EXHIBIT 2
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DIGIMARC CORPORATION
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
BY AND AMONG
DIGIMARC CORPORATION
AND
THE SEVERAL PURCHASERS
NAMED IN SCHEDULE I
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TABLE OF CONTENTS
1 AGREEMENT TO SELL AND PURCHASE 1
2. CLOSING, DELIVERY AND PAYMENT 1
2.1 Closing 1
2.2 Delivery 2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 2
3.1 Organization; Qualification and Subsidiaries 2
3.2 Capitalization; Voting Rights 2
3.3 Authorization; Binding Obligations 3
3.4 Financial Statements 4
3.5 Liabilities 4
3.6 Changes 4
3.7 Agreements; Action 5
3.8 Obligations to Related Parties 6
3.9 Title to Properties and Assets; Liens, etc. 7
3.10 Patents and Trademarks 7
3.11 Compliance with Other Instruments 7
3.12 Litigation 8
3.13 Tax Returns and Payments 8
3.14 Employees 9
3.15 Nondisclosure Agreement for Employee 9
3.16 Reserved Shares for Option Plan 9
3.17 Obligations of Management 9
3.18 Registration Rights 10
3.19 Compliance with Laws; Permits 10
3.20 Environmental and Safety Laws 10
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3.21 Offering Valid 10
3.22 Minute Books 10
3.23 Real Property Holding Corporation 11
3.24 Section 83(b) Elections 11
3.25 Insurance 11
3.26 Qualified Small Business 11
3.27 Small Business Concern 11
3.28 Full Disclosure 11
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS 11
4.1 Requisite Power and Authority 12
4.2 Consents 12
4.3 Investment Representations12
4.4 Transfer Restrictions 13
5. CONDITIONS TO CLOSING 13
5.1 Conditions to Purchaser's Obligations at the Closing 13
5.2 Conditions to Obligations of the Company 15
6. MISCELLANEOUS 16
6.1 Governing Law 16
6.2 Survival 16
6.3 Successors and Assigns 16
6.4 Entire Agreement 16
6.5 Separability 16
6.6 Amendment and Waiver 16
6.7 Delays or Omissions 16
6.8 Notice 17
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6.9 Expenses 17
6.10 Attorneys' Fees 17
6.11 Titles and Subtitles 17
6.12 Counterparts 17
6.13 Broker's Fees 17
Schedule I -- Purchasers and Consideration
Schedule II -- Disclosure schedules
EXHIBITS
Exhibit A -- First Amendment to First Amended and Restated Investor
Rights Agreement
Exhibit B -- First Amendment to First Amended and Restated Co-Sale and
Shareholder Agreement
Exhibit C -- Third Restated Articles of Incorporation, as amended
Exhibit D -- Employee Nondisclosure Agreement
Exhibit E -- First Amendment to Voting Agreement
Exhibit F -- Legal Opinion
DIGIMARC CORPORATION
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
This Series D Preferred Stock Purchase Agreement (the "Agreement") is
entered into as of June 8, 1999 among DIGIMARC CORPORATION, an Oregon
corporation (the "Company") and each of those persons and entities, severally
and not jointly, whose names are set forth on SCHEDULE I (which persons and
entities are hereinafter collectively referred to as "Purchasers" and each
individually as a "Purchaser").
R E C I T A L S
The Company has authorized the sale and issuance of an aggregate of up to
two million eight hundred thousand (2,800,000) shares of its Series D Preferred
Stock (the "Shares").
The Purchasers desire to purchase the Shares on the terms and conditions
set forth herein.
The Company desires to issue and sell the Shares to the Purchasers on the
terms and conditions set forth herein.
The parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE. Subject to the terms and conditions
hereof, at the Closing (as hereinafter defined) the Company hereby agrees to
issue and sell to Purchasers and each Purchaser agrees to purchase from the
Company, the number of Shares set forth opposite each Purchaser's name on
SCHEDULE I, at a purchase price of Two Dollars and Fifty Cents ($2.50) per
share.
2. CLOSING, DELIVERY AND PAYMENT.
2.1 CLOSING. The closing of the sale and purchase of the shares
under this Agreement (the "Closing") shall take place at 10:00 a.m. on June 8,
1999 at the offices of ▇▇▇▇ ▇▇▇▇▇ LLP, Suite 1800, 222 S.W. Columbia, Portland,
Oregon 97201-6618 or at such other time or place as the Company and Purchasers
may mutually agree (the "Closing Date"); provided, however, no Closing shall
take place until the Company has received at least $3,000,000 towards the
purchase of the Shares. Additional purchases and sales of the Shares may occur
from time to time thereafter (each a "Closing") at the same price per share,
provided that no such purchase and sale of Shares shall occur after July 30,
1999, and in no event shall the Company sell an aggregate of more than 2,800,000
Shares pursuant to the Closings. Any such subsequent purchase and sale shall be
made upon the same terms and conditions as those contained herein, and the
purchasers shall become parties to this Agreement and shall have the rights and
obligations of a Purchaser hereunder.
