Exhibit 10.53
DOVE PARTNERS, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
June 4, 1999
TABLE OF CONTENTS
Page
1. Formation of Holdings ................................................................. 1
1.1 Certificate of Incorporation ................................................. 1
1.2 Purchase and Sale of Common Stock ............................................ 2
1.3 Purchase and Sale of Initial Shares of Series A Preferred Stock .............. 2
1.4 Purchase and Sale of Additional Shares of Series A Preferred Stock ........... 2
1.5 Tax-Free Formation ........................................................... 3
1.6 Use of Proceeds .............................................................. 3
2. Representations and Warranties of the Company ......................................... 3
2.1 Organization, Good Standing and Qualification ................................ 4
2.2 Capitalization and Voting Rights ............................................. 4
2.3 Subsidiaries ................................................................. 4
2.4 Authorization ................................................................ 5
2.5 Governmental Consents ........................................................ 5
2.6 Customer Relations ........................................................... 5
2.7 Litigation ................................................................... 5
2.8 Patents and Trademarks ....................................................... 6
2.9 Compliance with Other Instruments ............................................ 7
2.10 Agreements Action ............................................................ 7
2.11 Related Party Transactions ................................................... 8
2.12 Permits ...................................................................... 9
2.13 Environmental g do Safety Laws ............................................... 9
2.14 Marketing Rights ............................................................. 9
2.15 Disclosure ................................................................... 9
2.16 Registration Rights .......................................................... 10
2.17 Financial Statements ......................................................... 10
2.18 Changes ...................................................................... 10
2.19 Organizational Documents ..................................................... 11
2.20 Title to Property and Assets ................................................. 11
2.21 Employee Benefit Plans ....................................................... 12
2.22 Tax Matters .................................................................. 12
-i-
TABLE OF CONTENTS
(continued)
Page
2.23 Insurance ....................................................................... 13
2.24 Books and Records ............................................................... 13
2.25 Labor Agreements and Actions .................................................... 13
2.26 Assumptions or Guaranties of Indebtedness of Other Persons ...................... 13
2.27 Member or Stockholder Agreements ................................................ 14
2.28 Year 2000 Readiness ............................................................. 14
3. Representations and Warranties of Holdings ............................................. 14
3.1 Organization, Good Standing and Qualification ................................... 14
3.2 Capitalization and Voting Right ................................................. 15
3.3 Authorization ................................................................... 15
3.4 Governmental Consents ........................................................... 15
3.5 Litigation ...................................................................... 15
3.6 Registration Rights ............................................................. 16
3.7 Valid Issuance of Series A Preferred Stock and Holdings Common Stock ............ 16
3.8 Market Stand-Off Agreements ..................................................... 16
4. Representations and Warranties of the Contributing Members ............................. 16
4.1 Company Membership Interests .................................................... 17
4.2 Binding Effect .................................................................. 17
4.3 Purchase Entirely for Own Account ............................................... 17
4.4 Disclosure of Information ....................................................... 17
4.5 Accredited Investor ............................................................. 18
4.6 Investment Experience ........................................................... 18
4.7 Restricted Securities ........................................................... 18
4.8 Further Limitations on Disposition .............................................. 18
4.9 Legends ......................................................................... 18
5. Representations and Warranties of the Investors ........................................ 19
5.1 Binding Effect .................................................................. 19
5.2 Purchase Entirely for Own Account ............................................... 19
5.3 Disclosure of Information ....................................................... 19
5.4 Investment Experience ........................................................... 19
-ii-
TABLE OF CONTENTS
(continued)
Page
5.5 Accredited Investor .............................................. 19
5.6 Restricted Securities ............................................ 20
5.7 Further Limitations on Disposition ............................... 20
5.8 Legends .......................................................... 20
5.9 Risks ............................................................ 21
5.10 No Representations ............................................... 21
6. California Commissioner of Corporations ................................. 21
7. Conditions to Initial Closing ........................................... 21
7.1 Conditions to Investor's Obligations ............................. 21
7.2 Conditions to Contributing Members' and Holding Obligations ...... 24
8. Conditions to the Additional Shares Closing ............................. 24
8.1 Conditions to the Investors' Obligations ......................... 24
8.2 Conditions to Holdings' Obligations .............................. 25
9. Miscellaneous ........................................................... 25
9.1 Survival of Warranties ........................................... 25
9.2 Successors and Assigns ........................................... 25
9.3 Governing, Law ................................................... 26
9.4 Titles and Subtitles ............................................. 26
9.5 Notices .......................................................... 26
9.6 Finder's Fee ..................................................... 26
9.7 Expenses ......................................................... 26
9.8 Amendments and Wavers ............................................ 27
9.9 Severability ..................................................... 27
9.10 Aggregation of Stock ............................................. 27
9.11 Entire Agreement ................................................. 27
9.12 Counterparts ..................................................... 27
SCHEDULES
1.3 ..................................................... Schedule of Investors
1.6 .......................................................... Use of Proceeds
-iii-
TABLE OF CONTENTS
(continued)
Page
2 .......................................................... Disclosure Schedule
EXHIBITS
EXHIBIT A - Certificate of Incorporation
EXHIBIT B - Senior Operating Manager Job Description
EXHIBIT C - Investors' Rights Agreement
EXHIBIT D - Stockholders' Agreement
EXHIBIT E - Form of Counsel Opinion
EXHIBIT F - Form of National Loan Exchange Common Stock Purchase Agreement
-iv-
SERIES A, PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is made
as of the 4th day of June 1999, by and between Dove Partners, Inc., a Delaware
corporation ("Holdings"), Dove Brothers LLC, a California limited liability
company (the "Company") The Dove Holdings Corporation, a California corporation
("Dove Holdings") ▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇, as individuals, and ▇▇▇▇ Management
Services, Inc., a Delaware corporation ("▇▇▇▇") (each a "Contributing Member",
and, collectively, (the "Contributing Members") and the investors listed on
Schedule 1.3 hereto, each of which is referred to herein as an "Investor" and
collectively, the "Investors".
WHEREAS, the Contributing Members own all of the outstanding membership
interests in the Company;
WHEREAS, the Investors and the Contributing Members desire to organize and
capitalize Holdings and provide for its initial governance and other matters;
WHEREAS, Holdings is a newly formed entity with no prior assets or
operations;
WHEREAS, the Contributing Members desire to contribute all of the
membership interests in the Company to Holdings in exchange (the "Exchange") for
common stock of Holdings ("Holdings Common Stock") in a transaction intended to
qualify under Section 357 of the Internal Revenue Code of 1986,as amended (the
"Code");
WHEREAS, Holdings, as of the date hereof, is authorized to issue up to
13,000,000 shares of Series A Preferred Stock (the "Series A Preferred Stock")
having the rights, preferences, privileges and restrictions set forth in
Holding's Certificate of Incorporation, a copy of which is attached hereto as
Exhibit A;
WHEREAS, Holdings desires to issue and sell an aggregate of 12,090,909
shares of Series A Preferred Stock, subject to adjustment as provided herein, to
the Investors for an aggregate purchase price of $3,990,000 in two closings, the
Initial Closing (as defined in Section 1.3 hereof) and the Additional Shares
Closing (as defined in Section 1.4 hereof) pursuant to the terms and conditions
set forth herein;
WHEREAS, the Investors desire to purchase from Holdings in the Initial
Closing the number of Initial Shares (as defined in Section 1.3 hereof) of
Series A Preferred Stock set forth opposite the name of the investor in Schedule
1.3 of this Agreement, and the Investors desire to purchase from Holdings in the
Additional Shares Closing the number of Additional Shares as specified in
Schedule 1.3;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Formation of Holdings
1.1 Certificate of Incorporation. The Certificate of Incorporation of
Holdings was filed with the Secretary of State of Delaware on June 4, 1999 (the
"Certificate of Incorporation"), a certified copy of which is attached hereto as
Exhibit A.
1
1.2 Purchase and Sale of Common Stock.
(a) Purchase and Sale. Upon the terms and conditions of this
Agreement, at the Initial Closing, Holdings agrees to acquire and each of the
Contributing Members agrees to contribute all of the membership interests in the
Company (the "Company Membership Interests") owned by such Contributing Member
in exchange for the issuance and delivery (i) to Dove Holdings of 25,688,135
shares of Holdings Common Stock, (ii) to ▇▇▇▇ ▇▇▇▇ of 254,417 shares of Holdings
Common Stock, (iii) to ▇▇▇▇ ▇▇▇▇ of 254,417 shares of Holdings Common Stock and
(iv) to ▇▇▇▇ of 2,015,152 shares of Holdings Common Stock.
(b) Common Stock Payment and Delivery. At the Initial Closing,
Holdings shall deliver to each Contributing Member a certificate representing
the Holdings Common Stock which such Contributing Member is entitled to receive
against delivery to Holdings of the certificates or certificates of interests or
other instruments, if any, issued by the Company and evidencing the Company
Membership Interests owned by such Contributing Member.
