or by other shareholders of the
Company having registration rights, the Company shall not be required under
Section 8(a)(i) to include any of Purchaser's Shares in the underwriting unless
Purchaser accepts the terms of the underwriting as agreed upon between the
Company and the underwriters
8
selected by it, and then only in such quantity as will not, in the opinion of
the underwriters, jeopardize the success of the offering by the Company or
the Company's shareholders demanding such registration, subject to
apportionment among selling shareholders as provided in the final sentence of
this Section 8(a)(ii). If the total amount of securities that all
shareholders of the Company request to be included in such offering (when
combined with the securities being offered by the Company or its shareholders
demanding such registration) exceeds the amount of securities that the
underwriters reasonably believe compatible with the success of the offering,
then the Company shall be required to include in the offering only that
number of securities pursuant to piggyback registration rights which the
underwriters believe will not jeopardize the success of the offering. The
securities so included pursuant to piggyback registration rights shall be
apportioned among the selling shareholders, including Purchaser, according to
the total number of securities which each selling shareholder shall have
elected to include in the registration or in such other proportions as shall
mutually be agreed to by the selling shareholders.
(b) "MARKET STAND-OFF" AGREEMENT. Purchaser shall not, to the extent
requested by the Company, sell or otherwise transfer or dispose of any Shares
during the period of one hundred eighty (180) days following the effective date
of a registration statement of the Company filed under the Act; PROVIDED,
HOWEVER, that this covenant shall apply only to the Company's initial
registration statement (the "First Registration Statement") and registration
statements filed within three (3) years after the effective date of the First
Registration Statement, and provided that all officers and directors of the
Company and other holders of registration rights enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to the Shares until the end of the one hundred eighty
(180) day period.
(c) TRANSFER. The rights granted under Section 8(a)(i) may be
transferred to a transferee of not less than 100,000 Shares who agrees to be
bound by the restrictions in Section 8(b) or to a third party approved by the
Company in its sole discretion who likewise agrees.
9. RIGHT OF FIRST REFUSAL.
(a) INITIATION OF RIGHT OF FIRST REFUSAL.
(i) Until the consummation of a firm commitment or best
efforts underwritten public offering of the Company's equity registered with
the Securities and Exchange Commission with gross proceeds to the Company of
five million dollars ($5,000,000) or more, Purchaser and Purchaser's
successors and assigns (each a "Shareholder"), shall not sell, pledge, assign
or otherwise transfer any of the Shareholder's interest in any of the Shares
to any person without first offering to the Company or its designees the
right and option to purchase said shares as provided hereinafter in this
Section 9 (the "Right of First Refusal").
(ii) Notwithstanding Section 9(a)(i), but subject to Sections 4
and 8(b) above, Purchaser may sell or transfer any interest in any of the Shares
to any Permitted Transferee without first offering said shares to the Company or
its designees, provided any of the transferee agrees in writing to be bound by
the restrictions set forth in this Section 9 and those of Sections 4 and 8(b)
above.
9
(iii) In the event of a pledge, hypothecation of, or the
granting of an option or other right to purchase the Shares, then the Right
of First Refusal shall come into existence at the time of any sale or
transfer of ownership of the shares pursuant to foreclosure under such pledge
or hypothecation or exercise of such option or right, as the case may be;
provided, however, that the Shareholder may not pledge or hypothecate or
grant an option or right to purchase the Shares unless the pledge holder or
option or right holder, as the case may be, agrees in writing at the time of
the pledge or grant of the option or right to be bound by the Right of First
Refusal as contained in this Section 8, and to cause any proposed assignee or
transferee of such pledge or right of option to execute and deliver to the
Company a similar writing prior to such assignment or transfer.
(b) MECHANICS.
(i) Any Shareholder desiring to sell any or all of the Shares
during the term of the Right of First Refusal shall given written notice to the
Secretary of the Company of the Shareholder's bona fide intention to sell the
shares pursuant to a bona fide written offer of a third party other than the
Company (the "Proposed Purchaser"). The notice shall include a photocopy of the
written offer which shall specify the identity of the Proposed Purchaser, the
number of shares proposed to be sold (the "Offered Shares"), and the price and
payment terms of the proposed offer to buy the Offered Shares. The payment
terms of the contemplated sale to the Proposed Purchaser from the Shareholder
(and of the Shareholder to the Company) must be expressed in terms of cash, cash
equivalents (such as certificates of deposit, shares of stock in publicly traded
companies, and the like) or a promissory note of the Proposed Purchaser payable
on date(s) specified or ascertained by passage of time. The Company or its
designees shall have the right and option to purchase all of the Offered Shares,
at the price and on the payment terms specified in the Shareholder's notice, for
a period of sixty (60) days from receipt of said notice from the Shareholder,
that is, the Shareholder's notice shall constitute an irrevocable offer by the
Shareholder to sell all of the Offered Shares to the Company or its designee(s)
at the price and on the payment terms specified in the notice for sixty (60)
days from the date of the Company's receipt of notice.
(ii) The Company shall exercise its option by giving written
notice of its election to do so (the "Exercise Notice") to the Shareholder. The
Company may exercise its option as to any or all of the Offered Shares.
(iii) The Shareholder shall deliver to the Company a share
certificate representing those Offered Shares being repurchased by the Company
within sixty (60) days of the Exercise Notice against payment by the Company for
the account of Shareholder of the purchase price specified in the Exercise
Notice.