2.2 DELIVERY. At the Closing, subject to the terms and conditions
hereof, the Company will deliver to the Purchasers certificates representing the
number of Shares to be purchased at the Closing by Purchaser, against payment of
the purchase price therefor by check or wire transfer made payable to the order
of the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the Disclosure Schedule, the Company hereby
represents and warrants to each Purchaser as follows:
3.1 ORGANIZATION; QUALIFICATION AND SUBSIDIARIES. The Company is a
corporation duly organized and validly existing under the laws of the State of
Oregon. The Company has all requisite corporate power and authority to own and
operate its properties and assets, to execute and deliver this Agreement, the
First
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Amendment to First Amended and Restated Investor Rights Agreement in the
form attached hereto as EXHIBIT A (the "Investor Rights Amendment"), the First
Amendment to First Amended and Restated Co-Sale and Shareholder Agreement in the
form attached hereto as EXHIBIT B ("Co-Sale Amendment") and the First Amendment
to Voting Agreement in the form attached hereto as EXHIBIT E (the "Voting
Amendment") (the First Amended and Restated Investor Rights Agreement, as
amended by the Investor Rights Amendment shall be referred to herein as the
"Investor Rights Agreement", the First Amended and Restated Co-Sale Agreement,
as amended by the Co-Sale Amendment shall be referred to herein as the "Co-Sale
Agreement" and the Voting Agreement, as amended by the Voting Amendment shall be
referred to herein as the "Voting Agreement") (the Investor Rights Agreement,
the Co-Sale Agreement and the Voting Agreement, are collectively referred to
herein as the "Related Agreements") and all documents required to be executed
and delivered at Closing, to issue and sell the Shares and the Common Stock
issuable upon conversion thereof (the "Conversion Shares") and to carry out the
provisions of this Agreement, the Related Agreements, and the Third Restated
Articles of Incorporation, as amended, attached hereto as EXHIBIT C ("Third
Restated Articles") and to carry on its business as presently conducted and as
presently proposed to be conducted. The Company is duly qualified and is
authorized to do business and is in good standing as a foreign corporation in
all jurisdictions in which the nature of its activities and of its properties
(both owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so would not have a material adverse effect
on the Company or its business. The Company owns no equity securities of any
other corporation, limited partnership or similar entity. The Company is not a
participant in any joint venture, partnership or similar arrangement.
3.2 CAPITALIZATION; VOTING RIGHTS. The authorized capital stock of
the Company consists, or will consist prior to the Closing, of twenty-five
million (25,000,000) shares of Common Stock, four million six hundred sixty four
thousand seven hundred forty nine (4,664,749) shares of which shall be issued
and outstanding, and twenty-two million three hundred ninety-eight thousand
(22,398,000) shares of Preferred Stock. Of the 22,398,000 shares of Preferred
Stock, three hundred twenty-five thousand (325,000) shares of Preferred Stock
are reserved for Series A-1 Preferred Stock, of which all will be issued and
outstanding, and 325,000 shares are reserved for Series A-N Preferred Stock, of
which none will be issued or outstanding; 1,804,000 shares will be reserved for
Series B-1 Preferred Stock, of which all will be issued and outstanding, and
1,804,000 shares will be reserved for Series B-N Preferred Stock, of which none
will be issued or outstanding; 4,059,573 shares will be reserved for Series C-1
Preferred Stock, of which all will be issued and outstanding and 4,070,000
shares will be reserved for Series C-N Preferred Stock, of which none will be
issued or outstanding; and 2,800,000 shares will be reserved for Series D
Preferred Stock of which none will be issued or outstanding prior to the
Closing. The Company has reserved five million six hundred thousand (5,600,000)
shares of Common Stock for issuance under the Company's 1995 Stock Incentive
Plan to employees, consultants, and directors or officers of the Company,
against which 3,299,600 options to purchase shares shall be issued and
outstanding immediately after the Closing. In addition to the 3,299,600 options
that are outstanding, the Company has issued a total of 661,674 shares of its
Common Stock pursuant to stock option exercises. All issued and outstanding
securities of the Company (i) will have been duly authorized and validly issued,
(ii) will be fully paid and nonassessable, and (iii) will have been issued in
compliance with all applicable state and federal laws concerning the issuance of
securities. The rights, preferences, privileges and restrictions of the Shares
are as stated in the Third Restated Articles. The Conversion Shares have been
duly and validly reserved for issuance. Other than as may be set forth in
SCHEDULE II, and except as may be granted pursuant to the Related Agreements,
there are no outstanding options, warrants, rights (including conversion or
preemptive rights and rights of first refusal), proxy or stockholder agreements,
or agreements of any kind for the purchase or acquisition from the Company of
any of its securities. Except as may be set forth in the Third Restated
Articles, the Company has no obligation to repurchase any of its capital stock.