1.3 Purchase and Sale of Initial Shares of Series A Preferred Stock.
(a) Purchase and Sale. Upon the terms and conditions of this
Agreement, each Investor agrees, severally, to purchase at the Initial Closing,
and Holdings agrees to sell and issue to each such Investor at the Initial
Closing that number of shares of the Series A Preferred Stock set forth opposite
each such Investor's name on Schedule 1.3 hereto for the purchase price set
forth therein (the "Initial Shares").
(b) Initial Closing. The closing (the "Initial Closing") of the
purchase and sale of the Company Membership Interests and the Initial Shares
shall be held at the offices of. O'Melveny & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, at 10:00 A.M., on June 14,1999, or at such
other time and place on or before June 30, 1999 as the parties agree (which time
and place are designated as the "Initial Closing Date").
(c) Initial Shares Closing Payment and Delivery. At the Initial
Closing, Holdings shall deliver to each Investor a certificate representing the
Initial Shares which such Investor is purchasing at the Initial Closing (as set
forth on Schedule 1.3) against delivery to Holdings by such Investor of a check
or wire transfer in the amount of the purchase price therefor payable to
Holdings' order.
1.4 Purchase and Sale of Additional Shares of Series A Preferred
Stock.
(a) Triggering Event. Upon the occurrence of the Triggering
Event (as hereinafter defined), the Investors shall purchase from Holdings on
and as of the Additional Shares Closing Date (as defined in Section 1.4(c)
hereof) that number of additional shares of Series A Preferred Stock opposite
each such Investor's name on Schedule 1.3 hereto for the purchase price set
forth therein (the "Additional Shares"), upon the terms and conditions of this
Agreement. The "Triggering Event" shall be deemed to have occurred on the fifth
business day following the receipt by the Investors of notice from Holdings of
the hiring by Holdings of a person to fill the position of senior operating
manager of Holdings having the duties,
2
responsibilities and authority as described in Exhibit B (the "Senior Operating
Manager") who has been mutually agreed upon by the Investors and ▇▇▇▇ ▇▇▇▇ and
▇▇▇▇ ▇▇▇▇.
(b) Purchase Regardless of Triggering Event. At any time during
that period from the Initial Closing Date through September 30 1999, any
Investor may in its discretion elect, regardless of the absence or occurrence of
the Triggering Event, to purchase the Additional Shares in accordance with the
terms and conditions hereof provided that each such Investor provides Holdings
and the other Investors written notice of its desire to purchase the Additional
Shares no later than September 15,1999(a "Notice of Exercise").
(c) Additional Shares Closing. The closing of the purchase and
sale of the Additional Shares hereunder (the "Additional Shares Closing") shall
be held at such time and place as the parties agree but in no event later than
the earlier of (i) fifteen(15) days after the Triggering Event or (ii) fifteen
(15) days after Holdings' receipt of a Notice of Exercise. The date on which the
Additional Shares Closing actually occurs is referred to herein as the
"Additional Shares Closing Date." If the Additional Shares Closing has not
occurred on or before September 30, 1999, then the parties obligations under
this Section 1.4 shall terminate and be of no further force or effect.
(d) Additional Shares Closing Payment and Delivery. At the
Additional Shares Closing, Holdings shall deliver to each Investor a certificate
representing the number of Additional Shares such Investor is purchasing from
Holdings, against delivery to Holdings by such Investor of a check or wire
transfer in the amount of the purchase price therefor payable to Holdings'
order.
1.5 Tax-Free Formation. Each of the transactions involving the
Holdings Common Stock and the Series A Preferred Stock hereunder are intended to
be entered into as part of a single integrated plan intended to qualify under
Section 351 of the Code. The Exchange and the formation of Holdings are intended
to be tax-free transactions pursuant to Section 351 of the Code and
corresponding state and local laws.
1.6 Use of Proceeds. The net proceeds (after payment of transaction
expenses) from the sale of the Initial Shares and the Additional Shares will be
used by Holdings as set forth on Schedule 1.6 hereto to develop an internet
auction business and shall not be used to repay existing indebtedness of the
Company audits subsidiaries or to invest in capital assets held for resale.
Pending utilization for the purposes set forth herein, Holding: shall invest the
net proceeds in short-term, interest-bearing government securities or
certificates of deposit or their equivalent issued by a bank or trust company
organized under the laws of the United States or any state thereof, having
capital, surplus and undivided profits aggregating at least $100,000,000.
2. Representations and Warranties of the Company. Except as set forth in
the applicable section of the disclosure schedule provided by the Company to the
Investors prior to the execution of this Agreement (the "Disclosure Schedule")
and attached hereto as Schedule 2, the Company hereby represents and warrants to
Holdings and each Investor as follows:
3
2.1 Organization, Good Standing and Qualification. The Company is a
limited liability company duly organized, validly existing and in good standing
under the laws of its state of organization and has all requisite power and
authority under the laws of its state of organization, its Articles or
Certificate of Organization and Operating Agreement to carry on its business as
now conducted and as proposed to be conducted. The Company has only two
subsidiaries, Dovetech, Inc., a California corporation ("Dovetech") and National
Loan Exchange, Inc., a Delaware corporation ("National Loan Exchange")
(collectively, the "Subsidiaries"). Each Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to conduct its business as now conducted and as proposed to be
conducted. The Contributing Members have delivered to Holdings (it being
understood that all items stated herein to have been delivered or provided to
Holdings have also been delivered or provided to the Investors) complete and
correct copies of the organizational documents of each of the Company and its
Subsidiaries. Each of the Company and its Subsidiaries is duly qualified to
transact business and is in good standing in each of the jurisdictions specified
in Section 2.1 of the Disclosure Schedule.
2.2 Capitalization and Voting Rights.
(a) All of the outstanding Company Membership Interests (i) are
owned as of the date hereof and (ii) will be owned after giving effect to the
transactions set forth in Section 7(o) hereof by the Contributing Members in the
percentages set forth on Section 2.2 of the Disclosure Schedule. The outstanding
Company Membership Interests are all duly and validly authorized and issued,
fully paid and nonassessable and were issued in accordance with the registration
or qualification provisions of the Securities Act of 1933, as amended, and any
relevant state securities laws, or pursuant to valid exemptions therefrom.
(b) No options, warrants, rights (including conversion or
preemptive rights) or agreements are presently outstanding for the purchase or
acquisition from the Company of any Company Membership Interests. The Company is
not a party or subject to any agreement or understanding and, to the Company's
knowledge, there is no agreement or understanding between any persons and/or
entities, which affects or relates to the voting or giving of written consents
with respect to any security or by a director of the Company.
2.3 Subsidiaries. As of the date hereof the Subsidiaries are the only
subsidiaries of the Company. Section 2.3 of the Disclosure Schedule is a
complete and correct list setting forth for each Subsidiary (a) the number of
shares of authorized capital stock of each class of its capital stock, and (b)
the number of issued and outstanding share of each class of its capital stock,
the names of the holders thereof and the number of shares held by each such
holder as of the date hereof and after giving effect to the transactions set
forth in Section 7(o) and 7(p) hereof. All of the issued and outstanding shares
of capital stock of each Subsidiary have been duly authorized and are validly
issued, fully paid and non-assessable. The Company owns of record and
beneficially 100% of the outstanding shares of capital stock of Dovetech and
66.6666% of the outstanding shares of capital stock of National Loan Exchange,
free and clear of all liens, encumbrances, adverse claims and interests of
others of any kind. There are no preemptive or similar rights on the part of any
holder of any class of securities of either Subsidiary, or options, warrants,
conversion or other rights, agreements, commitments of any
4
kind obligating either Subsidiary, contingently or otherwise to issue, sell or
otherwise cause to become outstanding any shares of its capital stock of any
class or securities convertible into or exchangeable for any such securities.
There are no voting trusts, proxies, or other agreements or understandings with
respect to the voting, dividend rights or disposition of any capital stock of
either Subsidiary. Neither the Company nor either Subsidiary controls directly
or indirectly or has any direct or indirect equity participation in any
corporation, partnership, trust or other entity other than the Company's
ownership of Subsidiaries.
2.4 Authorization.
The Company and its members and managers have all requisite power and
authority under the laws of its state of organization, its Articles or
Certificate of Organization and Operating Agreement necessary for the
authorization, execution and delivery of this Agreement and the other agreements
contemplated hereby to which it is a party and the performance of all of its
obligations hereunder and thereunder. This Agreement and the other agreements
contemplated hereby to which the Company is a party have been duly authorized,
executed and delivered by the Company, and constitute valid and legally binding
obligations of the Company, enforceable in accordance with their respective
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies.
2.5 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority on
the part of the Company or Subsidiaries is required in connection with the
consummation of the transactions contemplated by this Agreement
2.6 Customer Relations. Since December 31,1997, no significant
customer of the Company or Subsidiaries that has been a party to a master
national auction contract with the Company has terminated its relationship with
the Company or Subsidiaries or threatened to do so. Section 2.6 of the
Disclosure Schedule sets forth a complete and correct list of each such
termination and the reasons for such termination.