(iv) Any Offered Shares for which the Company and its designees
fail to exercise their option as provided in this section may be sold by the
Shareholder to the Proposed Purchaser within a period of ninety (90) days
following the end of the Company's sixty (60)-day option period, provided that:
(A) the sale is made at the price and on the payment terms specified in the
original notice from the Shareholder to the Company or not more favorable to the
Proposed Purchaser; (B) the Proposed Purchaser delivers a written undertaking to
the Secretary of the Company to be bound by the restrictions on Offered Shares
set forth in this Section 9; and (C) the
10
Company receives an opinion of counsel reasonably satisfactory to it that the
sale of the Offered Shares to be Proposed Purchaser complies with applicable
federal and state corporate securities laws.
(v) Upon receipt of the appropriate undertaking from
Shareholder and Proposed Purchaser as specified in the previous paragraph,
the Company shall transfer the ownership of record of the Offered Shares to
the Proposed Purchaser (and reissue the applicable certificate).
(vi) If within the ninety (90)-day period the Shareholder
does not enter into an agreement for such a sale of Offered Shares to the
Proposed Purchaser, which sale is consummated within thirty (30) days of the
execution of the agreement, the Right of First Refusal shall be revived as to
the Offered Shares, which thereupon shall not be sold or transferred unless
the Shareholder first offers the Company the right and option to repurchase
any and all such Offered Shares in accordance with this Section 9.
(vii) Any transfer or proposed transfer of the Shares or any
interest therein shall be null and void unless the terms and conditions of this
Section 9 are observed or are waived by action of the Company's Board of
Directors.
10. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California applicable to contracts
between California residents entered into and to be performed entirely within
the State of California.
(b) SUCCESSORS AND ASSIGNS. Except as provided above, the rights of
Purchaser under this Agreement may not be assigned without the prior express
written consent of the Company and any attempted assignment without such consent
shall be void. Except as otherwise 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.
(c) ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
documents delivered pursuant hereto or referred to herein constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and thereof. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the written
consent of the Company and the holders of a majority in interest of the Shares
initially sold pursuant to this Agreement that have not been resold to the
public. Any amendment or waiver effected in accordance with this section shall
be binding upon each holder of any Shares purchased under this Agreement at the
time outstanding, each future holder of all such Shares, and the Company.
(d) NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be effective five (5) days
after mailed by first-class, registered or certified mail, postage prepaid, or
upon delivery if delivered by hand, facsimile, telecopy, messenger or a courier
delivery service, addressed to the respective parties at the
11
addresses set forth below accompanying the parties' names on the signature
page to this Agreement or at such other addresses as the parties shall
provide one another by notice pursuant to this section; provided, however,
that notices may be sent to any Shareholder who has acquired Shares from
Purchaser at the address appearing for that person on the stock records of
the Company; and each Shareholder shall be deemed to have been given notice
of any change in the address of the Company's principal executive office
which occurs while Shareholder is a Shareholder of the Company.
(e) CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION OR IN THE ABSENCE OF AN EXEMPTION FROM SUCH
QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH CONSIDERATION BY THE
COMPANY, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION
BEING AVAILABLE.
(f) SEVERABILITY. If the application of any provision or
provisions of this Agreement to any particular facts or circumstances shall
be held invalid or unenforceable by any court of competent jurisdiction, then
(i) the validity and enforceability of such provision or provisions as
applied to any other particular facts or circumstances and the validity of
other provisions of this Agreement shall not in any way be affected or
impaired thereby and (ii) such provision or provisions shall be reformed
without further action by the parties hereto and only to the extent necessary
to make the same valid and enforceable when applied to such particular facts
and circumstances.
(g) SECTION HEADINGS. The section headings in this Agreement are
solely for convenience and shall not be considered in its interpretation.
(h) VENUE. Any lawsuit is brought to enforce this Agreement shall be
brought in Santa ▇▇▇▇▇ County or Alameda County, California and the parties
hereby irrevocably agree and submit to the personal and subject matter
jurisdiction and venue of such court.
(i) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
(j) REMEDIES. In addition to all other rights it may have under this
Agreement, the Company shall have the right to enjoin any sale or other transfer
of the Shares which would violate or cause a breach of the Repurchase Option,
Right of First Refusal, Market Stand-Off or securities laws of the U.S. or any
state. The prevailing party in any litigation or arbitration proceeding
pertaining to the parties' rights and obligations under this Agreement shall be
entitled to recover reasonable attorneys' fees.
12
AUTHORIZED SIGNATURES
For the purpose of binding the parties to the above Consulting Agreement,
the parties or their duly authorized representatives have signed their names on
the dates indicated.
MATRIDIGM CORPORATION BRC HOLDINGS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇. ▇. ▇▇▇▇▇▇
------------------------- ----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇. ▇. ▇▇▇▇▇▇
Chief Executive Officer Chief Executive Officer
Dated: 10/23/96 Dated: 10/23/96
Address: Address:
MATRIDIGM CORPORATION BRC HOLDINGS, INC.
Attention: Chief Executive Officer Attention: Chief Executive Officer
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇. ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
13
DESIGNATION OF ESCROW HOLDER
MATRIDIGM CORPORATION hereby designates ▇▇▇▇▇▇▇▇▇, Parish & ▇▇▇▇▇▇, P.C. as
the Escrow Holder pursuant to Section 5 of the above Stock Purchase Agreement;
and ▇▇▇▇▇▇▇▇▇, Parish & ▇▇▇▇▇▇, P.C., hereby accepts such appointment pursuant
to the term and conditions set forth in that section.
▇▇▇▇▇▇▇▇▇, PARISH & ▇▇▇▇▇▇, P.C. MATRIDIGM CORPORATION
By: /s/ Signature Illegible By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------ ----------------------------
Member of the Firm Chief Executive Officer
14