3.3 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on
the part of the Company, its officers, directors and stockholders necessary for
the authorization of this Agreement and the Related Agreements, the performance
of all obligations of the Company hereunder and thereunder at the Closing and
the authorization, sale, issuance and delivery of the Shares pursuant hereto and
the Conversion Shares pursuant to the Third Restated Articles has been taken or
will be taken prior to the Closing. The Agreement and the Related Agreements,
when executed and delivered, will be valid and binding obligations of the
Company enforceable in accordance with their terms against it, except (i) as
limited by applicable bankruptcy, insolvency, reorganization,
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moratorium or other laws of general application affecting enforcement of
creditors' rights; (ii) general principles of equity that restrict the
availability of equitable remedies; and (iii) to the extent that the
enforceability of the indemnification provisions in Section 3.8 of the Investor
Rights Amendment may be limited by applicable laws. When issued in compliance
with the provisions of this Agreement and the Third Restated Articles and
delivered for the consideration specified in SCHEDULE I, the Shares and the
Conversion Shares will be duly authorized, validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided, however,
that the Shares and the Conversion Shares may be subject to restrictions on
transfer under state and/or federal securities laws as set forth herein, as
otherwise required by such laws at the time a transfer is proposed or subject to
restrictions contained in the Investor Rights Agreement. The sale of the Shares
and the subsequent conversion of Shares into Conversion Shares are not and will
not be subject to any preemptive rights or rights of first refusal that have not
been properly waived or complied with.
3.4 FINANCIAL STATEMENTS. The Company has furnished to the
Purchasers the audited balance sheet of the Company as of December 31, 1998,
and the related audited statements of income, stockholders' equity and cash
flow of the Company for the year ended December 31, 1998, and the unaudited
balance sheet of the Company as of March 31, 1999, and the related unaudited
statements of income of the Company for the three months ended March 31, 1999
(collectively referred to herein as the "Financial Statements"). All such
Financial Statements have been prepared in accordance with generally accepted
accounting principles consistently applied (except that such unaudited
Financial Statements do not contain all of the required footnotes) and fairly
present the financial position of the Company as of December 31, 1998, and
the results of its operations and cash flows for the year ended December 31,
1998 and the three months ended March 31, 1999, respectively.
3.5 LIABILITIES. The Company has no material (fixed or contingent)
liabilities, indebtedness, guarantees, or other obligations that are not
disclosed in the Financial Statements other than current liabilities incurred in
the ordinary course of business subsequent to December 31, 1998.
3.6 CHANGES. Since March 31, 1999, there has not been:
(a) Any change in the assets, liabilities, financial
condition or operations of the Company from that reflected in the Financial
Statements, other than changes in the ordinary course of business, none of which
individually or in the aggregate has had or is expected to have a material
effect on such assets, liabilities, financial condition or operations of the
Company, such current liabilities totaling less than $10,000;
(b) Any resignation or termination of any key officer of the
Company and the Company, to the best of its knowledge, does not know of the
impending resignation or termination of employment of any such officer.
(c) Any change, except in the ordinary course of business,
in the contingent obligations of the Company by way of guaranty, endorsement,
indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the properties, business or
prospects or financial condition of the Company;
(e) Any waiver by the Company of a valuable right or of a
material debt owed to it;
(f) Any direct or indirect loans made by the Company to any
stockholder, employee, officer or director of the Company or any entity
associated or affiliated with any of them, other than advances made in the
ordinary course of business;
(g) Any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder or any entity
associated or affiliated with any of them;
(h) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
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(i) Any labor organization activity;
(j) Any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business, such current
liabilities not exceeding $10,000 individually or in the aggregate;
(k) Any sale, assignment, transfer or license of any
patents, trademarks, copyrights, trade secrets, know how or other intangible
assets;
(l) Any change in any material agreement to which the
Company is a party or by which it is bound which materially and adversely
affects the business, assets, liabilities, financial condition, operations or
prospects of the Company, including compensation agreements with the Company's
employees; or
(m) Any other event or condition of any character that,
either individually or cumulatively, has materially adversely affected the
business, assets, liabilities, financial condition, operations or prospects of
the Company.
3.7 AGREEMENTS; ACTION.
(a) Except for agreements explicitly delivered at Closing
and agreements between the Company and its employees with respect to the sale of
the Company's Common Stock, there are no agreements, understandings or proposed
transactions between the Company 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 is a party or to its knowledge by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $10,000 (other than obligations of, or payments to, the
Company arising from purchase or sale agreements entered into in the ordinary
course of business), or (ii) provisions restricting or affecting the
development, manufacture or distribution of the Company's products or services
or (iii) indemnification by the Company with respect to infringements of
proprietary rights (other than indemnification obligations arising from purchase
or sale agreements entered into in the ordinary course of business).