2.7 Litigation. There is no action, suit, claim, dispute, proceeding
or investigation pending or, to the knowledge of the Company, currently
threatened writing or involving an amount in excess of $100,000 (whether or not
in writing) against the Company or Subsidiaries which questions the validity of
this Agreement or the right of the Company to enter into this Agreement; the
transactions contemplated hereby or thereby, or which could reasonably be
expected to result, either individually or in the aggregate, in any material
adverse changes in the assets, condition affairs or prospects of the Company and
its Subsidiaries taken as a whole, financially or otherwise, or any change in
the current equity ownership of the Company or Subsidiaries. The foregoing
includes, without limitation, actions pending or threatened in writing or
involving an amount in excess of $100,000 (whether or not in writing) involving
the prior employment of any of the Company or Subsidiaries' employees, their use
in connection with the Company or Subsidiaries' business of any information or
techniques allegedly proprietary to any of their former employers, or their
obligations under any agreements with prior employers. There is no action, suit,
claim, dispute, proceeding or investigation pending or,
5
to the knowledge of the Company, currently threatened against the Company by any
member of the Company, against any member of the Company by the Company on to
the Company's knowledge, between any of the members of the Company relating to
the Company. There is no action, suit, claim, dispute, proceeding or
investigation pending or currently threatened against either Subsidiary by any
stockholder of either Subsidiary, against any stockholder of either Subsidiary
by either Subsidiary or to the Company or either Subsidiary's knowledge, between
any of the stockholders of either Subsidiary relating to either Subsidiary.
Neither the Company nor Subsidiaries is a party or subject to the provisions of
any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality. There is no action, suit, proceeding or investigation
by the Company or Subsidiaries currently pending or which the Company or
Subsidiaries intends to initiate.
2.8 Patents and Trademarks. The Company and each Subsidiary has
sufficient title and ownership of, or rights to use, all patents, trademarks,
service marks, trade names, copyrights, trade secrets and proprietary rights and
processes (collectively, "Intellectual Property Rights") necessary for its
business as now conducted and as proposed to be conducted, without, to the best
knowledge of Company and each Subsidiary, any conflict with or infringement of
the rights of others. The Company and each Subsidiary owns or has currently
effective licenses to use all Intellectual Property Rights the absence of which
could materially impair the Company or Subsidiaries' ability to carryout its
strategic plans. Section 2.8 of the Disclosure Schedule is a correct and
complete list of all of the patents, trademarks, service marks, trade names and
copyrights of the Company and each Subsidiary and all royalties payable by the
Company or Subsidiaries in connection with its current or currently planned
products, processes and technologies identifying the payee, the royalty rate and
the product, processor technology to which the royalty relates. There are no
pending or threatened claims or disputes regarding royalties payable by the
Company or Subsidiaries under currently existing licenses or otherwise. There
are no outstanding options, licenses or agreements of any kind relating to the
foregoing, nor is the Company or Subsidiaries bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity. The
execution. delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby, will not breach, violate or conflict with
any instrument or agreement governing any Intellectual Property Right of the
Company or Subsidiaries, will not cause any forfeiture or termination or give
rise to a right of forfeiture or termination of any Intellectual Property Right
of the Company or Subsidiaries or in any way impair the right of the Company or
Subsidiaries to use, sell, license or dispose of or bring any action for the
infringement of, any Intellectual Property Right of the Company or Subsidiaries
or portion thereof. There are no pending claims nor any claims threatened in
writing or otherwise known to management of the Company or Subsidiaries, or
litigation contesting the validity, ownership or right to use, sell, license or
dispose of any of the Company or Subsidiaries' Intellectual Property Rights. nor
is the Company or Subsidiaries aware of any reasonable basis for any such claim,
nor has the Company or Subsidiaries received any communications alleging that
the Company or Subsidiaries have violated or, by conducting its business as
proposed, would violate any of the patents, trademarks, service marks, trade
names, copyrights or trade secrets or other proprietary rights of any other
person or entity. Neither the Company nor either Subsidiary is aware that any of
its employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement or subject to any judgment, decree
6
or order of any court or administrative agency, that would interfere with the
use of his or her best efforts to promote the interests of the Company or
Subsidiaries or that would conflict with the Company or Subsidiaries' business
as conducted. Neither the execution nor delivery of this Agreement nor the
carrying on of the Company or Subsidiaries' business by the employees of the
Company or Subsidiaries, nor the conduct of the Company or Subsidiaries'
business as proposed, will, to the knowledge of the Company, conflict with or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract, covenant or instrument under which any of such
employees is now obligated Neither the Company nor Subsidiaries believes it is
or will be necessary to utilize any inventions of any of its employees (or
people it currently intends to hire) made prior to their employment by the
Company or Subsidiaries.
2.9 Compliance with Other Instruments. The Company is not in
violation or default of any provisions of its Articles or Certificate of
Organization or Operating Agreement or of any judgment, order, writ or decree to
which it is a party or by which it is bound. The Company is not in violation or
default of any instrument or contract to which it is a ▇▇▇▇▇ or by which it is
bound or of any provision of any federal or state statute, rule or regulation
applicable to the Company, except for violations or defaults of any contract
that, individually or in the aggregate, could not reasonably be expected to have
a material adverse effect on the business, financial condition or properties of
the Company and its Subsidiaries taken as a whole. Neither Subsidiary is in
violation or default of any provisions of its Articles or Certificate of
Incorporation or Bylaws or of any judgment, order, writ or decree to which it is
a party or by which it is bound. Neither Subsidiary is in violation or default
or of any instrument or contract to which it is a party or by which it is bound
or of any provision of any federal or state statute, rule or regulation
applicable to Subsidiaries, except for violations or defaults of any contract
that individually or in the aggregate, could not reasonably be expected to have
a material adverse effect on the business, financial condition or properties of
the Company and its Subsidiaries taken as a whole. The execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby will not result in any such violation or be in conflict with
or constitute, with or without the passage of time and giving of notice, either
a default under any such provision, instrument, judgment, order, writ, decree or
contract or an event which results in the creation of any lien, charge or
encumbrance upon any assets of the Company or Subsidiaries or the suspension,
revocation, impairment, forfeiture, or nonrenewal of any material permit,
license, authorization, or approval applicable to the Company or Subsidiaries,
their respective businesses or operations or any of their respective assets or
properties.
2.10 Agreements Action.
(a) Except for agreements explicitly contemplated hereby, there
are no agreements, understandings or proposed transactions between the Company
and any of its members, managers, affiliates, or any affiliate thereof or
between either Subsidiary and any of its officers, directors, affiliates, or any
affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company or Subsidiaries are a party or by which they are bound which may
involve (i) obligations (contingent or otherwise) of the Company or Subsidiaries
in excess of $25,000 (excluding net auction proceeds
7
payable by the Company to customers and maintained in the Company's trust
account or auction or other sale proceeds payable pursuant to the contracts set
forth in Section 2.3(d) of the Disclosure Schedule), or payments to the Company
or Subsidiaries in excess of $50,000 (excluding gross auction revenues payable
to the Company in connection with concluded auction sales), or (ii) the license
of any patent, copyright, trade secret or other proprietary right to or from the
Company or Subsidiaries or (iii) provisions restricting or affecting the
development, manufacture or distribution of the Company or Subsidiaries'
products or services, or (iv) indemnification by the Company or Subsidiaries
with respect to infringement of proprietary rights.
(c) The Company has not, except as expressly contemplated by
this Agreement or disclosed in the financial statements delivered to the
Investors or set forth in Section 2.10 of the Disclosure Schedule, (i) since
December 31,1998, authorized or made any distribution upon or with respect to
any class of the Company Membership Interests, (ii) incurred any outstanding
indebtedness for money borrowed or any other outstanding fixed, non-contingent
liabilities, other than in the ordinary course of business, individually in
excess of $25,000 or, in the case of such indebtedness and/or such liabilities
individually less than $25,000, in excess of $50,000 in the aggregate, (iii)
made any outstanding loans or advances to any person, other than ordinary
advances for business-related expenses, or (iv) since December 31,1998, sold,
exchanged or otherwise disposed of any of its assets or rights, other than in
the ordinary course of business.
(d) Neither Subsidiary has, except as disclosed in the
financial statements delivered to the Investors or set forth in Section 2.10 of
the Disclosure Schedule, (i) since December 31,1998, declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its capital stock, in each case other than to the Company, Q)
incurred any outstanding indebtedness for money borrowed or any other
outstanding fixed, non-contingent liabilities individually in excess of $25,000
or, in the case of such indebtedness and/or such liabilities individually less
than $25,000,in excess of $50,000 in the aggregate, (iii) made any outstanding
loans or advances to any person, other than ordinary advances for business
related expenses, or (iv) since December 31,1998, sold, exchanged or otherwise
disposed of any of its assets or rights, other than in the ordinary course of
business.
(e) For the purposes of subsections (b), (c) and (d) above, all
applicable indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities the Company or Subsidiaries have reason to
believe are affiliated therewith) shall be aggregated for the purpose of meeting
the individual minimum dollar amounts of such subsections.
(f) Neither the Company nor either Subsidiary has engaged in
the past six months in any discussion regarding the liquidation, dissolution or
winding up of the Company or such Subsidiary.
