1
EXHIBIT 10.2
EUPHONIX, INC.
STOCK ISSUANCE AGREEMENT
THIS STOCK ISSUANCE AGREEMENT (the "AGREEMENT") is made as of March 15,
2001, by and between Euphonix, Inc., a California corporation (the "COMPANY"),
▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇") and ▇▇▇▇▇▇ ▇▇▇▇▇ ("BOSCH," and together with ▇▇▇▇▇, the
"INVESTORS").
In consideration of the mutual covenants and representations herein set
forth, the Company and the Investors agree as follows:
1. ISSUANCE OF STOCK. Subject to the terms and conditions of this
Agreement, the Company hereby agrees to issue promptly and deliver to each
Investor the number of shares of Common Stock of the Company set forth above
such Investor's name on the signature page hereof (the "SHARES"), registered in
the name of such Investor. The Shares are being issued to the Investors in
consideration for the Investors' commitment to loan to the Company up to three
million five hundred thousand dollars ($3,500,000), as set forth in that certain
Secured Promissory Note (the "NOTE"), dated as of the date hereof, by and
between the Company and the Investors, which Note is being executed concurrently
herewith.
2. LEGENDS. All certificates representing the Shares subject to the
provisions of this Agreement shall have endorsed thereon legends substantially
as follows:
(a) THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO DISTRIBUTION AND HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW. THESE
SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND UNTIL THEY HAVE FIRST BEEN REGISTERED OR QUALIFIED UNDER ANY
APPLICABLE STATE SECURITIES LAW, UNLESS AN OPINION OF COUNSEL ACCEPTABLE TO
EUPHONIX, INC. THAT SUCH REGISTRATION OR QUALIFICATION IS NOT REQUIRED HAS BEEN
OBTAINED.
(b) Any other legend required to be placed thereon by applicable blue
sky laws of any state.
3. INVESTORS' REPRESENTATIONS. Each Investor hereby severally represents
and warrants to the Company with respect to the acquisition of Shares by such
Investor and with respect only to such Investor, as follows:
(a) INVESTMENT INTENT; CAPACITY TO PROTECT INTERESTS. The Investor is
acquiring the Shares solely for his own account for investment and not with a
view to or for sale in connection
2
with any distribution of the Shares or any portion thereof and not with any
present intention of selling, offering to sell or otherwise disposing of or
distributing the Shares or any portion thereof in any transaction other than a
transaction exempt from registration under the Securities Act of 1933, as
amended (the "ACT"). The Investor also represents that the entire legal and
beneficial interest of the Shares is being acquired by, and will be held for,
the Investor's account only, and neither in whole or in part for any other
person. The Investor either has a pre-existing business or personal relationship
with the Company or any of its officers, directors or controlling persons or by
reason of the Investor's business or financial experience, or the business or
financial experience of the Investor's professional advisors who are
unaffiliated with and who are not compensated by the Company or any affiliate or
selling agent of the Company, directly or indirectly, could be reasonably
assumed to have the capacity to evaluate the merits and risks of an investment
in the Company and to protect the Investor's own interests in connection with
this transaction.
(b) ECONOMIC RISK. The Investor realizes that the acquisition of the
Shares will be a highly speculative investment and involves a high degree of
risk, and the Investor is able, without impairing his financial condition, to
hold the Shares for an indefinite period of time and to have the Shares become
worthless.
(c) RESTRICTED SECURITIES. The Investor understands and acknowledges
that:
(i) the Shares have not been registered under the Act and the
Shares must be held indefinitely unless subsequently registered under the Act or
an exemption from such registration is available (such as Rule 144) and the
Company is under no obligation to register the Shares, except as set forth in
that certain Registration Rights Agreement, dated as of the date hereof, by and
between the Company and the Investors;
(ii) the share certificate representing the Shares will be
stamped with the legends specified in Section 2 hereof; and
(iii) the Company will make a notation in its records of the
aforementioned restrictions on transfer and legends.
(d) DISPOSITION UNDER THE ACT. The Investor understands that the
Shares are restricted securities within the meaning of Rule 144 promulgated
under the Act; that the exemption from registration under Rule 144 will not be
available in any event for at least one year from the date of acquisition of the
Shares, and even then will not be available unless (i) a public trading market
then exists for the common stock of the Company, (ii) adequate information
concerning the Company is then available to the public and (iii) other terms and
conditions of Rule 144 are complied with; and that any sale of the Shares may be
made only in limited amounts in accordance with such terms and conditions.