(c) The Company has not (i) declared or paid any dividends,
or authorized or made any distribution upon or with respect to any class or
series of its capital stock, (ii) incurred any indebtedness for money borrowed
or any other liabilities incurred in the ordinary course of business
individually in excess of $10,000 (or, in the case of indebtedness and/or
liabilities individually less than $10,000, in excess of $25,000 in the
aggregate), (iii) made any loans or advances to any person, other than ordinary
advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of
any of its assets or rights, other than the sale of its inventory in the
ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) The Company has not engaged in any discussion (i) with
any representative of any corporation or corporations regarding the
consolidation or merger of the Company with or into any such corporation or
corporations, (ii) with any corporation, partnership, association or other
business entity or any individual regarding the sale, conveyance or disposition
of all or substantially all of the assets of the Company, or a transaction or
series of related transactions in which more than fifty percent (50%) of the
voting power of the Company is disposed of, or (iii) regarding any other form of
acquisition, liquidation, dissolution or winding up of the Company.
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3.8 OBLIGATIONS TO RELATED PARTIES. There are no obligations of
the Company to officers, directors, stockholders, or employees of the Company
other than (a) for payment of salary for services rendered, (b) reimbursement
for reasonable business-related expenses incurred on behalf of the Company and
(c) for other standard employee benefits made generally available to all
employees (including stock option agreements outstanding under any stock option
plan approved by the Board of Directors of the Company). None of the officers,
directors or stockholders of the Company, or any member of their immediate
families, are indebted to the Company or, to the best of the Company's knowledge
after due inquiry of all its officers and directors, have any direct or indirect
ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation which competes with the Company, except that officers, directors
and/or stockholders of the Company may own stock in publicly traded companies
which fall into the foregoing categories. No officer, director or stockholder of
the Company, or any member of their immediate families, is, directly, or to the
best of the Company's knowledge, indirectly interested in any material contract
with the Company (other than such contracts as relate to any such person's
ownership of capital stock or other securities of the Company). The Company is
not a guarantor or indemnitor of any indebtedness of any other person, firm or
corporation.
3.9 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has
good and marketable title to its properties and assets, and good title to its
leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (i) those resulting from taxes which have not
yet become delinquent, (ii) minor liens and encumbrances which do not materially
detract from the value of the property subject thereto or materially impair the
operations of the Company, and (iii) those that have otherwise arisen in the
ordinary course of business, which do not materially detract from the value of
the property subject thereto or materially impair the operations of the Company.
All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company are in good operating condition and repair
and are reasonably fit and usable for the purposes for which they are being
used.
3.10 PATENTS AND TRADEMARKS. The Company owns or possesses
sufficient legal rights to all trademarks, service marks, trade names,
copyrights, trade secrets, information and other proprietary rights and
processes necessary for its business as now conducted and as proposed to be
conducted, without any infringement of the rights of others. The Company owns or
possesses sufficient legal rights to all patents necessary for its business as
now conducted and as proposed to be conducted, without any infringement of the
rights of others of which the Company is aware. There are no outstanding
options, licenses, or agreements of any kind relating to the foregoing, nor is
the Company bound by, or is 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, proprietary rights and processes of any
other person or entity other than such licenses or agreements arising from the
purchase of "off the shelf" or standard products. The Company has not received
any communications alleging that the Company has 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. The Company is not 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 or order of
any court or administrative agency, that would interfere with their duties to
the Company or that would conflict with the Company's business as proposed to be
conducted. Neither the execution nor delivery of this Agreement, nor the
carrying on of the Company's business by the employees of the Company, nor the
conduct of the Company's business as proposed, will, to the Company's knowledge,
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any employee is now obligated. The Company does not believe it is or will be
necessary to utilize any inventions, trade secrets or proprietary information of
any of its employees made prior to their employment by the Company, except for
inventions, trade secrets or proprietary information that have been duly
assigned to the Company.
3.11 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default in any respect of any term of its Third Restated Articles
or Bylaws, or of any provision of any mortgage, indenture,
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agreement, instrument or contract to which it is party or by which it is bound,
or of any judgment, decree, order, writ, or to its knowledge after due inquiry,
for purposes of United States law, and to its knowledge after Reasonable
Investigation for purposes of any law outside the United States, any statute,
rule or regulation applicable to the Company which would materially and
adversely affect the business, assets, liabilities, financial condition,
operations or prospects of the Company. The execution, delivery, and performance
of and compliance with this Agreement and the Related Agreements, and the
issuance and sale of the Shares pursuant hereto and of the Conversion Shares
pursuant to the Third Restated Articles, will not with the passage of time or
the giving of notice or both result in any such violation, or be in conflict
with or constitute a default under any such term, or result in the creation of
any mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company or the suspension, revocation, impairment, forfeiture or
nonrenewal of any permit, license, authorization or approval applicable to the
Company, its business or operations or any of its assets or properties. For
purposes of this Section 3.11 and Section 3.19, "Reasonable Investigation" shall
mean, to the extent an issue of law in a jurisdiction outside the United States,
has come to the attention of the Company or a reasonable person should have been
aware of such issue of law, a good faith effort by the Company to determine and,
comply with the law of such jurisdiction.