2.11 Related Party Transactions. (i) No employee, manager or
member of the Company or member of his or her immediate family is indebted to
the Company, nor is the Company indebted (or committed to make loans or extend
or guarantee credit) to any of them, and (ii) no employee, officer or director
of either Subsidiary or member of his or her immediate
8
family is indebted to either Subsidiary, nor is either Subsidiary indebted (or
committed to make loans or extend or guarantee credit) to any of them. To the
best of the Company's knowledge, none of such persons has any direct or indirect
ownership interest in any firm or corporation with which the Company or either
Subsidiary is affiliated or with which the Company or either Subsidiary has a
business relationship, or any firm or corporation that competes with the Company
or either Subsidiary, except that employees, managers or members of the Company,
the employees, officers or directors of either Subsidiary and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company or either Subsidiary. No member of the immediate family of any
manager or member of the Company or of any officer or director of either
Subsidiary is directly or indirectly interested in any material contract with
the Company or either Subsidiary.
2.12 Permits. The Company and each Subsidiary have all franchises,
permits, licenses, and any similar authority necessary for the conduct of their
business as now being conducted by it, the lack of which could materially and
adversely affect the business, properties, prospects, or financial condition of
the Company and its Subsidiaries taken as a whole, and the Company believes it
or Subsidiaries can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. Neither
the Company nor Subsidiaries are in default in any material respect under any of
such franchises, permits, licenses, or other similar authority.
2.13 Environmental g do Safety Laws. To the best of the Company's
knowledge, neither the Company nor Subsidiaries are in violation of any statute,
law or regulation relating to the environment or occupational health and safety,
where such violation could reasonably be expected to have a material adverse
effect on the business, financial condition or properties of the Company and its
Subsidiaries taken as a whole and to the best of the Company's knowledge, no
material expenditures are or will be required of the Company or Subsidiaries in
order to comply with any such existing statute, law or regulation, where the
violation of, or non-compliance with, such statute, law of regulation could
reasonably be expected to have a material adverse effect on the business,
financial condition or properties of the Company and its Subsidiaries taken as a
whole.
2.14 Marketing Rights. Neither the Company nor Subsidiaries have
granted rights to license, market, or sell its services to any other person or
is bound by any agreement that affects the Company's or Subsidiaries' exclusive
right to develop, distribute, market, license or sell its services.
2.15 Disclosure. The representations and warranties of the Company
and its Subsidiaries contained in this Agreement and the written information
provided by the Company and its Subsidiaries to the Investors (including any
supplemental written information provided to the Investors prior to the
execution of this Agreement), taken as a whole, does not contain any untrue
statement of a material fact or omit to state a fact necessary in order to make
the statements contained therein not misleading as of the date made and in light
of the circumstances in which the same were made. As of the date hereof, there
are no facts known (or which should upon the reasonable exercise of diligence be
known) to the Company (other than matters of a general economic nature) that,
individually or in the aggregate, could reasonably be expected to
9
have a material adverse effect on the business, financial condition or
properties of the Company and its Subsidiaries taken as a whole and that have
not been provided to the Investors.
2.16 Registration Rights. The Company has not granted or agreed to
grant any registration or other rights or any nature, including piggyback
rights, to any person or entity.
2.17 Financial Statements. The Company has delivered to Holdings and
Investors financial statements (balance sheet, statement of operations,
statement of stockholders' equity and statement of cash flows, including notes
thereto) at December 31, 1996, 1997 and 1998 and for the three years then ended
which have been reviewed by Ernst & Young LLP and its financial statements
(balance sheet and statement of operations) as at and for the three-month period
ended March 31,1999 for the Company and Subsidiaries (the "Financial
Statements"). The Financial Statements have been prepared in accordance with
generally accepted accounting principles consistently applied, except that the
three-month Financial Statements may not contain all footnotes required by
generally accepted accounting principles. The Financial Statements fairly
present the financial condition and operating results of the Company or
Subsidiaries, as applicable, as of the dates, and for the periods, indicated
therein. Except as set forth in the Financial Statements, neither the Company
nor Subsidiaries have any liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to December
31,1998 and (ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally accepted accounting
principles to be reflected in the Financial Statements, which, in both cases,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company or Subsidiaries. Except as disclosed in the
Financial Statements, neither the Company nor Subsidiaries are a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation. The
Company and Subsidiaries maintain and will continue to maintain a standard
system of accounting established and administered in accordance with generally
accepted accounting principles.
2.18 Changes. Since December 31,1998 there has not been:
(a) any change in the assets, liabilities, financial condition
or operating results of the Company or Subsidiaries from that reflected in the
Financial Statements, except changes in the ordinary course of business that
have not been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results, prospects or business of the Company and its
Subsidiaries taken as a whole (as such business is presently conducted and as it
is proposed to be conducted);
(c) any waiver by the Company or Subsidiaries of a valuable
right or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company or Subsidiaries, except
in the ordinary course of business and that is not material to the assets,
properties, financial condition, operating results or
10
business of the Company and its Subsidiaries taken as a whole (as such business
is presently conducted and as it is proposed to be conducted);
(e) any material change or amendment to a material contract or
material arrangement by which the Company or Subsidiaries or any of their assets
or properties is bound or subject other than in connection with the transactions
expressly contemplated hereby;
(f) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets of the Company or
Subsidiaries;
(g) any resignation or termination of employment of any key
manager of the Company or officer of Subsidiaries; and the Company, to the best
of its knowledge, does not know of the impending resignation or termination of
employment of any such manager or officer,
(h) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company or Subsidiaries, with respect to any of its
material properties or assets, except liens for taxes not yet due or payable;
(i) any declaration, setting aside or payment or other
distribution in respect of any of the Company's Membership Interests or
Subsidiaries' capital stock (other than to the Company), or any direct or
indirect redemption, purchase or other acquisition of any of such membership
interest by the Company or such stock by Subsidiaries;
(j) to the best of the Company's knowledge, any other event or
condition of any character that could reasonably be expected to materially and
adversely affect the assets, properties, financial condition, operating results
or business of the Company and its Subsidiaries taken as a whole (as such
business is presently conducted and as it is proposed to be conducted); or
(k) any agreement or commitment by the Company or Subsidiaries
to do any of the things described in this Section 2.18, except in connection
with the transactions expressly contemplated hereby.
2.19 Organizational Documents. Except for amendments necessary to
satisfy representations and warranties or conditions contained herein (the form
of which amendments has been approved by Holdings and the Investors), the
organizational documents of the Company and Subsidiaries, are in the form
previously provided to Holdings and the Investors.
2.20 Title to Property and Assets. The Company and Subsidiaries have
good and marketable title to their properties and assets and has good title to
all of its leasehold interests. The Company and Subsidiaries own their property
and assets free and clear of all mortgages, liens, loans and encumbrances of any
kind, except for (i) any liens arising by operation of law, and (ii) any
encumbrances and liens which arise in the ordinary course of business and do not
materially impair the Company's or Subsidiaries' ownership or use of such
property or assets including, without limitation, any liens granted to third
parties on assets acquired by the Company (1) for resale in the ordinary course
of business or (2) pursuant to a lease or purchase money financing for use in
the ordinary course of business, provided that in
11
each case such liens do not relate to any assets of the Company other than the
assets so acquired. With respect to the property and assets it leases, the
Company and Subsidiaries are in compliance with such leases in all material
respects and, to the best of the Company's knowledge, hold a valid leasehold
interest free of any lions, claims or encumbrances.
2.21 Employee Benefit Plans. Neither the Company nor Subsidiaries
have any Employee Benefit Plan as defined in the Employee Retirement Income
Security Act of 1974.
2.22 Tax Matters. (a) The Company and Subsidiaries have filed all Tax
Returns as required by law. All such Tax Returns are true, correct and complete
in all material respects. The Company and Subsidiaries have paid all Taxes and
other assessments due (whether or not shown on any Tax Return). The provisions
for Taxes of the Company and Subsidiaries as shown in the Financial Statements
are adequate for Taxes due or accrued as of the date thereof. Neither the
Company nor Subsidiaries currently are the beneficiary of any extension of time
within which to file any Tax Return. No claim has ever been made by an authority
in a jurisdiction where either the Company or Subsidiaries does not file Tax
Returns that the Company or Subsidiaries are or may be subject to taxation by
that jurisdiction. There are no security interests on any of the assets of the
Company or Subsidiaries that arose in connection with any failure (or alleged
failure) to pay any Tax.
(b) The Company and Subsidiaries have withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or other
third ▇▇▇▇▇.
(c) No Contributing Member (excluding ▇▇▇▇) or director or
officer (or employee responsible for Tax matters) of the Company or Subsidiaries
expects any authority to assess any additional Taxes for any period for which
Tax Returns have been filed. There is no dispute or claim concerning any Taxes
of any of the Company and Subsidiaries either (1) claimed or raised by any
authority in writing or (2) as to which any of the Contributing Members
(excluding ▇▇▇▇) and the directors and officers (and employees responsible for
Tax matters:) of the Company or Subsidiaries have knowledge based upon personal
contact with any agent of such authority. The Contributing Members (excluding
▇▇▇▇) have delivered to the Investors correct and complete copies of all
federal income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by either the Company or Subsidiaries since
December 31, 1994.