(e) FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
his representations set forth above, the Investor further agrees that the
Investor shall in no event make any disposition of all or any portion of the
Shares unless and until (i) there is then in effect a registration statement
under the Act covering such proposed disposition and such disposition is made
-2-
3
in accordance with said registration statement, or (ii) the resale provisions of
Rule 144 are available in the opinion of counsel to the Company or (iii) (A) the
Investor shall have notified the Company of the proposed disposition and shall
have furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition and (B) the Investor shall have furnished
the Company with an opinion of the Investor's counsel to the effect that such
disposition will not require registration of such stock under the Act.
(f) LOCK-UP PERIOD. The Investors agree in connection with a firm
commitment public offering pursuant to an effective registration statement on
Form ▇-▇, ▇-▇ or any successor forms or other forms under the Act (each, a
"PUBLIC OFFERING"), covering the offer and sale of Common Stock for the account
of the Company to the public, not to sell, make any short sale of, loan, grant
any option for the purchase of or otherwise dispose of any equity securities of
the Company without the prior written consent of the Company or its
underwriters, for such period of time (not to exceed one hundred eighty (180)
days) from the effective date of such registration as may be requested by the
Company or such underwriters; provided, that all officers and directors of the
Company who own stock of the Company and all holders of four percent (4%) or
more of the Company's outstanding securities also agree to such restrictions.
(g) ROLE OF COUNSEL. The Investor has reviewed the provisions of this
Agreement, has had an opportunity to obtain the advice of the Investor's own tax
and legal advisors prior to executing this Agreement and fully understands and
agrees to the provisions hereof. The Investor understands that the law firm of
Wilson, Sonsini, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ is acting as counsel to the Company in
connection with the transactions contemplated by the Agreement, and is not
acting as counsel for the Investor.
4. COVENANTS. The Company hereby covenants that, upon receipt of the
necessary approvals for the convertibility feature of the Note as set forth in
Section C.5 therein, it will enter into a registration rights agreement with
each of the Investors to provide for the registration of the Shares, in
substantially the form attached to the Note as Exhibit C. The Company further
covenants that, if it does not receive the necessary approvals for the
convertibility feature of the Note, it will enter into a registration rights
agreement with each of the Investors to provide for the registration of the
Shares, in substantially the form attached to the Note as Exhibit C, except that
such registration rights agreement will not contain demand registration rights
as set forth in Section 1.5 of the registration rights agreement attached to the
Note as Exhibit C.
5. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed in all respects
by the laws of the State of California without giving effect to any choice of
law provision or rule (whether of the State of California or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of California.
(b) SURVIVAL. The representations and warranties contained herein
shall survive the execution and delivery of this Agreement and the issuance of
the Shares.
-3-
4
(c) SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
(d) ENTIRE AGREEMENT. This Agreement embodies the entire
understanding and agreement between the Investors and the Company and supersedes
all prior agreements and understandings relating to the subject matter hereof.
This Agreement shall not be amended except by an instrument in writing signed by
the parties hereto.
(e) NOTICES. All notices and other communications required or
permitted hereunder shall be deemed sufficiently made if given in writing and
delivered in person, or sent by telecopy, electronic mail, or an internationally
recognized overnight delivery service (such as FedEx or DHL), addressed (a) if
to the Investors, at each Investor's address set forth on the last page of this
Agreement, or at such other address as the Investors shall have furnished the
Company in writing, or (b) if to the Company, at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇, attn: Chief Executive Officer, or at such other address as the Company
shall be furnished to the Investors in writing. Any such notice shall be deemed
to have been received, if personally delivered, or if sent by telecopy,
electronic mail or overnight delivery service, on the date of delivery.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which shall constitute one instrument.
(g) SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
(h) TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
(Remainder of page left intentionally blank)
-4-
5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
COMPANY
EUPHONIX, INC.
a Delaware corporation
By:
-------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, Chief Executive Officer
INVESTORS
▇▇▇▇▇▇ ▇▇▇▇▇
300,000 shares of Common Stock
----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
Address: ▇/▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ #▇
▇▇-▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
or
c/o Soundproof, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
50,000 shares of Common Stock
----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
Address: ▇▇▇▇▇▇▇▇▇▇▇▇▇▇. ▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
(Signature page(s) to Stock Issuance Agreement)