3.12 LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company that questions
the validity of this Agreement or the Related Agreements or the right of the
Company to enter into such agreements, or to consummate the transactions
contemplated hereby or thereby, or which might result, either individually or in
the aggregate, in any material adverse change in the assets, condition, affairs
or prospects of the Company, financially or otherwise, or any change in the
current equity ownership of the Company, nor is the Company aware that there is
any basis for any of the foregoing. The foregoing includes, without limitation,
actions pending or threatened (or any basis therefor known to the Company)
involving the prior employment of any of the Company's employees, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. The Company is not a party to 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 currently pending or which the
Company intends to initiate.
3.13 TAX RETURNS AND PAYMENTS. The Company has timely filed all tax
returns (federal, state and local) required to be filed by it and such tax
returns are true and correct in all material respects. All taxes shown to be due
and payable on such returns, any assessments imposed, and to the Company's
knowledge after due inquiry all other taxes due and payable by the Company on or
before the Closing have been paid or will be paid prior to the time they become
delinquent. The Company has not been advised (i) that any of its returns,
federal, state or other, have been or are being audited as of the date hereof,
or (ii) of any deficiency in assessment or proposed judgment to its federal,
state or other taxes. The Company has no knowledge of any tax to be imposed upon
its properties or assets as of the date of this Agreement that is not adequately
provided for. The Company's net operating losses for Federal income tax
purposes, as set forth in the Financial Statements referred to in Section 3.4,
are not subject to any limitations imposed by Section 382 of the Internal
Revenue Code of 1986, as amended (the "Code") and the full amount of such net
operating losses are available to offset the taxable income of the Company for
the current fiscal year and, to the extent not so used, succeeding fiscal years.
Consummation of the transactions contemplated by this Agreement or by any other
agreement, understanding or commitment (contingent or otherwise) to which the
Company is a party or by which it is otherwise bound will not have the effect of
limiting the Company's ability to use such net operating losses in full to
offset such taxable income.
3.14 EMPLOYEES. The Company has no collective bargaining agreements
with any of its employees. There is no labor union organizing activity pending
or, to the Company's knowledge, threatened with respect to the Company. No
employee has any agreement or contract, written or verbal, regarding his
employment. To the Company's knowledge, no employee of the Company, nor any
consultant with whom the Company has contracted, is in violation of any term of
any employment contract, proprietary information agreement, patent disclosure
agreement or any other agreement relating to the right of any such individual to
be employed by, or to contract with, the Company because of the nature of the
business to be conducted by the Company; and to the Company's knowledge, the
continued employment by the Company of its present employees, and the
performance of the Company's contracts with its independent contractors, will
not result in any such violation. The Company has
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not received any notice alleging that any such violation has occurred. No
employee of the Company has been granted the right to continued employment by
the Company or to any material compensation following termination of employment
with the Company. 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, nor does the Company have a present intention to terminate the
employment of any officer, key employee or group of key employees, nor has any
former employee proposed, filed or taken any action, suit or other proceeding
against the Company in connection with the Company's termination of such
employee's employment.
3.15 NONDISCLOSURE AGREEMENT FOR EMPLOYEE. Each employee of the
Company has executed a Nondisclosure Agreement for Employee substantially in the
form of EXHIBIT D attached hereto and no exceptions have been taken by any such
employee to the form of such agreement. The Company, after reasonable
investigation, is not aware that any of its employees are in violation thereof,
and the Company will use its best efforts to prevent such violation.
3.16 RESERVED SHARES FOR OPTION PLAN. The Company has reserved
5,600,000 shares of the Company's Common Stock for issuance under the Company's
Incentive Stock Option plan to employees, consultants and directors, of which
3,299,600 shares have been committed through the issuance of options, 661,674
shares of which have been issued pursuant to stock option exercises, which
leaves a balance of 1,638,726 shares available for issuance under the plan.
3.17 OBLIGATIONS OF MANAGEMENT. Each officer of the Company is
currently devoting one hundred percent (100%) of his or her business time to the
conduct of the business of the Company.
3.18 REGISTRATION RIGHTS. Except as required pursuant to the
Investor Rights Agreement, the Company is presently not under any obligation,
and has not granted any rights, to Register (as defined in Section 1 of the
Investor Rights Amendment) any of the Company's presently outstanding securities
or any of its securities that may hereafter be issued.
3.19 COMPLIANCE WITH LAWS; PERMITS. To the best of its knowledge
after due inquiry for purposes of United States law, and to its knowledge after
Reasonable Investigation for purposes of any law outside of the United States,
the Company is not in violation of any applicable statute, rule, regulation,
order or restriction of any domestic or foreign government or any
instrumentality or agency thereof in respect of the conduct of its business or
the ownership of its properties which violation would materially and adversely
affect the business, assets, liabilities, financial condition, operations or
prospects of the Company. No governmental orders, permissions, consents,
approvals or authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the execution and
delivery of this Agreement and the issuance of the Shares or the Conversion
Shares, except such as has been duly and validly obtained or filed, or with
respect to any filings that must be made after the Closing, as will be filed in
a timely manner. The Company has all franchises, permits, licenses and any
similar authority necessary for the conduct of its 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
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted.