(d) Neither the Company nor Subsidiaries have waived any statute
of limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency. Neither the Company nor Subsidiaries
have elected to be treated as a Subchapter S corporation or a collapsible
corporation pursuant to Section 1362(a) or Section 341(f) of the Code nor has it
made any other elections pursuant to the Code (other than elections which relate
solely to methods of accounting, depreciation, or amortization) which would have
a material effect on the Company, Subsidiaries, their respective financial
condition, their respective business as presently conducted or proposed to be
conducted or any of their respective properties or material assets. Subsidiaries
have not made any payments, are not obligated to make any payments, and are not
a party to any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Code (S)280G. Neither the
12
Company nor Subsidiaries are party to any Tax allocation or sharing agreement.
Subsidiaries have not been a member of an affiliated group (within the meaning
of Section 1504 of the Code) filing a consolidated federal income Tax Return,
and neither the Company nor Subsidiary has any liability for the Taxes of any
person (other than the Company or Subsidiary) under Treasury Regulation
(S)1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
2.23 Insurance. The Company and Subsidiaries have in full force and
effect public liability insurance and fire and standard casualty insurance
policies (excluding earthquake and flood insurance), with extended coverage,
sufficient in amount (subject to reasonable deductibles) to allow it to replace
any of its properties that might be damaged or destroyed by fire or any covered
casualty.
2.24 Books and Records. The books and records of the Company provided
to Investors reflect all transactions referred to in such books and records
accurately in all material respects, and reflect all transactions in Company
Membership Interests since the date of organization. The minute books and stock
record books of Subsidiaries provided to Investors reflect all transactions
referred to in such books and records accurately in all material respects, and
in the case of me stock record books and capitalization schedules provided to
Investors reflect all transactions in the capital stock of Subsidiaries since
the date of incorporation.
2.25 Labor Agreements and Actions. Neither the Company nor
Subsidiaries are bound by or subject to (and none of its assets or properties is
bound by or subject to) any written or oral, express or implied, contract,
commitment or arrangement with any labor union, and no labor union has requested
or, to the knowledge of the Company, has sought to represent any of the
employees, representatives or agents of the Company or Subsidiaries. There is no
strike or other labor dispute involving the Company or Subsidiaries pending, or
to the knowledge of the Company threatene4l, which could have a material adverse
effect on the assets, properties, financial condition, operating results, or
business of the Company or Subsidiaries (as such business is presently conducted
and as it is proposed to be conducted), nor is the Company aware of any labor
organization activity involving the employees of the Company or Subsidiaries.
The Company is not aware that any officer or key employee, or that any group of
key employees, intends to terminate their employment with the Company or
Subsidiaries, nor does the Company or Subsidiaries have a present intention to
terminate the employment of any of the foregoing. Subject to general principles
related to wrongful termination of employees, the employment of each officer and
employee of the Company and Subsidiaries is terminable at the will of the
Company or Subsidiary.
2.26 Assumptions or Guaranties of Indebtedness of Other Persons.
Neither the Company nor Subsidiaries are directly or contingently liable on
(including, without limitation liability by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply funds to or
otherwise invest in any person or otherwise to assure any creditor against
loss)any indebtedness of any other person liabilities and has conducted no
operations or business, other than incident to its corporate formation or in
connection with the consummation of the transactions contemplated by this
Agreement. True and correct copies of Holdings' Certificate of Incorporation and
Bylaws have been delivered to the Investors and Contributing Members.
13
2.27 Member or Stockholder Agreements. There are no agreements or
arrangements between the Company and any of the Company's members, or to the
Company's knowledge, between or among any of the Company's members, which grant
voting or other rights with respect to any Company Membership Interests or which
affect any shareholder's ability or right freely to alienate or vote such
interests. There are no agreements or arrangements between Subsidiaries and any
of their stockholders, or to Company's knowledge, between or among any of
stockholders of Subsidiaries, which grant voting or other rights with respect to
any shares of Subsidiary's capital stock or which affect any shareholder's
ability or right freely to alienate or vote such shares.
2.28 Year 2000 Readiness. To the Company's best knowledge and belief
all of its accounting software is, and has been represented by its vendor(s) to
be, Year 2000 compliant, with the exception of the mail system module of the
software manufactured by CUS. CUS has represented to the Company that said CUS
mail system software module requires an upgrade in order to become Year 2000
compliant, which upgrade is currently in Beta-testing and is expected to be
released and installed on the Company's system prior to November 1, 199. The
Company believes that the failure of the CUS mail system software module to be
Year 2000 compliant would potentially cause it to incur material additional
costs and expenses as a result of the need to implement workaround solutions,
but the Company nevertheless believes that such workaround solutions would allow
the Company to continue operate its business in an effective manner. The Company
does not believe that it has any other hardware or software or electronically
controlled system whose failure to be Year 2000 compliant would have a material
adverse effect on the business of the Company and its Subsidiaries, taken as a
whole. The Company has not undertaken any testing or independent verification of
the status of any of the third party systems with which it interfaces or upon
which it is otherwise dependent. The Company will make appropriate inquiries of
all such third parties to the extent the failure of such third parties' systems
to by Year 2000 compliant could reasonably be expected to have a material
adverse effect on the Company and its Subsidiaries, taken as a whole, and the
Company will develop appropriate contingency plans to address such potential
failures, which the parties acknowledge could occur notwithstanding the
assurances such third parties may provide. The term "Year 2000 compliant", as
used herein in reference to any hardware, software, or other system, shall mean
that such hardware, software, or system will (a) correctly handle and process
date information before, during and after January 1, 2000, accepting date input,
and performing calculations, including but not limited to sorting and
sequencing, on dates and portions of dates, (b) function according to the
documentation during and after January 1, 2000, without changes in operation
resulting from the advent of the new century, (c) where appropriate respond to
two digit date input in a way that resolves any ambiguity as to the century in a
disclosed, defined and predetermined manner, (d) store and provide output of
date information in ways that are unambiguous as to the century, and (e)
properly manage the leap year occurring in the year 2000.
3. Representations and Warranties of Holdings. Holdings hereby represents
and warrants to the Investors and Contributing Members as follows:
3.1 Organization, Good Standing and Qualification. Holdings is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Holdings
is a newly formed corporation and has no assets or
14
liabilities and has conducted no operations or business, other than incident to
its corporate formation or in connection with the consummation of the
transactions contemplated by this Agreement. True and correct copies of
Holdings' Certificate of Incorporation and Bylaws have been delivered to the
Investors and Contributing Members.
3.2 Capitalization and Voting Right. The authorized capital stock of
Holdings consists of 75,000,000 shares of Holdings Common Stock and 25,000,000
shares of Preferred Stock ("Preferred Stock"), of which 13,000,000 shares have
been designated Series A Preferred Stock. After giving effect to the Initial
Closing and Additional Shares Closing and the transactions to be completed
simultaneously therewith, Holdings will have 12,090,909 shares of Series A
Preferred Stock outstanding all of which will be held by the Investors and
28,212,121 shares of Holdings Common Stock outstanding, all of which will be
held by the Contributing Members. No options, warrants, rights (including
conversion or preemptive rights) or agreements are presently outstanding for the
purchase or acquisition from Holdings of any Holdings Common Stock presently
outstanding.
3.3 Authorization. All corporate action on the part of Holdings, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement, the Investors' Right Agreement and the
Stockholders Agreement, the performance of all obligations of Holdings hereunder
and thereunder, the authorization, issuance (or reservation for issuance), sale
and delivery of the Series A Preferred Stock being sold hereunder and the
Holdings Common Stock issuable upon conversion of the Seder A Preferred Stock
and the authorization, issuance, sale and delivery of the Holdings Common Stock
being sold hereunder has been taken or will be taken prior to the Initial
Closing, and this Agreement, the Investors' Right Agreement and the Stockholders
Agreement constitute void and legally binding obligations of Holdings,
enforceable in accordance with their respective terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally,(ii)as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, and (iii)to the extent the indemnification
provisions contained in the Investors' Right Agreement may be limited by
applicable federal or state securities laws.
3.4 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, statue local or provincial governmental authority on
the pad of Holdings is required in connection with the consummation of die
transactions contemplated by this Agreement, except for the filing pursuant to
Section 251020 of the California Corporate Securities Law of 1968,as amended,
and the rules thereunder, which filing will be effected within 15 days after the
she of the Series A Preferred Stock hereunder, and any other applicable state
securities law filings.
3.5 Litigation. There is no action, suit, claim, dispute,
proceeding-or investigation pending or currently threatened against Holdings
which questions the validity of this Agreement the Investors' Rights Agreement
or the Stockholders Agreement or the right of Holdings to enter into any of
them, or to consummate the transactions contemplated hereby or thereby, or which
might result either individually or in the aggregate, in any material adverse
changes in the assets, condition, affairs or prospects of Holdings, financially
or otherwise, or any change in the current equity ownership of Holdings.
Holdings is not a party or subject to the
15
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality.
3.6 Registration Rights. Except as provided in the Investors' Rights
Agreement, Holdings has not granted or agreed to grant any registration or other
rights or any nature, including piggyback rights, to any person or entity.
3.7 Valid Issuance of Series A Preferred Stock and Holdings Common
Stock.
(a) The Series A Preferred Stock which is being purchased by
the Investors hereunder, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable and, based in part upon the representations
of the Investors in this Agreement will be issued in compliance wig all
applicable federal and site securities laws and will be free of restrictions on
transfer other than restrictions on transfer under this Agreement and the
Investors' Rights Agreement and under applicable state and federal securities
law. The Holdings Common Stock issuable upon conversion of the Series A
Preferred Stock purchased under this Agreement has been duly and validly
reserved for issuance and, upon issuance in accordance with the terms of the
Certificate of Incorporation, shall be duly and validly issued, fully paid and
nonassessable, and issued in compliance with all applicable securities laws and
will be free of restrictions on transfer other than restrictions on transfer
under this Agreement the Investors' Rights Agreement and the Stockholders
Agreement and under applicable state and federal securities law, as presently in
effect of the United States and each of the states whose securities laws govern
the issuance of any of me Series A Preferred Stock hereunder.
(b) The shares of Holdings Common Stock which are being
purchased by the Contributing Members hereunder, when issued, sold and delivered
in accordance with the terms hereof for the consideration expressed herein will
be duly and validly authorized and issued, fully paid and nonassessable and,
based in part upon the representations of the Contributing Members in this
Agreement will be issued in compliance with all applicable federal and state
securities laws and will be fee of restrictions on transfer other than
restrictions on transfer under this Agreement the Investors' Right Agreement the
Stockholders Agreement and under applicable site and federal securities law.
3.8 Market Stand-Off Agreements. Holdings has obtained agreements
from each of its stockholders whereby such stockholder has agreed that, during
the period of duration (not to exceed 180 days) specified by Holdings and an
underwriter of common stock or other securities of Holdings following the
effective die of a registration statement of Holdings filed under the Act such
stockholder will not, to the extent requested by Holdings and the underwriter,
directly or indirectly self offer to sell, contact to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any
securities of Holdings held such stockholder at any time ▇▇▇▇ such period except
common stock, if any, including such registration statement
4. Representations and Warranties of the Contributing Members. Each of
the Contributing Members severally represents and warrants to Holdings as
follows:
16
4.1 Company Membership Interests. Such Contributing Member has good
and valid title to the Company Membership Interests owned by him, her or it as
set forth in Schedule 2.2 hereto, free and clear of any claims, liens, security
interests, options, charges, adverse claims and interests of others whatsoever.
Upon delivery to Holdings at the Initial Closing of the certificate or
certificates of interest or other instruments, if any, issued by the Company and
evidencing the Company Membership Interests owned by such Contributing Member,
duly endorsed by such Contributing Member for transfer to Holdings, Holdings
will obtain good and valid title to such Company Membership Interests, fits and
clear of any claims, liens, security interests, options, charges, adverse claims
and interests of others whatsoever. There are no voting trusts, proxies, or
other agreements or understandings with respect to the voting, dividend right or
disposition of such Contributing Member's Company Membership Interests. Neither
the Contributing Member nor, to the Contributing Member's knowledge, the Company
has any obligation, absolute or contingent, to any other person or entity to
issue, sell or otherwise dispose of any Company Membership Interests or to
effect any merger, consolidation, reorganization or other business combination
of the Company or any Subsidiary or to enter into any agreement with respect
thereto.
4.2 Binding Effect. This Agreement and the other agreements
contemplated hereby to which such Contributing Member is a ▇▇▇▇▇ have been duly
executed and delivered by such Contributing Member, and constitute valid and
legally binding obligations of such Contributing Member, enforceable in
accordance with their respective terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, and (iii) to the extent the indemnification
provisions contained in the Investors' Rights Agreement may be limited by
applicable federal or state securities laws.
4.3 Purchase Entirely for Own Account. This Agreement is made with
each Contributing Member in reliance upon such Contributing Member's
representation to Holdings, which such Contributing Member hereby confirms, that
the Holdings Common Stock to be received by such Contributing Member will be
acquired for investment for such Contributing Member's own account, not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereto & and that such Contributing Member has no present intention of selling,
granting any participation in, or otherwise distributing the same. Each
Contributing Member further represents that such Contributing Member does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Holdings Common Stock.
4.4 Disclosure of Information. Such Contributing Member has received
and reviewed this Agreement and all annexes, schedules and exhibits hereto, and
has received all such business, financial and other information as such
Contributing Stockholder deems necessary and appropriate to enable him to
evaluate the financial risk inherent in making an investment in Holdings Common
Stock. Each Contributing Member further represents that he has had an
opportunity to ask questions and has received satisfactory and complete answers
from Holdings regarding the business and financial condition of Holdings and the
terms and conditions of the offering of the Holdings Common Stock. The
foregoing, however, does not limit or modify the
17
representations and warranties of the Company in Section 2 or Holdings in
Section 3 of this Agreement or the right of the Contributing Members to rely
thereon.
4.5 Accredited Investor. Such Contributing Member is an "accredited
investor" within the meaning of Securities and Exchange Commission Rule 501 of
Regulation D, as presently in effect.
4.6 Investment Experience. Such Contributing Member has such
knowledge and experience in financial and business ▇▇▇▇▇▇ alto be capable of
evaluating the merit and risks of his investment in Holdings, and acknowledges
that he is able to fend for himself, can bear the economic ask of his investment
and has such knowledge and experience in financial or business matters that he
is capable of evaluating the merit and asks of the investment in the Common
Stock.
4.7 Restricted Securities. Such Contributing Member understands that
the shares of Holdings Common Stock he is purchasing are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from Holdings in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act of 1933,as amended (the
"Act"), only in certain limited circumstances. In this connection, each
Contributing Member represents that he is familiar with Rule 144 of the Act
("Rule 144"), as presently in effect, and understands the resale limitations
imposed thereby and by the Act.
4.8 Further Limitations on Disposition. Without in any way limiting
the representations set forth above, each Contributing Member further agrees not
to make any disposition of all or any portion of the Holdings Common Stock
unless and until the transferee has agreed in writing for the benefit of
Holdings to be bound by this Section 4, provided and to the extent such section
is then applicable, and the Investors' Rights Agreement and:
(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) Such Contributing Member shall have notified Holdings of the
proposed disposition and shall have furnished Holdings with a detailed statement
of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by Holdings, such Contributing Member shall have famished
Holdings with an opinion of counsel, reasonably satisfactory to Holdings, that
such disposition will not require registration of such shares under the Act (it
being. agreed that Holdings will not require opinions of counsel for
transactions made pursuant to Rule 144 except in unusual circumstances).
4.9 Legends. It is understood that the certificates evidencing the
Holdings Common Stock may bear one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such Act or, if required by
18
Holdings, an opinion of counsel satisfactory to Holdings that such registration
is not required or unless sold pursuant to Rule 144 of such Act."
(b) Any legend required by the laws of the State of California
or any other applicable state.
5. Representations and Warranties of the Investors. Each Investor hereby
represents and warrants to Holdings that:
5.1 Binding Effect. This Agreement constitutes its valid and legally
binding obligation, enforceable in accordance with its terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Investors' Rights
Agreement may be limited by applicable federal or state securities laws.
5.2 Purchase Entirely for Own Account. This Agreement is made with
each Investor in reliance upon such Investor's representation to Holdings,
which such Investor hereby confirms, that the Series A Preferred Stock to be
received by such Investor and the Holdings Common Stock issuable upon conversion
thereof (collectively, the "Securities") will be acquired for investment for
such Investor's own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and that such Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. Each Investor further represents that such Investor does
not have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Securities. Each Investor represents that it has full
power and authority to enter into this Agreement.
5.3 Disclosure of Information. It believes it has received all the
information it considers necessary or appropriate for deciding whether to
purchase the Series A Preferred Stock. Each Investor further represents that it
has had an opportunity to ask questions and receive answers from Holdings
regarding the terms and conditions of the offering of the Series A Preferred
Stock. The foregoing, however, does not limit or modify the representations and
warranties of the Company in Section 2 or Holdings in Section 3 of this
Agreement or the right of the investors to rely thereon
5.4 Investment Experience. Each Investor is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Series A
Preferred Stock. If other than an individual, Investor also represents it has
not been organized for the purpose of acquiring the Series A Preferred Stock.
5.5 Accredited Investor. Each Investor is an "accredited investor"
within the meaning of Securities and Exchange Commission Rule 501 of Regulation
D, as presently in effect.
19
5.6 Restricted Securities. It understands that the shahs of Series A
Preferred Stock it is purchasing are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired from
Holdings in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without
registration under the Act, as amended, only in certain limited circumstances.
In this connection, each Investor represents that it is familiar with Rule
I44,as presently in effect, and understands the resale limitations imposed
thereby and by the Act.