3.20 ENVIRONMENTAL AND SAFETY LAWS. To its knowledge, the Company
is not in violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.
3.21 OFFERING VALID. Assuming the accuracy of the representations
and warranties of the Purchasers contained in Section 4.3 hereof, the offer,
sale and issuance of the Shares and the Conversion Shares will be exempt from
the registration requirements of the Securities Act of 1933, as amended (the
"Securities Act") and will have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws. Neither the Company nor
any agent on
8
its behalf has solicited or will solicit any offers to sell or has offered to
sell or will offer to sell all or any part of the Shares to any person or
persons so as to bring the sale of such Shares by the Company within the
registration provisions of the Securities Act.
3.22 MINUTE BOOKS. The minute books of the Company available to the
Purchasers or their attorneys or agents contain a complete summary of all
meetings and actions by written consent of directors and stockholders since the
time of incorporation.
3.23 REAL PROPERTY HOLDING CORPORATION. The Company is not a real
property holding corporation within the meaning of Code Section 897(c)(2) and
any regulations promulgated thereunder.
3.24 SECTION 83(b) ELECTIONS. To the Company's knowledge, all
elections and notices permitted by Section 83(b) of the Code and any analogous
provisions of applicable state tax laws have been timely filed by all employees
who have purchased shares of the Company's Common Stock under agreements that
provide for the vesting of such shares.
3.25 INSURANCE. The Company has insurance policies, including but
not limited to fire and casualty, products liability and errors and omissions
policies, with coverage customary for companies similarly situated.
3.26 QUALIFIED SMALL BUSINESS. The Shares shall qualify as
"Qualified Small Business Stock" as defined in Section 1202(c)(f) of the Code as
of the date hereof.
3.27 SMALL BUSINESS CONCERN. The Company, together with its
affiliates (as that term is defined in 13 CFR Section 121.103) is a "small
business concern" within the meaning of the Small Business Investment Act of
1958, as amended, and the regulations promulgated thereunder (the "Small
Business Investment Act") and Part 121 of Title 13 of the United States Code
of Federal Regulations ("CFR"). The information provided by the Company to
each Purchaser that is a licensed Small Business Investment Company (an "SBIC
Investor") on SBA Forms 480, 652, and for Form 1031 delivered in connection
herewith is accurate and complete.
3.28 FULL DISCLOSURE. This Agreement, the Exhibits hereto, the
Related Agreement, and all other documents delivered by the Company to
Purchasers or their attorneys or agents in connection herewith or therewith or
with the transactions contemplated hereby or thereby, when taken as a whole, do
not contain any untrue statement of a material fact nor omit to state a material
fact necessary in order to make the statements contained herein or therein not
misleading, except that, with respect to any projections, the Company represents
only that such projections were prepared in good faith on the basis of
assumptions believed by management of the Company to be reasonable at the time
they were made. To the knowledge of the Company and its directors and officers,
there are no facts which (individually or in the aggregate) materially adversely
affect the business, assets, liabilities, financial condition, prospects or
operations of the Company that have not been set forth in the Agreement, the
Exhibits hereto, the Schedules hereto, any of the Related Agreements or in other
documents delivered to Purchasers or their attorneys or agents in connection
herewith.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser, severally and not jointly hereby represents and
warrants to the Company as follows (such representations and warranties do not
lessen or obviate the representations and warranties of the Company set forth in
this Agreement):
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and the Related Agreements and other documents
contemplated to be delivered by it at Closing hereby. All action on Purchaser's
part required for the lawful execution and delivery of this Agreement and those
documents have been or will be effectively taken prior to the Closing. Upon
their execution and delivery, this Agreement and all agreements contemplated
hereby will be
9
valid and binding obligations of Purchaser, enforceable in accordance with their
terms against such Purchaser, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights, (ii) general principles of equity
that restrict the availability of equitable remedies, and (iii) to the extent
that the enforceability of the indemnification provisions of Section 3.8 of the
Investor Rights Agreement may be limited by applicable laws.
4.2 CONSENTS. All consents, approvals, orders, authorizations,
registrations, qualifications, designations, declarations or filings with any
governmental or banking authority on the part of Purchaser required in
connection with the consummation of the transactions contemplated in the
Agreement and the Investor Rights Agreement have been or shall have been
obtained prior to and be effective as of the Closing.
4.3 INVESTMENT REPRESENTATIONS. Purchaser understands that neither
the Shares nor the Conversion Shares have been registered under the Securities
Act. Purchaser also understands that the Shares are being offered and sold
pursuant to an exemption from registration contained in the Securities Act based
in part upon Purchaser's representations contained in the Agreement. Purchaser
hereby represents and warrants, severally and not jointly as follows:
(a) PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in development stage companies similar to the Company so that it is
capable of evaluating the merits and risks of its investment in the Company and
has the capacity to protect its own interests. Purchaser understands that its
investment in the Shares is speculative and involves a high degree of risk of
loss of a substantial portion or all of Purchaser's investment. Purchaser must
bear the economic risk of this investment indefinitely unless the Shares (or the
Conversion Shares) are registered pursuant to the Securities Act, or an
exemption from registration is available. Purchaser understands that the Company
has no present intention of registering the Shares, the Conversion Shares or any
shares of its Common Stock. Purchaser also understands that there is no
assurance that any exemption from registration under the Securities Act will be
available and that, even if available, such exemption may not allow Purchaser to
transfer all or any portion of the Shares or the Conversion Shares under the
circumstances, in the amounts or at the times Purchaser might propose.