5.7 Further Limitations on Disposition. Without in any way limiting
the representations set forth above, each Investor further agrees not to make
any disposition of all or any portion of the Series A Preferred Stock (or the
Holdings Common Stock issuable upon the conversion thereof) unless and until the
transferee has agreed in writing for the benefit of Holdings to be bound by this
Section 4, provided and to the extent such section is then applicable, and the
Investors' Rights Agreement and:
(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) Such Investor shall have notified Holdings of the proposed
disposition and shall have furnished Holdings with a detailed statement of the
circumstances surrounding the proposed disposition, and (ii) if reasonably
requested by Holdings, such Investor shall have furnished Holdings with an
opinion of counsel, reasonably satisfactory to Holdings, that such disposition
will not require registration of such shares under the Act (it being agreed that
Holdings will not require opinions of counsel for transactions made pursuant to
Rule 144 except in unusual circumstances).
Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
far a transfer by an Investor which is a partnership or limited liability
company to a partner or member thereof or a retired partner or member thereof
who retires after the date hereof or to the estate of any such partner or member
or retired partner or member or the transfer by gift, will or intestate
succession of any partner or member to his spouse or to the siblings, lineal
descendants or ancestors of such partner or member or his spouse, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if he were an original Investor Maunder.
5.8 Legends. It is understood that the certificates evidencing the
Series A Preferred Stock (and the Holdings Common Stock issuable upon conversion
thereof) may bear one or all of the following legends:
(a) "These securities have not been registered undo the
Securities Act of 1933. They may not be sold, offered, for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such Act or an opinion of counsel satisfactory to
Holdings that such registration is not required or unless sold pursuant to Rule
144 of such Act."
20
(b) Any legend required by the taws of the State of California
or any other applicable state.
5.9 Risks. Each Investor acknowledges that (a)this investment
involves substantial risks; (b) the projections for the Company are based upon
good faith estimates and assumptions believed by the Company to be reasonable at
the time made, it being recognized by the Investors that such projections as to
future events are not to be viewed as facts and that actual results during the
period or periods covered by any such projections may differ from the projected
results; and (c)to succeed, the Company may need to attract additional capital
and additional personnel, and there can be no assurances that the Company will
be able to attract such capital or personnel.
5.10 No Representations. Each Investor acknowledges that there have
been no representations, guarantees or warranties made to it by the Company, its
agent or employees, or by any other person with respect to (a) the approximate
length of time that such Investor will be required to remain as the owner of the
Series A Preferred Stock; or (b) the percentage of profit or amount of profit to
be realized, if any, as a result of its investment.
6. California Commissioner of Corporations.
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 FOR SUCH SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL,
UNLESS THE SALE OF SECURITIES EXEMPT FROM QUALIFICATION BY SECTION 25100,25102
OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS
AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED,
UNLESS THE SALE IS SO EXEMPT.
7. Conditions to Initial Closing.
7.1 Conditions to Investor's Obligations. The obligations of each
Investor under subsection 1.3 of this Agreement are subject to the fulfillment
on or before the Initial Closing of each of the following conditions, the waiver
of which shall not be effective against any Investor who does not consent
thereto:
(a) Representations and Warranties. The representations and
warranties of the Company contained in Section 2, Holdings in Section 3 and the
Contributing Members in Section 4 of this Agreement shall be true on and as of
the Initial Closing Date with the same effect as though such representations and
warranties had been made on and as of the Initial Closing Date.
(b) Performance. Each of the Company, the Contributing Members
and Holdings shall have performed and complied with all agreements, obligations
and conditions contained in this Agreement that are required to be performed or
complied with by it on or before Initial Closing.
21
(c) Compliance Certificates.
(i) The Chef Executive Officer and Chief Financial
Officer of the Company shall deliver to each of the investors or their special
counsel a certificate certifying that the conditions specified in Sections
7.1(a) and 7.1 (b) with respect to the Company have been fulfilled and stating
that there shall have been no adverse change in the business, affairs,
operations, properties, assets or condition of the Company or Subsidiaries since
December 31, 1998.
(ii) The Chief Executive Officer and Chief Financial
Officer of Holdings shall deliver to each of the Investors or their special
counsel a certificate certifying that the conditions specified in Sections
7.1(a) and 7.1(b) with respect to Holdings have been fulfilled and stating that
there shall have been no adverse change in the business affairs, operations,
properties, assets or conditions of Holdings since the date of its
incorporation.
(d) Qualifications. The Commissioner o f Corporations of the
State of California shall have issued a permit qualifying the offer and sale of
the Series A Preferred Stock and the underlying Holdings Common Stock to the
Investors pursuant to this Agreement and the offer and sale of the Holdings
Common Stock to the Contributing Members, or such over and sales shall be exempt
from such qualification under the California Corporate Securities Law of 1968,
as amended. Any other authorizations, approvals, or permits, if any, of any
governmental authority or regulatory body of the United States or of any state
that are required in connection with the lawful issuance and sale of the
securities pursuant to this Agreement shall be duly obtained and effective as of
the Initial Closing.
(e) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Initial
Closing and all documents incident thereto shall be reasonably satisfactory in
form and substance to Investors' special counsel, and they shall have received
all such counterpart original and certified or other copies of such documents as
they may reasonably request.
(f) Board of Directors. Concurrently with the Initial Closing,
the Board of Directors of Holdings shall be increased to five directors and the
directors of Holdings immediately after the Initial Cloning Date shall consist
of the following persons: ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, and there shall be one vacancy on the Board of Directors.
(g) Investors' Rights Agreement. Holdings and each Investor
shall have entered into the Investors` Rights Agreement in the form attached as
Exhibit C.
(h) Stockholders' Agreement. The stockholders of Holdings shall
enter into a Stockholders' Agreement in the form of Exhibit D hereto.
(i) Charter Documents. Investors shall have received a
certified copy of Holdings Certificate of Incorporation, in the form attached
hereto as Exhibit A
(j) Satisfactory Due Diligence. Fremont Ventures shall have
completed its due diligence with respect to the Company, Subsidiaries and
Holdings and the
22
results of such due diligence shall have been satisfactory to Fremont Ventures,
as determined by it in its sole discretion.
(k) Senior Operating Manager Search. The Company shall have
made progress satisfactory to the Investors with regard to retaining a search
firm to recruit a new Senior Operating Manager.
(l) Opinion of Holdings and Company Counsel. Each of the
Investors shall have received from Howard, Rico, Nemerovski, Canady, ▇▇▇▇ &
Rabkin, A Professional Corporation ("▇▇▇▇▇▇ ▇▇▇▇"), counsel for Holdings, the
Company and Subsidiaries, an opinion dated as of the Initial Closing Date, in
the form of Exhibit E hereto.
(m) Director Indemnification Agreement. Holdings shall have
entered into a Director Indemnification Agreement with each of its directors in
a form reasonably satisfactory to the Investors and their counsel.
(n) Merger of the Company. The Company shall have merged with
and into a Delaware limited liability company, pursuant to documentation in form
and substance satisfactory to the Investors. Holdings and successor limited
liability company shall have entered into a limited liability company agreement
in form and substance satisfactory to the Investors.
(o) ▇▇▇▇ Agreements. Contributing Members and the Company shall
have entered into agreements in form and substance satisfactory to the Investors
pursuant to which Dove Holdings shall satisfy $875,000 of the existing fixed
obligation due from Dove Holdings, ▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇ to ▇▇▇▇ (the "▇▇▇▇
Obligation") and the other obligations under or pursuant to the Agreement for
Sale of Interest in ▇▇▇▇-▇▇▇▇, dated as of October ▇, ▇▇▇▇,▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ Holdings (such agreement as amended to date, together
with the ▇▇▇▇ Security Agreement and all other related agreement being the "▇▇▇▇
Agreements"), by transferring to ▇▇▇▇ (1)7,500 shares of common stock of
National Loan Exchange owned by Dove Holdings representing 3 1/3% interest in
the total outstanding common stock and (2) Company Membership Interests owned by
Dove Holdings representing a 7 1/7% interest in the Company. Dove Holdings shall
provide to the Investor evidence satisfactory to the Investors that all
obligations of the Contributing Members under the ▇▇▇▇ Agreement have been
terminated and that the security interest in the Company Membership Interest
owner by the Contributing Member pursuant to the Security Agreement, dates as of
October 1,1997(the "▇▇▇▇ Security Agreement"), by and among ▇▇▇▇, ▇▇▇▇ ▇▇▇▇,
▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ Holdings has been terminated and released. The Company shall
assume Dove Holdings, ▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇'▇ remaining $1,000,000 obligation
to ▇▇▇▇ under the ▇▇▇▇ Obligation and Dove Holdings, ▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇
will provide a guaranty to ▇▇▇▇ regarding such $1,000,000 obligation.
(p) Distribution of Stock of National Loan Exchange. Prior to
the consummation of the transactions described in Section 7.1(o), Dove Brothers
California shall distribute all of the capital stock of National Loan Exchange
owned by it to its members pro rata in accordance with their respective Company
Membership Interests, pursuant to documentation in form and substance
satisfactory to the Investors.
23
(q) Purchase of Common Stock of National Loan Exchange by the
Investors. The National Loan Exchange Common Stock Purchase Agreement
substantially in the form attached hereto as Exhibit F and related documentation
referred to therein shall have been executed and delivered and ail of the
transactions contemplated thereby shall be consummated concurrently with the
Initial Closing.
7.2 Conditions to Contributing Members' and Holding Obligations. The
obligations the Contributing Members and Holdings to each other party under this
Agreement are subject to the fulfillment on or before the Initial Closing Date
of each of the following conditions by such party:
(a) Representations d Warranties. The representations and
warranties of the Investors contained in Section 5 of this Agreement shall be
true on and as of the Initial Closing Date with the same effect as though such
representations and warranties had been made. on and as of the Initial Closing
Date.
(b) Payment of Purchase Price. The Investors shall have
delivered the purchase price specified in Section 1.3.
8. Conditions to the Additional Shares Closing.
8.1 Conditions to the Investors' Obligations. The obligations of the
Investors under Section 1.4 of this Agreement are subject to the fulfillment at
or before the Additional Shares Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
thereto:
(a) Representations and Warranties. (i) The representations and
warranties of the Company contained in Section 2 and of Holdings in Section 3
shall be true on and as of the Additional Shares Closing Date with the same
effect as though said representations and warranties had been made on and as of
be Additional Shares Closing Date and (ii) the representations and warranties
contained in subsections 2.6 through 2.15,2.20, 2.2 1, 2.26 and 2.28 shall be
true and correct as if made on and as of the Additional Shares Closing Date by
Holdings with all references contained therein to "Company" being deemed
references to "Holdings" and all references contained therein to "Subsidiaries"
being deemed to include Company; that with respect to all of such
representations and warranties, Holdings shall provide to Investors, if
necessary, new schedules required to qualify the content of such representations
and warranties not less than three business days prior to the Additional Shares
Closing and the content of such schedules shall nod in the sole discretion of
the Investors; reflect any material adverse change in Holdings or any change
that could materially impair the value of be Series A Preferred Stock. For
purposes of this Section 8.1(a), the term "material adverse change" means any
change that is or is likely to be materially adverse to the business assets,
prospects, financial condition or results of operations of Holdings and its
subsidiaries.
(b) Performance. Holdings shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Additional
Shares Closing Date.
24
(c) Compliance Certificate. The Chief Executive Officer and
Chief Financial Officer of Holdings shall deliver to each of the Investors or
their special counsel at the Additional Shares Closing a certificate certifying
that the conditions specified in Section 8.1(a) and 8.1P) have been fulfilled
and stating that there shall have been no adverse change in the business,
affairs, operations, properties, assets or conditions of Holdings and its
subsidiaries since the Initial Closing Date.
(d) Qualifications. The Commissioner of Corporations of the
State of California shall have issued a permit qualifying the offer and she of
the Series A Preferred Stock and the underlying Holdings Common Stock to the
Investors pursuant to this Agreement or such offer and sale shall be exempt from
such qualification under the California Corporate Securities Law of 1968,as
amended. Any other authorizations, approvals, or permits, if any, of any
governmental authority or regulatory body of the United States or of any state
that are required in connection with the lawful issuance and sale of the
securities pursuant to this Agreement shall be duly obtained and effective as of
the Additional Shares Closing.
(e) Proceedings and Document. All corporate and other
proceedings in connection with the transactions contemplated at the Additional
Shares Closing and all documents incident thereto shall be reasonably
satisfactory in form and substance to Investors' special counsel, and they shall
have received all such counterpart original and certified or other copies of
such documents as they may reasonably request.
8.2 Conditions to Holdings' Obligations. The obligations of
Holdings to the Investors under Sections 1.4 of this Agreement are subject to
the fulfillment on or before the Additional Shares Closing Date of each of the
following conditions by such party:
(a) Representations and Warranties. The representations and
warranties of the Investors contained in Section 4 shall be true on and as of
the Additional Shares Closing Date with the same effect as though such
representations and warranties had been made on and as of the Additional Shares
Closing Date.
(b) Payment of Purchase Price. The Investors shall have
delivered, ate Additional Shares Closing, the purchase price specified in
Section 1.4.
9. Miscellaneous.
9.1 Survival of Warranties. The warranties, representations and
covenants of the Company, Contributing Member, Holdings and Investors contained
in or made pursuant to this Agreement shall survive t0execution and delivery of
this Agreement and the Initial Closing and the Additional Shares Closing and
shall in no way be affected by any investigation of the subject matter thereof
made by or on behalf of the Investors, Holdings, Contributing Member or the
Company.
9.2 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Series A Preferred Stock sold hereunder or any
Holdings Common Stock issued upon conversion thereof or any Holdings Common
Stock sold hereunder). Nothing in this Agreement express or implied, is
25
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement except as expressly provided in
this Agreement
9.3 Governing, Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California.
9.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement
9.5 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
given for all purposes (a) upon personal delivery, (b) one day after being send
when sent by professional overnight courier service from and to locations within
the United Stated (c) five days after posing when sent by registered or
certified mail, or (d) on the date of transmission when sent by facsimile,
addressed (i) if to the Company at the address set forth on the signature pages
hereto; (ii) if to the Contributing Members at the addresses set forth on the
signature pages hereto; (iii) if to Holdings at the address set forth on the
signature pages hereto; or (iv) if to the Investors at the addresses set forth
on the signature pages hereto. Any party hereto may from time to time by notice
in writing to the other parties as provided herein, designate a different
mailing address or a different person to which such notices or demands are
thereafter be addressed or delivered.
9.6 Finder's Fee. Each party represent that it neither is nor will
be obligated for any finder's, fee or commission in connection with this
transaction. Each party to this Agreement agrees to indemnify and to hold
harmless each other party to this Agreement from any liability for any
commission or compensation in the nature of a finder's fee (and the costs and
expenses of defending against such liability or asserted liability) for which
such party or any of its officers, partners, employees, members or
representatives is responsible.
9.7 Expenses. Irrespective of whether the initial Closing is
effected, the Company shall pay all costs and expense that it incurs with
respect to the negotiation execution, delivery and performance of this Agreement
including the fen and costs of ▇▇▇▇▇▇, ▇▇▇▇ (counsel to the Company, Holdings
▇▇▇▇ and ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ Holdings and the Subsidiaries) in connection with this
transaction. If the Initial Closing is effected, the Company shall, at the
Initial Closing, reimburse the reasonable fees and expenses of O'Melveny & ▇▇▇▇▇
LLP, counsel for the Investors, and the reasonable out-of-pocket fees and
expenses of the Investors incurred in connection with the transactions
contemplated hereby. If the Additional Shares Closing is effected, Holdings
shall at such closing, reimburse the reasonable fees and expenses of O'Melveny &
▇▇▇▇▇ LLP, counsel for the Investors, and the reasonable out-of pocket fees and
expenses of the Investors incurred in connection with the transactions
contemplated hereby. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement or the Certificate of Incorporation,
the prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
26
9.8 Amendments and Wavers. Any term of his Agreement may be amended
and the observance of any term of this Agreement may be waved (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company, Holdings, the Contributing Members and
holders of Series A Preferred Stock then owning a majority of the Series A
Preferred Stock and the Common Stock issued upon conversion of the Series A
Preferred Stock issued pursuant to this Agreement. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each holder of
any securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, the Company and Holdings.
9.9 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
9.10 Aggregation of Stock. All shares of the Series A Preferred
Stock held or acquired by affiliated entities or persons shall be aggregated
together for the purpose of determining the availability of any rights under
this Agreement
9.11 Entire Agreement. This Agreement and the document referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
9.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
27
IN WITNESS WHEREOF, the parties hereto have executed this Agreement with
the intent and agreement that the same shall be effective as of the day and year
first above written.
THE COMPANY
DOVE BROTHERS, LLC
By: /s/ ▇▇▇▇ ▇▇▇▇
----------------------------------
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
HOLDINGS:
DOVE PARTNERS, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇
----------------------------------
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
CONTRIBUTING MEMBERS:
THE DOVE HOLDINGS CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇
----------------------------------
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇
--------------------------------------
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No. (▇▇▇)▇▇▇-▇▇▇▇
▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇
---------------------------------------
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
28
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇ MANAGEMENT SERVICES, INC.
By: /s/ ▇▇▇▇▇▇ [ILLEGIBLE]
----------------------------------------
Title: Vice President
-------------------------------------
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇. ▇▇▇▇
----------------------------
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------------------
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
INVESTORS:
FREMONT VENTURES L.L.P.,
a Delaware limited partnership
By: FV, L.L.P., its General Partner
By: Fremont Resources, Inc.,
its General Partner
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------
Name: W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------
Title: Vice President
----------------------------
Address: Fremont Ventures L.L.P.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
29
SCHEDULE 1.3
Schedule of Investors
Number and Price of Initial Number and Price of Additional
Investor Shares of Preferred Stock Shares of Preferred Stock
-------- ------------------------- -------------------------
Fremont Ventures I, L.P. 6,045,455 shares 6,045,454 shares
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ $0.33 per share $0.33 per share
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ $1,995,000.15 total purchase $1,994,999.82 total purchase price
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ price
Attention: W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