(b) ACQUISITION FOR OWN ACCOUNT. Each Purchaser is acquiring
the Shares for the Purchaser's own account for investment purposes only, and not
with a view towards their distribution.
(c) DISCLOSURE OF INFORMATION. Purchaser believes it has
received all information it considers necessary or appropriate for deciding
whether to purchase the Shares. Purchaser has had an opportunity to ask
questions and receive answers from the Company about such information.
(d) PURCHASER CAN PROTECT ITS INTEREST. Purchaser represents
that by reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement and the Related Agreements.
(e) ACCREDITED INVESTOR. Purchaser represents that it is an
Accredited Investor within the meaning of Regulation D under the Securities Act.
(f) RULE 144. Purchaser has been advised of or is aware of
the provisions of Rule 144 promulgated under the Securities Act, which permits
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things: the
availability of certain current public information about the Company, the resale
occurring not less than one year after a party has purchased and paid for the
security to be sold, the sale being through an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934) and the number of shares
being sold during any three-month period not exceeding specified limitations.
4.4 TRANSFER RESTRICTIONS. Each Purchaser acknowledges and agrees
that the Shares and the Conversion Shares are subject to restrictions on
transfer as set forth in the Investor Rights Agreement.
10
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASER'S OBLIGATIONS AT THE CLOSING. Each
Purchaser's obligation to purchase the Shares at the Closing is subject to the
satisfaction, at or prior to the Closing, of the following conditions, which may
only be waived severally by each Purchaser with respect to its obligation to
purchase the number of shares set forth opposite its name on SCHEDULE I:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in Section 3
hereof shall be true and correct in all respects as of the Closing Date with the
same force and effect as if they had been made as of the Closing Date, and the
Company shall have performed all obligations and conditions herein required to
be performed or observed by it on or prior to the Closing.
(b) LEGAL INVESTMENT. On the Closing Date, the sale and
issuance of the Shares and the proposed issuance of the Conversion Shares shall
be legally permitted by all laws and regulations to which Purchasers and the
Company are subject.
(c) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and the Related
Agreements (except for such as may be properly obtained subsequent to the
Closing).
(d) AUTHORIZATION OF SHARES. The Company shall have
authorized the sale and issuance to Purchasers of the Shares having the rights,
preferences, privileges and restrictions set forth in the Third Restated
Articles of the Company, in the form attached hereto as EXHIBIT C.
(e) FILING OF THIRD RESTATED ARTICLES. The Amendment to the
Third Restated Articles shall have been filed with the Secretary of State of the
State of Oregon.
(f) INVESTOR RIGHTS AMENDMENT. The Investor Rights Amendment
shall have been executed and delivered by the parties thereto. The stock
certificates representing the Shares shall have had appropriate legends placed
upon them to reflect the restrictions on transfer set forth in the Investor
Rights Agreement.
(g) VOTING AGREEMENT AMENDMENT. The Company, the Purchasers,
certain key officers of the Company, and at least the number of holders of the
Company's Series B Preferred Stock and Series C Preferred Stock as such
Agreement requires for amendment shall have executed or consented to the
execution of the Voting Amendment. The Shares shall be imprinted with a legend
to reflect the restrictions on voting set forth in the Voting Rights Agreement.
(h) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchasers and their
special counsel, and the Purchasers and their special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as they may reasonably request.
(i) SATISFACTORY DUE DILIGENCE. The Purchasers and their
counsel shall have been provided adequate materials from the Company to make a
detailed due diligence investigation into the Company and its operations and the
Purchasers and their counsel shall be satisfied with the results of such
investigations.
(j) KEY MAN INSURANCE. The Company shall have obtained
renewable term life insurance, naming the Company as the beneficiary, in the
amount of one million dollars ($1,000,000) on the life of each of ▇▇▇▇▇ ▇▇▇▇▇,
Chief Executive Officer and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Chief Technical Officer.
11
(k) COMPLIANCE CERTIFICATE. The Company shall have delivered
to the Purchasers a certificate, executed by the Chief Executive Officer of the
Company, dated the Closing Date, certifying to the fulfillment of the conditions
specified in this Section 5.1.
(l) SECRETARY'S CERTIFICATE. The Company shall have
delivered to the Purchasers, a certificate executed by the Secretary of the
Company, dated the Closing Date, as to (i) the valid organization and existence
of the Company, (ii) no amendment to the By-Laws, (iii) Board of Directors
resolutions authorizing and approving the execution, delivery and performance of
the Agreement and the Investor Rights Amendment, the Co-Sale Amendment and the
Voting Amendment and (iv) the incumbency of certain officers authorized to sign
any instrument executed in connection with the Agreement or the Investor Rights
Amendment, the Co-Sale Amendment or the Voting Amendment.
(m) LEGAL OPINION. The Purchasers shall have received from
legal counsel to the Company an opinion addressed to them, dated as of the
Closing Date, in substantially the form attached hereto as EXHIBIT F.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Shares at the Closing is subject to the
satisfaction, on or prior to the Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties made by Purchasers in Section 4 hereof shall be true and correct
in all material respects at the date of the Closing, with the same force and
effect as if they had been made on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. Purchasers shall have
performed and complied with all agreements and conditions herein required to be
performed or complied with by Purchasers on or before the Closing.
(c) INVESTOR RIGHTS AMENDMENT. The Investor Rights Amendment
shall have been executed and delivered by the parties thereto.
(d) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and each of the
Related Agreements (except for such as may be properly obtained subsequent to
the Closing).
6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of Oregon as such laws are applied to
agreements between Oregon residents entered into and performed entirely in
Oregon.
6.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
6.3 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 and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
12
6.4 ENTIRE AGREEMENT. This Agreement, the Exhibits hereto, the
agreements contemplated hereby, and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and no party shall be liable or bound
to any other in any manner by any representations, warranties, covenants and
agreements except as specifically set forth herein and therein.
6.5 SEPARABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
6.6 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and holders of at least sixty percent (60%) of
the Shares (treated as if converted and including any Conversion Shares into
which the Shares have been converted that have not been sold to the public).
(b) The obligations of the Company and the rights of the
holders of the Shares and the Conversion Shares under the Agreement may be
waived only with the written consent of the holders of at least sixty percent
(60%) of the Shares (treated as if converted and including any Conversion Shares
into which the Shares have been converted that have not been sold to the
public).
6.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party upon any breach,
default or noncompliance by another party under this Agreement shall impair any
such right, power or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of or in
any similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent or approval of any kind or character on
any Purchaser's part of any breach, default or noncompliance under this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies under this Agreement shall
be cumulative and not alternative.
6.8 NOTICE. Notice for each party shall be sent to the person and
address shown under that party's signature below, or to such other person or
address as the parties may from time to time by Notice provide. Notice shall be
effective when actually received by the party this agreement designates for
Notice, if sent by any means that leaves a hard-copy record in the hands of the
recipient. If sent properly addressed by certified or registered mail, postage
prepaid, return receipt requested, Notice shall be deemed effective on the date
the return receipt shows the Notice was accepted, refused, or returned
undeliverable.
6.9 EXPENSES. Each party shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
the Agreement.
6.10 ATTORNEYS' FEES. In the event that any dispute among the
parties to this Agreement should result in litigation, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
6.11 TITLES AND SUBTITLES. The titles of the sections and
subsections of the Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
6.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
13
6.13 BROKER'S FEES. Each party hereto represents and warrants
severally and not jointly that no agent, broker, investment banker, person or
firm acting on behalf of or under the authority of such party hereto is or will
be entitled to any broker's or finder's fee or any other commission directly or
indirectly in connection with the transactions contemplated herein. Each party
hereto further agrees to indemnify each other party for any claims, losses or
expenses incurred by such other party as a result of the representation in this
Section 6.13 being untrue.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
14
IN WITNESS WHEREOF, the parties hereto have executed the Series D
Preferred Stock Purchase Agreement as of the date set forth in the first
paragraph hereof.
DIGIMARC CORPORATION:
By:
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇, Chief Executive Officer
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
15
PURCHASERS
REUTERS, LTD. HEWLETT-PACKARD COMPANY
By: By:
------------------------------------ -------------------------------
▇▇▇▇ ▇▇▇▇▇▇ Title:
Director, New Business Ventures ----------------------------
Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Address: ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇
MACROVISION CORPORATION
By:
--------------------------------------- -------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Title:
----------------------------
Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ADOBE VENTURES L.P.
By: H&Q Adobe Ventures Management, L.P. ----------------------------------
By: H&Q Adobe Ventures Management, Corp. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Address: ▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
By:
------------------------------------
Title:
---------------------------------
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ----------------------------------
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
BEAGLE LTD. Address: ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
By:
------------------------------------ ----------------------------------
Title: ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
---------------------------------
Address: ▇/▇ ▇▇▇▇▇ & ▇▇. ▇▇ ▇▇▇▇▇▇▇: ▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
AVI MANAGEMENT PARTNERS III, LP
By: AVI Capital Management, L.P.,
its General Partner
By:
------------------------------------
Title:
---------------------------------
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Address: ▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
16
SCHEDULE 1
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PURCHASERS AND CONSIDERATION
PURCHASER SERIES D PREFERRED SHARES CONSIDERATION
--------------------------------------------------------------------------------
Total: