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EXHIBIT 10.8
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SERIES C CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
BETWEEN
NEW ERA OF NETWORKS, INC.
AND
THE SEVERAL PURCHASERS NAMED IN SCHEDULE I
DATED AS OF JUNE 3, 1996
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TABLE OF CONTENTS
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ARTICLE I - THE PREFERRED SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1 Issuance, Sale and Delivery of the Preferred Shares . . . . . . 1
SECTION 1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . 1
SECTION 2.1 Organization, Qualifications and Corporate Power . . . . . . . 2
SECTION 2.2 Authorization of Agreements, Etc . . . . . . . . . . . . . . . 2
SECTION 2.3 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.4 Authorized Capital Stock . . . . . . . . . . . . . . . . . . . 3
SECTION 2.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.6 Events Subsequent to the April 30, 1996 Balance Sheet . . . . . 4
SECTION 2.7 Litigation; Compliance with Law . . . . . . . . . . . . . . . . 5
SECTION 2.8 Third Party Approvals . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.9 Proprietary Information of Third Parties . . . . . . . . . . . 6
SECTION 2.11 Title to Properties . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.12 Leasehold Interests . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.13 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.15 Offering of the Preferred Shares . . . . . . . . . . . . . . . 8
SECTION 2.16 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.17 Transactions with Affiliates . . . . . . . . . . . . . . . . . 8
SECTION 2.18 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.19 Non-Competition Agreement . . . . . . . . . . . . . . . . . . 8
SECTION 2.20 Material Contracts and Obligations . . . . . . . . . . . . . . 8
SECTION 2.21 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.22 Books and Records . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.23 U.S. Real Property Holding Corporation . . . . . . . . . . . . 9
SECTION 2.24 Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.25 Qualified Small Business Stock . . . . . . . . . . . . . . . . 9
SECTION 2.26 Securities Laws . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS . . . . . . . . . . 10
ARTICLE IV - CONDITIONS TO THE OBLIGATIONS . . . . . . . . . . . . . . . . . . . . 11
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TABLE OF CONTENTS
(CONTINUED)
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ARTICLE V - COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.1 Financial Statements, Reports, Etc. . . . . . . . . . . . 13
SECTION 5.2 Right of Participation . . . . . . . . . . . . . . . . . 14
SECTION 5.3 Reserve for Conversion Share . . . . . . . . . . . . . . 14
SECTION 5.4 Corporate Existence . . . . . . . . . . . . . . . . . . . 15
SECTION 5.5 Properties, Business, Insurance . . . . . . . . . . . . . 15
SECTION 5.6 Inspection, Consultation and Advice . . . . . . . . . . . 15
SECTION 5.7 Restrictive Agreements Prohibited . . . . . . . . . . . . 15
SECTION 5.8 Transactions with Affiliates . . . . . . . . . . . . . . 15
SECTION 5.9 Expenses of Directors . . . . . . . . . . . . . . . . . . 16
SECTION 5.10 Use of Proceeds . . . . . . . . . . . . . . . . . . . . 16
SECTION 5.11 Board of Directors Meetings . . . . . . . . . . . . . . 16
SECTION 5.13 Vesting of Reserved Employee Shares . . . . . . . . . . 16
SECTION 5.14 Employee Nondisclosure and Developments Agreements . . . 17
SECTION 5.15 Activities of Subsidiaries . . . . . . . . . . . . . . . 17
SECTION 5.16 Compliance with Laws . . . . . . . . . . . . . . . . . . 17
SECTION 5.17 Keeping of Records and Books of Account . . . . . . . . 17
SECTION 5.18 Change in Nature of Business . . . . . . . . . . . . . . 17
SECTION 5.19 U.S. Real Property Interest Statement . . . . . . . . . 17
SECTION 5.20 Rule 144A Information . . . . . . . . . . . . . . . . . 18
SECTION 5.21 Termination of Covenants . . . . . . . . . . . . . . . . 18
SECTION 5.22 Qualified Small Business Stock . . . . . . . . . . . . . 18
SECTION 5.23 Liens, Etc . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VI - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 6.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 6.2 Survival of Agreements . . . . . . . . . . . . . . . . . 19
SECTION 6.3 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 6.4 Parties in Interest . . . . . . . . . . . . . . . . . . . 19
SECTION 6.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 6.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 6.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . 20
SECTION 6.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 6.9 Amendments . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 6.10 Severability . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 6.11 Titles and Subtitles . . . . . . . . . . . . . . . . . . 21
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TABLE OF CONTENTS
(CONTINUED)
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SECTION 6.12 Waiver and Termination of Certain Provisions of
Series A Purchase Agreement and the Series B
Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 6.13 Certain Defined Terms . . . . . . . . . . . . . . . . . 21
INDEX TO SCHEDULES
SCHEDULE I Purchasers
SCHEDULE II Disclosure Schedule
SCHEDULE III Security Holders
INDEX TO EXHIBITS
EXHIBIT A Form of Amendment No. 2 to the Registration Rights
Agreement
EXHIBIT B Second Amended and Restated Stock Restriction Agreement
EXHIBIT C Charter and All Amendments Thereto
EXHIBIT D-1 ▇▇▇▇ Nondisclosure and Developments Agreement
EXHIBIT D-2 Form of Employee Nondisclosure and Developments Agreement
EXHIBIT E ▇▇▇▇ Non-Competition Agreement
EXHIBIT F Opinion Letter of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ P.C.
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SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT dated as of June
3, 1996 between NEW ERA OF NETWORKS, INC., a Delaware corporation (the
"Company"), ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, and the several purchasers
named in the attached Schedule I (individually, a "Purchaser" and collectively,
the "Purchasers").
WHEREAS, the Company wishes to issue and sell to the Purchasers an
aggregate of 4,664,596 shares (the "Preferred Shares") of the authorized but
unissued Series C Convertible Preferred Stock, $.01 par value, of the Company
(the "Series C Preferred Stock"); and
WHEREAS, the Purchasers, severally, wish to purchase the Preferred
Shares on the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties agree as follows:
ARTICLE I
THE PREFERRED SHARES
SECTION 1.1 Issuance, Sale and Delivery of the Preferred Shares. The
Company agrees to issue and sell to each Purchaser, and each Purchaser hereby
agrees to purchase from the Company, the number of Preferred Shares set forth
opposite the name of such Purchaser under the heading "Number of Preferred
Shares to be Purchased" on Schedule I, at the aggregate purchase price set
forth opposite the name of such Purchaser under the heading "Aggregate Purchase
Price for Preferred Shares" on Schedule I.
SECTION 1.2 Closing. The closing shall take place at the offices of
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ P.C., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇-▇▇▇▇, at 11:00 a.m., Chicago time, on June 3, 1996, or at such other
location, date and time as may be agreed upon between the Purchasers and the
Company (such closing being called the "Closing" and such date and time being
called the "Closing Date"). At the Closing, the Company shall issue and
deliver to each Purchaser a stock certificate or certificates in definitive
form, registered in the name of such Purchaser, representing the Preferred
Shares being purchased by it at the Closing. As payment in full for the
Preferred Shares being purchased by it under this Agreement, and against
delivery of the stock certificate or certificates therefor as aforesaid, on the
Closing Date each Purchaser shall transfer to the account of the Company by
wire transfer the amount set forth opposite the name of such Purchaser under
the heading "Aggregate Purchase Price for Preferred Shares" on Schedule I.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers that, except as
set forth in the Disclosure Schedule attached hereto as Schedule II:
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SECTION 2.1 Organization, Qualifications and Corporate Power.
(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and is duly
licensed or qualified to transact business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification, except where failure to so qualify
would not have a material adverse effect on the business, affairs or prospects
of the Company. The Company has the corporate power and authority to own and
hold its properties and to carry on its business as now conducted and as
proposed to be conducted, to execute, deliver and perform this Agreement,
Amendment No. 2 to the Registration Rights Agreement with the Purchasers in the
form attached as Exhibit A (the "Second Registration Rights Amendment") and the
Second Amended and Restated Stock Restriction Agreement with the Purchasers and
the other parties thereto named in paragraph (g) of Article V of this
Agreement, in the form attached as Exhibit B (the "Second Restated Stock
Restriction Agreement"), to issue, sell and deliver the Preferred Shares and to
issue and deliver the shares of Common Stock, $.001 par value, of the Company
("Common Stock") issuable upon conversion of the Preferred Shares (the
"Conversion Shares").
(b) Other than New Era Of Networks Limited, a U.K. company wholly
owned by the Company, the Company has no subsidiaries and the Company does not
(i) own of record or beneficially, directly or indirectly, (A) any shares of
capital stock or securities convertible into capital stock of any other
corporation or (B) any participating interest in any partnership, joint venture
or other non-corporate business enterprise or (ii) control, directly or
indirectly, any other entity.
SECTION 2.2 Authorization of Agreements, Etc.
(a) The execution and delivery by the Company of this Agreement, the
Second Registration Rights Amendment and the Second Restated Stock Restriction
Agreement, the performance by the Company of its obligations hereunder and
thereunder, the issuance, sale and delivery of the Preferred Shares and the
issuance and delivery of the Conversion Shares have been duly authorized by all
requisite corporate action and will not violate any provision of law, any order
of any court or other agency of government, the Certificate of Incorporation of
the Company, as amended (the "Charter") or the By-laws of the Company, as
amended, or any provision of any indenture, agreement or other instrument to
which the Company, any of its subsidiaries or any of their respective
properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge, restriction, claim or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company or any of its
subsidiaries. To the best of the Company's knowledge, no provision of the
Second Restated Stock Restriction Agreement violates, conflicts with, results
in a breach of or constitutes (with due notice or lapse of time or both) a
default by any other party under any other indenture, agreement or instrument.
(b) The Preferred Shares have been duly authorized and, when issued
in accordance with this Agreement, will be validly issued, fully paid and
nonassessable shares of Series C Preferred Stock
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with no personal liability attaching to the ownership thereof and will be free
and clear of all liens, charges, restrictions, claims and encumbrances imposed
by or through the Company except as set forth in the Second Registration Rights
Amendment and the Second Restated Stock Restriction Agreement. The Conversion
Shares have been duly reserved for issuance upon conversion of the Preferred
Shares and, when so issued, will be duly authorized, validly issued, fully paid
and nonassessable shares of Common Stock with no personal liability attaching
to the ownership thereof and will be free and clear of all liens, charges,
restrictions, claims and encumbrances imposed by or through the Company except
as set forth in the Second Registration Rights Amendment and the Second
Restated Stock Restriction Agreement. Neither the issuance, sale or delivery
of the Preferred Shares nor the issuance or delivery of the Conversion Shares
is subject to any preemptive right of stockholders of the Company or to any
right of first refusal or other similar right in favor of any person, other
than the preemptive rights of certain holders of the outstanding shares of (i)
Series A Convertible Preferred Stock, $.0l par value, of the Company (the
"Series A Preferred Stock") or (ii) Series B Convertible Preferred Stock, $.01
par value, of the Company (the "Series B Preferred Stock"), which preemptive
rights have been either exercised or waived by such holders with respect to
such issuance, sale and delivery.
SECTION 2.3 Validity. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding
obligation of the Company, enforceable in accordance with its terms, and the
Second Registration Rights Amendment and the Second Restated Stock Restriction
Agreement, when executed and delivered in accordance with this Agreement, will
constitute the legal, valid and binding obligations of the Company, enforceable
in accordance with their respective terms (subject in each case, as to the
enforcement of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium and similar laws affecting the rights of creditors generally).
SECTION 2.4 Authorized Capital Stock. The authorized capital stock of
the Company consists of (a) 20,016,963 shares of Preferred Stock, $.01 par
value (the "Preferred Stock"), of which (i) 9,169,028 shares have been
designated Series A Convertible Preferred Stock ("Series A Preferred Stock"),
(ii) 6,183,339 shares have been designated Series B Preferred Stock, (iii)
4,664,596 shares have been designated Series C Convertible Preferred Stock
("Series C Preferred Stock") and (b) 33,275,652 shares of Common Stock, $.001
par value (the "Common Shares"). Immediately prior to the Closing, 6,095,486
shares of Common Stock will be validly issued and outstanding, fully paid and
nonassessable with no personal liability attaching to the ownership thereof,
9,169,028 shares of Series A Preferred Stock will be validly issued and
outstanding, fully paid and nonassessable with no personal liability attaching
to the ownership thereof and 6,183,339 shares of Series B Preferred Stock will
be validly issued and outstanding. The stockholders of record and holders of
subscriptions, warrants, options, convertible securities, and other rights
(contingent or other) to purchase or otherwise acquire equity securities of the
Company, and the number of shares of Common Stock and the number of such
subscriptions, warrants, options, convertible securities, and other such rights
held by each, are as set forth in the attached Schedule III. The designations,
powers, preferences, rights, qualifications, limitations and restrictions in
respect of each class and series of authorized capital stock of the Company are
as set forth in the Charter, a copy of which is attached as Exhibit C, and all
such designations, powers, preferences, rights, qualifications, limitations and
restrictions are valid,
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binding and enforceable and in accordance with all applicable laws. Except as
set forth in the attached Schedule III, (i) no person owns of record or is
known to the Company to own beneficially any share of Common Stock or Preferred
Stock, (ii) no subscription, warrant, option, convertible security, or other
right (contingent or other) to purchase or otherwise acquire equity securities
of the Company is authorized or outstanding and (iii) there is no commitment by
the Company to issue shares, subscriptions, warrants, options, convertible
securities, or other such rights or to distribute to holders of any of its
equity securities any evidence of indebtedness or asset. Except as provided
for in the Charter or as set forth in the attached Schedule III, the Company
has no obligation (contingent or other) to purchase, redeem or otherwise
acquire any of its equity securities or any interest therein or to pay any
dividend or make any other distribution in respect thereof. Except for the
Series A Preferred Stock Purchase Agreement dated as of May 9, 1995 by and
among the Company and the Purchasers named therein (the "Series A Purchase
Agreement"); the Series B Preferred Stock Purchase Agreement dated as of
September 20, 1995 (the "Series B Purchase Agreement"); the Second Amended and
Restated Stock Restriction Agreement; the Voting Agreement, dated May 9, 1995,
by and among ▇▇▇▇▇▇ ▇. ▇▇▇▇ and the holders of the Series A Preferred Stock
(the "Voting Agreement"); and the Company's 1995 Employee Stock Option Plan, to
the best of the Company's knowledge there are no voting trusts or agreements,
stockholders' agreements, pledge agreements, buy-sell agreements, rights of
first refusal, preemptive rights or proxies relating to any securities of the
Company or any of its subsidiaries (whether or not the Company or any of its
subsidiaries is a party thereto). All of the outstanding securities of the
Company were issued in compliance with all applicable Federal and state
securities laws.
SECTION 2.5 Financial Statements. The Company has furnished to the
Purchasers an audited balance sheet of the Company as of December 31, 1995 and
the unaudited balance sheet of the Company as of April 30, 1996 (the "Balance
Sheets") and the related audited statements of operations and cash flows for
the year ended December 31, 1995 and unaudited statements of operation and cash
flows of the Company for the 4 months ended April 30, 1996. 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, 1995 and April 30, 1996
respectively, and the results of its operations and cash flows for the year
ended December 31, 1995 and the 4 months ended April 30, 1996 respectively.
Since April 30, 1996, (i) there has been no change in the assets, liabilities
or financial condition of the Company from that reflected in the April 30, 1996
Balance Sheet except for changes in the ordinary course of business which in
the aggregate have not been materially adverse and (ii) none of the business,
prospects, financial condition, operations, property or affairs of the Company
has been materially adversely affected by any occurrence or development,
individually or in the aggregate, whether or not insured against.
SECTION 2.6 Events Subsequent to the April 30, 1996 Balance Sheet.
Except as set forth on Schedule II attached hereto, since April 30, 1996, the
Company has not (i) issued any stock, bond or other corporate security (other
than employee stock options), (ii) borrowed an amount or incurred or become
subject to any liability (absolute, accrued or contingent), except current
liabilities incurred and liabilities under contracts entered into in the
ordinary course of business,
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(iii) discharged or satisfied any lien or encumbrance or incurred or paid any
obligation or liability (absolute, accrued or contingent) other than current
liabilities shown on the April 30, 1996 Balance Sheet and current liabilities
incurred since April 30, 1996 in the ordinary course of business, (iv) declared
or made any payment or distribution to stockholders or purchased or redeemed
any share of its capital stock or other security, (v) mortgaged, pledged,
encumbered or subjected to lien any of its assets, tangible or intangible,
other than liens of current real property taxes not yet due and payable, (vi)
sold, assigned or transferred any of its tangible assets except in the ordinary
course of business, or canceled any debt or claim, (vii) sold, assigned,
transferred or granted any exclusive license with respect to any patent,
trademark, trade name, service ▇▇▇▇, copyright, trade secret or other
intangible asset, (viii) suffered any loss of property or waived any right of
substantial value whether or not in the ordinary course of business, (ix) made
any change in officer compensation except in the ordinary course of business
and consistent with past practice, (x) made any material change in the manner
of business or operations of the Company, (xi) entered into any transaction
except in the ordinary course of business or as otherwise contemplated hereby
or (xii) entered into any commitment (contingent or otherwise) to do any of the
foregoing.
SECTION 2.7 Litigation; Compliance with Law. There is no (i) action,
suit, claim, proceeding or investigation pending or, to the best of the
Company's knowledge, threatened against or affecting the Company, at law or in
equity, or before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (ii) arbitration proceeding relating to the Company pending under
collective bargaining agreements or otherwise or (iii) governmental inquiry
pending or, to the best of the Company's knowledge, threatened against or
affecting the Company (including without limitation any inquiry as to the
qualification of the Company to hold or receive any license or permit), and to
the Company's actual knowledge there is no basis for any of the foregoing. The
Company has not received any opinion or memorandum or legal advice from legal
counsel to the effect that it is exposed, from a legal standpoint, to any
liability or disadvantage which may be material to its business, prospects,
financial condition, operations, property or affairs. The Company is not in
default with respect to any order, writ, injunction or decree known to or
served upon the Company of any court or of any Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign. There is no action or suit by the
Company pending or threatened against others. To its knowledge, the Company
has complied with all laws, rules, regulations and orders applicable to its
business, operations, properties, assets, products and services, the Company
has all necessary permits, licenses and other authorizations required to
conduct its business as conducted and as proposed to be conducted, and the
Company has been operating its business pursuant to and in compliance with the
terms of all such permits, licenses and other authorizations. To the Company's
actual knowledge, there is no existing law, rule, regulation or order, and the
Company after due inquiry is not aware of any proposed law, rule, regulation or
order, whether Federal, state, county or local, which would prohibit or
restrict the Company from, or otherwise materially adversely affect the Company
in, conducting its business in any jurisdiction in which it is now conducting
business.
SECTION 2.8 Third Party Approvals. No registration or filing with, or
consent or approval of or other action by any third party, is or will be
necessary for the valid execution, delivery and
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performance by the Company of this Agreement, the Second Registration Rights
Amendment, the Second Restated Stock Restriction Agreement and the Voting
Agreement, the issuance, sale and delivery of the Preferred Shares or, upon
conversion thereof, the issuance and delivery of the Conversion Shares, other
than (i) filings pursuant to state securities laws (all of which filings have
been made by the Company, other than those which are required to be made after
the Closing and which will be duly made on a timely basis) in connection with
the sale of the Preferred Shares and (ii) with respect to the Registration
Rights Agreement as amended by Amendment No. 1 and Amendment No. 2 to the
Registration Rights Agreement, the registration of the shares covered thereby
with the Commission and filings pursuant to state securities laws.
SECTION 2.9 Proprietary Information of Third Parties. To the best of
the Company's knowledge, no third party has claimed or has reason to claim that
any person employed by or affiliated with the Company has (a) violated or may
be violating any of the terms or conditions of his employment, non-competition
or non-disclosure agreement with such third party, (b) disclosed or may be
disclosing or utilized or may be utilizing any trade secret or proprietary
information or documentation of such third party or (c) interfered or may be
interfering in the employment relationship between such third party and any of
its present or former employees. No third party has requested information from
the Company which suggests that such a claim might be contemplated. To the
best of the Company's knowledge, no person employed by or affiliated with the
Company has employed or proposes to employ any trade secret or any information
or documentation proprietary to any former employer, and to the best of the
Company's knowledge, no person employed by or affiliated with the Company has
violated any confidential relationship which such person may have had with any
third party, in connection with the development, manufacture or sale of any
product or proposed product or the development or sale of any service or
proposed service of the Company, and the Company has no reason to believe there
will be any such employment or violation. To the best of the Company's
knowledge, none of the execution or delivery of this Agreement, or the carrying
on of the business of the Company as officers, employees or agents by any
officer, director or key employee of the Company, or the conduct or proposed
conduct of the business of the Company, will 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 such person is obligated.
SECTION 2.10 Patents, Trademarks, Etc. Set forth in Schedule II is a
list and brief description of all domestic and foreign patents, patent rights,
patent applications, trademarks, trademark applications, service marks, service
▇▇▇▇ applications, trade names and copyrights, and all applications for such
which are in the process of being prepared, owned by or registered in the name
of the Company, or of which the Company is a licensor or licensee or in which
the Company has any right, and in each case a brief description of the nature
of such right. The Company owns or possesses adequate licenses or other rights
to use all patents, patent applications, trademarks, trademark applications,
service marks, service ▇▇▇▇ applications, trade names, copyrights,
manufacturing processes, formulae, trade secrets, customer lists and know how
(collectively; "Intellectual Property") necessary or desirable to the conduct
of its business as conducted and as proposed to be conducted, and no claim is
pending or, to the best of the Company's knowledge, threatened to the effect
that the operations of the Company infringe upon or conflict with the asserted
rights of any other person under any Intellectual Property, and to the
Company's knowledge there is
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no basis for any such claim (whether or not pending or threatened). To the
Company's knowledge, no claim is pending or threatened to the effect that any
such Intellectual Property owned or licensed by the Company, or which the
Company otherwise has the right to use, is invalid or unenforceable by the
Company, and there is no basis for any such claim (whether or not pending or
threatened). To the best of the Company's knowledge, all technical information
developed by and belonging to the Company which has not been patented has been
kept confidential.
SECTION 2.11 Title to Properties. The Company has good and marketable
title to the properties and assets reflected on the Balance Sheet or acquired
by it since the date of the Balance Sheet (other than properties and assets
disposed of in the ordinary course of business since the date of the Balance
Sheet), and, except as set forth in Schedule II, all such properties and assets
are free and clear of mortgages, pledges, security interests, liens, charges
and other encumbrances, except for liens for current taxes not yet due and
payable and minor imperfections of title, if any, not material in nature or
amount and not materially detracting from the value or impairing the use of the
property subject thereto or impairing the operations or proposed operations of
the Company.
SECTION 2.12 Leasehold Interests. Each lease or agreement to which the
Company is a party under which it is a lessee of any property, real or
personal, is a valid subsisting agreement, without any material default of the
Company thereunder and, to the knowledge of the Company, without any default
thereunder of any other party thereto. No event has occurred and is continuing
which, with due notice or lapse of time or both, would constitute a default or
event of default under any such lease or agreement. The Company's possession
of such property has not been disturbed nor has any claim been asserted against
the Company adverse to its rights in such leasehold interests.
SECTION 2.13 Insurance. The Company has policies of casualty and
comprehensive general liability insurance in respect of (i) the plants,
equipment and inventory of the Company with extended coverage against such
casualties and contingencies, in such amounts and of such types as is customary
for companies similarly situated and are deemed by the Company to be sufficient
and (ii) its products and services against such casualties and contingencies,
in such amounts and of such types as is customary for companies similarly
situated and are deemed by the Company to be sufficient. Valid policies in
such amounts will be outstanding and duly in force at the Closing Date.
SECTION 2.14 Taxes. The Company has filed all tax returns, Federal,
state, county and local, required to be filed by it, and the company has paid
all taxes shown to be due by such returns as well as all other taxes,
assessments and governmental charges which have become due or payable,
including without limitation all taxes which the Company is obligated to
withhold from amounts owing to employees, creditors and third parties. All
such taxes with respect to which the Company has become obligated pursuant to
elections made in accordance with generally accepted practice by the Company
have been paid and adequate reserves have been established for all taxes
accrued but not yet payable. Except for taxes for the payment of which an
adequate reserve has been established on the Balance Sheet, there is no tax
lien, whether imposed by the Federal, state, county or local taxing authority,
outstanding against the assets, properties or business of the Company.
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SECTION 2.15 Offering of the Preferred Shares. Neither the Company nor
any person authorized or employed by the Company as agent, broker, dealer or
otherwise in connection with the offering or sale of the Preferred Shares or
any such similar security of the Company has offered the Preferred Shares or
any such similar security for sale to, or solicited any offer to buy the
Preferred Shares or any similar security of the Company from, or otherwise
approached or negotiated with respect thereto with, any person or persons, and
neither the Company nor any person acting on its behalf has taken or will take
any action (including, without limitation, any offer, issuance or sale of any
security of the Company under circumstances which might require the integration
of such security with the Preferred Shares under the Securities Act of 1933, as
amended (the "Securities Act"), or the rules and regulations of the Commission
thereunder), that might subject the offering, issuance or sale of the Preferred
Shares to the registration provisions of the Securities Act.
SECTION 2.16 Brokers. The Company has no contract, arrangement or
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
SECTION 2.17 Transactions with Affiliates. Except as set forth in the
Schedule II, no officer of the Company, or member of the family of any such
person, or any corporation, partnership, trust or other entity in which any
such person, or any member of the family of any such person, has a substantial
interest or is an officer, director, trustee, partner or holder of more than 5%
of the outstanding capital stock thereof, is a party to any transaction with
the Company, including any contract, agreement or other arrangement providing
for the employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to any such person or firm.
SECTION 2.18 Employees. ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇. has executed a
Nondisclosure and Developments Agreement on May 9, 1995, attached hereto as
Exhibit D-1, and such agreement is in full force and effect. Each other key
employee of the Company has executed an Employee Nondisclosure and Developments
Agreement (the "Employee Agreement") substantially in the form of Exhibit D-2
attached hereto, and such agreements are in full force and effect. To the
Company's actual knowledge, the Company has complied in all material respects
with all applicable laws relating to the employment of labor, including
provisions relating to wages, hours, equal opportunity, collective bargaining
and the payment of Social Securities and other taxes, and with the Employee
Retirement Income Security Act of 1974, as amended.
SECTION 2.19 Non-Competition Agreement. ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇., has
entered into a Non-Competition Agreement with the Company substantially in the
form attached as Exhibit E (the "Non-Competition Agreement") and such agreement
is in full force and effect.
SECTION 2.20 Material Contracts and Obligations. Schedule II includes
a list of all material agreements of any nature to which the Company is a party
or by which it is bound, including without limitation (i) each agreement which
requires future expenditures by the Company in excess of $10,000, (ii) all
employment and consulting agreements, employee benefit, bonus, pensions, profit
sharing, stock option, stock purchase and similar plans and arrangements, and
distributor and sales representative agreements, and (iii) any agreement to
which the Company and any stockholder,
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officer, consultant, independent contractor or director of the Company, or any
"affiliate" or "associate" of such persons (as such terms are defined in the
rules and regulations promulgated under the Securities Act), is presently a
party, including without limitation any agreement or other arrangement
providing for the furnishing of services by, rental of real or personal
property from, or otherwise requiring payments to, any such person or entity.
All of such agreements and contracts are valid and binding obligations of the
Company, enforceable in accordance with their respective terms, and in full
force and effect, and the Company is not in material breach or default under
any such agreement or contract.
SECTION 2.21 Compliance. There is no term or provision of any material
mortgage, indenture, contract, agreement or instrument to which the Company is
a party or by which it is bound, or, to the best of the Company's knowledge, of
any provision of any state or federal judgment, decree, order, statute, rule or
regulation applicable to or binding upon the Company, which materially
adversely affects or, so far as the Company may now foresee, in the future is
reasonably likely to materially adversely affect, the business, prospects,
condition, affairs or operations of the Company or any of its properties or
assets.
SECTION 2.22 Books and Records. The minute books of the Company
contain complete and accurate records of all meetings and other corporate
actions of its stockholders and its board of directors and committees thereof.
The stock ledger of the Company is complete and accurate in all respects and
reflects all issuances, transfers, repurchases and cancellations of shares of
capital stock of the Company.
SECTION 2.23 U.S. Real Property Holding Corporation. The Company is
not now and has never been a "United States real property holding corporation",
as defined in Section 897(c)(2) of the Internal Revenue Code of 1986, as
amended (the "Code") and Section 1.897-2(b) of the regulations promulgated
thereunder.
SECTION 2.24 Disclosures. Neither this Agreement, the Second
Registration Rights Amendment, the Second Restated Stock Restriction Agreement
nor any Schedule or Exhibit hereto or thereto, nor any report, certificate or
instrument furnished to any of the Purchasers or their special counsel in
connection with the transactions contemplated by this Agreement, the Second
Registration Rights Amendment, the Second Restated Stock Restriction Agreement
or the Charter, contains or will contain any material misstatement of fact or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein, in the light of the circumstances under which they
were made, not misleading. The Company knows of no information or fact which
has or would have a material adverse effect on the financial condition,
business or prospects of the Company which has not been disclosed to the
Purchasers or to their special counsel.
SECTION 2.25 Qualified Small Business Stock. The Preferred Shares
constitute "qualified small business stock" as defined in Section 1202(c) of
the Code (assuming that the exchange of 4,584,514 shares of Common Stock for
4,584,514 shares of the Series A Preferred Stock, no par value, of the Company
effected on May 9, 1995 effected by ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇. does not disqualify the
Preferred Shares from such treatment).
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SECTION 2.26 Securities Laws. The issuance and sale of the Series C
Preferred Stock pursuant to this Agreement is exempt from registration under
Section 5 of the Securities Act of 1933, as amended.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser severally represents and warrants to the Company that:
(a) it is an "accredited investor" within the meaning of Rule 501
under the Securities Act and was not organized for the specific purpose of
acquiring the Preferred Shares;
(b) it has sufficient knowledge and experience in investing in
companies similar to the Company in terms of the Company's stage of development
so as to be able to evaluate the risks and merits of its investment in the
Company and it is able financially to bear the risks thereof;
(c) it has had an opportunity to discuss the Company's business,
management and financial affairs with the Company's management;
(d) the Preferred Shares being purchased by it are being acquired for
its own account for the purpose of investment and not with a view to or for
sale in connection with any distribution thereof,
(e) it understands that (i) the Preferred Shares and the Conversion
Shares have not been registered under the Securities Act by reason of their
issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated
under the Securities Act, (ii) the Preferred Shares and, upon conversion
thereof, the Conversion Shares must be held indefinitely unless a subsequent
disposition thereof is registered under the Securities Act or is exempt from
such registration, (iii) the Preferred Shares and the Conversion Shares shall
bear a legend to such effect and (iv) the Company will make a notation on its
transfer books to such effect; and
(f) if it sells any Conversion Shares pursuant to Rule 144A
promulgated under the Securities Act, it will take all necessary steps in order
to perfect the exemption from registration provided thereby, including (i)
obtaining on behalf of the Company information to enable the Company to
establish a reasonable belief that the purchaser is a qualified institutional
buyer and (ii) advising such purchaser that Rule 144A is being relied upon with
respect to such resale.
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ARTICLE IV
CONDITIONS TO THE OBLIGATIONS
OF THE PURCHASERS
The obligation of each Purchaser to purchase and pay for the Preferred
Shares being purchased by it on the Closing Date is, at its option, subject to
the satisfaction, on or before the Closing Date, of the following conditions:
(a) Opinion of Company's Counsel. The Purchasers shall have received
from ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ P.C., counsel for the Company, an opinion dated the
Closing Date, in form and scope as set forth in Exhibit F attached hereto.
(b) Representations and Warranties to be True and Correct. The
representations and warranties contained in Article II shall be true, complete
and correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and the
President of the Company shall have certified to such effect to the Purchasers
in writing, provided, that if this agreement is executed on the Closing Date,
execution of this Agreement by such persons shall suffice.
(c) Performance. The Company shall have performed and complied with
all agreements contained herein required to be performed or complied with by it
prior to or at the Closing Date, and the President of the Company shall have
certified to the Purchasers in writing to such effect and to the further effect
that all of the conditions set forth in this Article IV have been satisfied,
provided, that if this agreement is executed on the Closing Date, execution of
this Agreement by such persons shall suffice.
(d) All Proceedings to be Satisfactory. All corporate and other
proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be satisfactory in
form and substance to the Purchasers and their counsel, and the Purchasers and
their counsel shall have received all such counterpart originals or certified
or other copies of such documents as they reasonably may request.
(e) Supporting Documents. The Purchasers and their counsel shall
have received copies of the following documents:
(i) (A) the Charter, certified as of a recent date by the
Secretary of State of the State of Delaware, and (B) a certificate of said
Secretary dated as of a recent date as to the due incorporation and good
standing of the Company, the payment of all franchise taxes by the Company and
listing all documents of the Company on file with said Secretary.
(ii) a certificate of the Secretary or an Assistant Secretary
of the Company dated the Closing Date and certifying: (A) that attached thereto
is a true and complete copy of the By-laws of the Company as in effect on the
date of such certification; (B) that attached thereto is a true and
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complete copy of all resolutions adopted by the Board of Directors or the
stockholders of the Company authorizing the execution, delivery and performance
of this Agreement, the Second Registration Rights Amendment and the Second
Restated Stock Restriction Agreement, the issuance, sale and delivery of the
Preferred Shares and the reservation, issuance and delivery of the Conversion
Shares, and that all such resolutions are in full force and effect and are all
the resolutions adopted in connection with the transactions contemplated by
this Agreement, the Second Registration Rights Amendment and the Second
Restated Stock Restriction Agreement; (C) that the Charter has not been amended
since the date of the last amendment referred to in the certificate delivered
pursuant to clause (i)(B) above; and (D) to the incumbency and specimen
signature of each officer of the Company executing this Agreement, the Second
Registration Rights Amendment or the Second Restated Stock Restriction
Agreement, the stock certificates representing the Preferred Shares and any
certificate or instrument furnished pursuant hereto, and a certification by
another officer of the Company as to the incumbency and signature of the
officer signing the certificate referred to in this clause (ii); and
(iii) such additional supporting documents and other information
with respect to the operations and affairs of the Company as the Purchasers or
their counsel reasonably may request.
(f) Registration Rights Amendment. The Company shall have executed
and delivered the Second Registration Rights Amendment.
(g) Restated Stock Restriction Agreement. The Second Restated Stock
Restriction Agreement shall have been executed and delivered by the Company and
▇▇▇▇▇▇ ▇. ▇▇▇▇.
(h) Charter. The Charter shall read in its entirety as set forth in
Exhibit C. The Charter shall provide the number of shares of authorized Common
Stock of the Company may be increased or decreased (but not below the number
then outstanding) by the affirmative vote of the holders of a majority of the
outstanding shares of capital stock of the Company entitled to vote thereon,
voting together as a single class.
(i) Preemptive Rights. All stockholders of the Company having any
preemptive, first refusal or other rights with respect to the issuance of the
Preferred Shares or the Conversion Shares shall have irrevocably waived the
same in writing.
(j) Fees of Purchasers' Counsel. The Company shall have paid in
accordance with Section 6.1 the fees and disbursements of Purchasers' counsel
invoiced at the Closing.
(k) Consents. All filings, consents or waiting periods required to
be obtained or imposed on the issuance and sale of the Series C Preferred Stock
have been obtained, expired, waived, or otherwise satisfied.
(l) Release of Lien on Intellectual Property. Contemporaneously with
the payment by the Purchasers of the Preferred Shares (i) the Company shall use
such amount of the proceeds of such purchase as shall be required by pay all
amounts then outstanding under the Company's line of credit
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with Silicon Valley Bank; and (ii) all such actions shall be taken, including
but not limited to the filing of all Uniform Commercial Code required documents
with the appropriate state and local authorities, to effect the release by the
Silicon Valley Bank of all mortgages, pledges, security interests, liens
charges or other encumbrances it has in the Company's Intellectual Property and
all other intellectual property, including but not limited to all software and
other technical information developed by and belonging to the Company.
All such documents shall be satisfactory in form and substance to the
Purchasers and their counsel.
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with each of the Purchasers that for so
long as any Preferred Stock is outstanding:
SECTION 5.1 Financial Statements, Reports, Etc.. The Company shall
furnish to each Purchaser holding either (i) together with its affiliates
500,000 Preferred Shares (as adjusted for stock splits, stock dividends and the
like) or (ii) all of the Preferred Shares purchased by it on the date hereof
(in either case a "Qualified Purchaser"):
(a) within fifteen (15) days after the end of each fiscal year, but
in no case later than one hundred twenty (120) days after the end of each
fiscal year of the Company, an audited consolidated balance sheet of the
Company and its subsidiaries as of the end of such fiscal year and the related
audited consolidated statements of income, stockholders' equity and cash flows
for the fiscal year then ended, prepared in accordance with generally accepted
accounting principles and certified by a firm of independent public accountants
of recognized national standing selected by the Board of Directors of the
Company;
(b) within fifteen (15) days after the end of each month, but in no
case later than ninety (90) days after the end of each month in each fiscal
year (other than the last month in each fiscal year) a consolidated balance
sheet of the Company and its subsidiaries and the related consolidated
statements of income, stockholders' equity and cash flows, unaudited but
prepared in accordance with generally accepted accounting principles and
certified by the Chief Financial Officer of the Company but with no requirement
to provide the customary footnotes, such consolidated balance sheet to be as of
the end of such month and such consolidated statements of income, stockholders'
equity and cash flows to be for such month and for the period from the
beginning of the fiscal year to the end of such month, in each case with
comparative statements for the prior fiscal year, provided that the Company's
obligations under this Section 5.1(b) shall terminate upon the completion of a
firm commitment underwritten public offering of the Company's securities;
(c) at the time of delivery of each annual financial statement
pursuant to Section 5.1(a), a certificate executed by the Chief Executive
Officer of the Company stating that such officer has
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caused this Agreement and the Preferred Stock to be reviewed and has no
knowledge of any default by the Company in the performance or observance of any
of the provisions of this Agreement or the Preferred Stock or, if such officer
has such knowledge, specifying such default and the nature thereof;
(d) at the time of delivery of each monthly statement pursuant to
Section 5.1(b), a management narrative report explaining all significant
variances from forecasts and all significant current developments in staffing,
marketing, sales and operations;
(e) no later than sixty (60) days prior to the start of each fiscal
year, consolidated capital and operating expense budgets, cash flow projections
and income and loss projections for the Company and its subsidiaries in respect
of such fiscal year, all itemized in reasonable detail and prepared on a
monthly basis, and, promptly after preparation, any revisions to any of the
foregoing;
(f) promptly following receipt by the Company, each audit response
letter, accountant's management letter and other written report submitted to
the Company by its independent public accountants in connection with an annual
or interim audit of the books of the Company or any of its subsidiaries;
(g) promptly after the commencement thereof, notice of all actions,
suits, claims, proceedings, investigations and inquiries of the type described
in Section 2.7 that could adversely affect the Company or any of its
subsidiaries;
(h) promptly upon sending, making available or filing the same, all
press releases, reports and financial statements that the Company sends or
makes available to its stockholders or directors or files with the Commission;
and
(i) promptly, from time to time, such other information regarding the
business, prospects, financial condition, operations, property or affairs of
the Company and its subsidiaries as such Purchaser reasonably may request.
(j) notwithstanding the foregoing, each Purchaser may request certain
financial statements in less time in order to prepare partnership quarterly
reports or annual audits. The Company will make a good faith effort to comply
with these requests.
SECTION 5.2 Right of Participation. [Intentionally deleted.]
SECTION 5.3 Reserve for Conversion Shares. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, for the purpose of effecting the conversion of the Preferred
Shares and otherwise complying with the terms of this Agreement, such number of
its duly authorized shares of Common Stock as shall be sufficient to effect the
conversion of the Preferred Shares from time to time outstanding or otherwise
to comply with the terms of this Agreement. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of the Preferred Shares or otherwise to comply with the
terms of this Agreement, the Company will forthwith take such corporate action
as
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may be necessary to increase its authorized but unissued shares of Common Stock
to such number of shares as shall be sufficient for such purposes. The Company
will obtain any authorization, consent, approval or other action by or make any
filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Common Stock upon conversion of the Preferred Shares.
SECTION 5.4 Corporate Existence. The Company shall maintain and,
except as otherwise permitted by Section 5.15 cause each of its subsidiaries to
maintain, their respective corporate existence, rights and franchises in full
force and effect.
SECTION 5.5 Properties, Business, Insurance. The Company shall
maintain and cause each of its subsidiaries to maintain as to their respective
properties and business, with financially sound and reputable insurers,
insurance against such casualties and contingencies and of such types and in
such amounts as is customary for companies similarly situated, which insurance
shall be deemed by the Company to be sufficient. The Company shall also
maintain in effect a "key person" life insurance policy, payable to the
Company, on the life of ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇., (so long as he remains an employee
of the Company), in the amount of $1,000,000 with the proceeds thereof payable
to the Company. The Company shall not cause or permit any assignment or change
in beneficiary and shall not borrow against any such policy. If requested by
Purchasers holding at least a majority of the outstanding Preferred Shares, the
Company will add one designee of such Purchasers as a notice party for each
such policy and shall request that the issuer of each policy provide such
designee with ten (10) days' notice before such policy is terminated (for
failure to pay premiums or otherwise) or assigned or before any change is made
in the beneficiary thereof.
SECTION 5.6 Inspection, Consultation and Advice. The Company shall
permit and cause each of its subsidiaries to permit each Qualified Purchaser
and such persons as it may designate, at such Qualified Purchaser's expense, to
visit and inspect any of the properties of the Company and its subsidiaries,
examine their books and take copies and extracts therefrom, discuss the
affairs, finances and accounts of the Company and its subsidiaries with their
officers, employees and public accountants (and the Company hereby authorizes
said accountants to discuss with such Qualified Purchaser and such designees
such affairs, finances and accounts), and consult with and advise the
management of the Company and its subsidiaries as to their affairs, finances
and accounts, all at reasonable times and upon reasonable notice.
SECTION 5.7 Restrictive Agreements Prohibited. Neither the Company nor
any of its subsidiaries shall become a party to any agreement which by its
terms restricts the Company's performance of this Agreement, the Second
Registration Rights Amendment, the Second Restated Stock Restriction Agreement
or the Charter.
SECTION 5.8 Transactions with Affiliates. Except for transactions
contemplated by this Agreement or as otherwise approved by the Board of
Directors, neither the Company nor any of its subsidiaries shall enter into any
transaction with any director, officer, employee or holder of more than 5% of
the outstanding capital stock of any class or series of capital stock of the
Company or any of its subsidiaries, member of the family of any such person, or
any corporation, partnership, trust or
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other entity in which any such person, or member of the family of any such
person, is a director, officer, trustee, partner or holder of more than 5% of
the outstanding capital stock thereof, except for transactions on customary
terms related to such person's employment.
SECTION 5.9 Expenses of Directors. The Company shall promptly
reimburse in full, each director of the Company who is not an employee of the
Company and who was elected as a director solely or in part by the holders of
Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock
(each a "Preferred Director"), for all of his reasonable out-of-pocket expenses
incurred in attending each meeting of the Board of Directors of the Company or
any Committee thereof.
SECTION 5.10 Use of Proceeds. The Company shall use the proceeds from
the sale of the Preferred Shares first to pay off all amounts then outstanding
under the Company's line of credit with Silicon Valley Bank as set forth in
paragraph (1) of Article IV of this Agreement and the remainder solely for
working capital, sales and marketing development, software applications
technology and administration of the business as outlined in the Company's
business plan.
SECTION 5.11 Board of Directors Meetings. The Company shall use its
best efforts to ensure that meetings of its Board of Directors are held at
least four times each year and at least once each quarter. The Company shall
permit each Qualified Purchaser to have one representative reasonably
acceptable to the Company attend each meeting of the Board of Directors of the
Company and each meeting of any Committee thereof and to participate in all
discussions during each such meeting. The Company shall send to each Qualified
Purchaser and such designee the notice of the time and place of such meeting in
the same manner and at the same time as it shall send such notice to its
directors or committee members, as the case may be. The Company shall also
provide to each Qualified Purchaser and such designee copies of all notices,
reports, minutes and consents at the time and in the manner as they are
provided to the Board of Directors or committee, except for information
reasonably designated as proprietary information by the Board of Directors.
The Company may require each such representative, prior to attendance at his or
her first meeting of the Company's Board of Directors, to execute a
confidentiality agreement reasonably acceptable to the Company. Notwithstanding
the foregoing, the Company may require that all affiliated Qualified Purchasers
designate a single representative to attend meetings of the Company's Board of
Directors as long as such Qualified Purchasers remain affiliated with each
other.
SECTION 5.12 Performance of Contracts. The Company shall not amend,
modify, terminate, waive or otherwise alter, in whole or in part, any of the
Employee Nondisclosure and Developments Agreements or the Non-Competition
Agreements without the written consent of two-thirds of the Preferred
Directors.
SECTION 5.13 Vesting of Reserved Employee Shares. The Company shall
not grant to any of its employees options to purchase Reserved Employee Shares
(as that term is defined in the Charter) which will become exercisable at a
rate in excess of 33-1/3% per annum from the date of such grant without the
unanimous written consent of the Preferred Directors; provided, however, that
options granted under the Company's Stock Option Plan will vest one-sixth in
year one, two-sixths in
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year two and three-sixths in year three and that the Company may grant fully
vested options to purchase up to an aggregate of 200,000 of the Reserved
Employee Shares under a program to reward its salespeople upon the completion
of certain customer contracts procured by them.
SECTION 5.14 Employee Nondisclosure and Developments Agreements. The
Company shall obtain, and shall cause its subsidiaries to obtain, an Employee
Nondisclosure and Developments Agreement in substantially the form of Exhibit E
from all future officers, key employees and other employees who will have
access to confidential information of the Company or any of its subsidiaries,
upon their employment by the Company or any of its subsidiaries.
SECTION 5.15 Activities of Subsidiaries. The Company shall not permit
any subsidiary to consolidate or merge into or with or sell or transfer all or
substantially all its assets, except that any subsidiary may (i) consolidate or
merge into or with or sell or transfer assets to any other subsidiary, or (ii)
merge into or sell or transfer assets to the Company. The Company shall not
sell or otherwise transfer any shares of capital stock of any subsidiary,
except to the Company or another subsidiary, or permit any subsidiary to issue,
sell or otherwise transfer any shares of its capital stock or the capital stock
of any subsidiary, except to the Company or another subsidiary. The Company
shall not permit any subsidiary to purchase or set aside any sums for the
purchase of, or pay any dividend or make any distribution on, any shares of its
stock, except for dividends or other distributions payable to the Company or
another subsidiary.
SECTION 5.16 Compliance with Laws. The Company shall comply, and cause
each subsidiary to comply, with all applicable laws, rules, regulations and
orders, noncompliance with which could materially adversely affect its business
or condition, financial or otherwise.
SECTION 5.17 Keeping of Records and Books of Account. The Company
shall keep, and cause each subsidiary to keep, adequate records and books of
account, in which complete entries will be made in accordance with generally
accepted accounting principles consistently applied, reflecting all financial
transactions of the Company and such subsidiary, and in which, for each fiscal
year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.
SECTION 5.18 Change in Nature of Business. The Company shall remain in
the business of software development and consulting.
SECTION 5.19 U.S. Real Property Interest Statement. The Company shall
provide prompt written notice to each Purchaser following any "determination
date" (as defined in Treasury Regulation Section 1.897-2(c)(i)) on which the
Company becomes a United States real property holding corporation. In
addition, upon a written request by any Purchaser, the Company shall provide
such Purchaser with a written statement informing the Purchaser whether such
Purchaser's interest in the Company constitutes a U.S. real property interest.
The Company's determination shall comply with the requirements of Treasury
Regulation Section 1.897-2(h)(1) or any successor regulation, and the Company
shall provide timely notice to the Internal Revenue Service, in accordance with
and to the extent required by Treasury Regulation Section 1.8972(h)(2) or any
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22
successor regulation, that such statement has been made. The Company's written
statement to any Purchaser shall be delivered to such Purchaser within ten (10)
days of such Purchaser's written request therefor. The Company's obligation to
furnish a written statement pursuant to this Section 5.22 shall continue
notwithstanding the fact that a class of the Company's stock may be regularly
traded on an established securities market.
SECTION 5.20 Rule 144A Information. The Company shall, at all times
during which it is neither subject to the reporting requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), nor exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange
Act, provide in writing, upon the written request of any Purchaser or a
prospective buyer of Preferred Shares or Conversion Shares from any Purchaser,
all information required by Rule 144A(d)(4)(i) of the General Regulations
promulgated by the Commission under the Securities Act ("Rule 144A
Information"). The Company also shall, upon the written request of any
Purchaser, cooperate with and assist such Purchaser or any member of the
National Association of Securities Dealers, Inc. PORTAL system in applying to
designate and thereafter maintain the eligibility of the Preferred Shares or
Conversion Shares, as the case may be, for trading through PORTAL. The
Company's obligations under this Section 5.20 shall at all times be contingent
upon the relevant Purchaser's obtaining from the prospective buyer of Preferred
Shares or Conversion Shares a written agreement to take all reasonable
precautions to safeguard the Rule 144A Information from disclosure to anyone
other than a person who will assist such buyer in evaluating the purchase of
any Preferred Shares or Conversion Shares.
SECTION 5.21 Termination of Covenants. The covenants set forth in
Sections 5.19 and 5.20 shall terminate and be of no further force or effect as
to each of the Purchasers when such Purchaser no longer holds any shares of
capital stock of the Company. All of the other covenants set forth in this
Article V shall terminate and be of no further force or effect as to each of
the Purchasers when such Purchaser is no longer a Qualified Purchaser. Each
Purchaser acknowledges that the covenants terminate with respect to such
Purchaser as set forth in the preceding sentence in the event that such
Purchaser's holdings of Preferred Shares are reduced via conversion of such
holdings into Common Stock, whether voluntarily or involuntarily.
SECTION 5.22 Qualified Small Business Stock. The Company shall submit
to its stockholders (including the Purchasers) and to the Internal Revenue
Service any reports that may be required under Section 1202(d)(1)(C) of the
Code and any related Treasury Regulations. In addition, within ten (10) days
after any Purchaser has delivered to the Company a written request therefor,
the Company shall deliver to such Purchaser a written statement informing the
Purchaser whether such Purchaser's interest in the Company constitutes
"qualified small business stock" as defined in Section 1202(c) of the Code
(subject to the assumption set forth in Section 2.25). The Company's obligation
to furnish a written statement pursuant to this Section 5.27 shall continue
notwithstanding the fact that a class of the Company's stock may be traded on
an established securities market.
SECTION 5.23 Liens, Etc. Except for (i) the liens on the Company's
property held by Silicon Valley Bank as indicated on Schedule II, after giving
effect to the requirements of paragraph (1) of Article IV, (ii) liens arising
by operation of law and in the ordinary course of
-18-
23
business, and (iii) equipment leases or purchase money financing agreements
where any security agreement or financing statement applies only to the
specific property being leased or purchased, the Company shall not, and shall
not permit any of its subsidiaries to, create, incur, assume or suffer to
exist, any lien on or with respect to any of its properties of any character
whether now owned or hereafter acquired, or sign or file, or permit any of its
subsidiaries to sign or file, under the Uniform Commercial Code of any
jurisdiction of the United States or under the laws of any other jurisdiction,
a financial statement or other similar document that names the Company or such
subsidiary as debtor, or sign, or permit any subsidiary to sign, any security
agreement authorizing any secured party thereunder to file such financing
statement or other similar document, or assign, or permit any subsidiary to
assign, any accounts; provided that, except with respect to liens or other
encumbrances on, or security interests in, any of the Company's Intellectual
Property or other intellectual property including, but not limited to all
software and other technical information developed by and belonging to the
Company, the holders of a majority of the shares of Preferred Stock may consent
to any lien or action taken in respect thereof.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Expenses. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated, provided, however, that assuming a
successful completion of such transactions, the Company shall pay the fees and
disbursements, not to exceed three thousand dollars ($3,000.00) to each of the
Purchasers' special counsel in connection with such transactions and any
subsequent amendment, waiver, consent or enforcement thereof
SECTION 6.2 Survival of Agreements. All covenants, agreements,
representations and warranties made herein or in the Second Registration Rights
Amendment, the Second Restated Stock Restriction Agreement or any certificate
or instrument delivered to the Purchasers pursuant to or in connection with
this Agreement, the Second Registration Rights Amendment or the Second Restated
Stock Restriction Agreement, shall survive the execution and delivery of this
Agreement, Second Registration Rights Amendment and the Second Restated Stock
Restriction Agreement, the issuance, sale and delivery of the Preferred Shares,
and the issuance and delivery of the Conversion Shares, and all statements
contained in any certificate or other instrument delivered by the Company
hereunder or thereunder or in connection herewith or therewith shall be deemed
to constitute representations and warranties made by the Company.
SECTION 6.3 Brokerage. Each party hereto will indemnify and hold
harmless the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
SECTION 6.4 Parties in Interest. All representations, covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the
-19-
24
respective successors and assigns of the parties hereto whether so expressed or
not. Without limiting the generality of the foregoing, all representations,
covenants and agreements benefiting the Purchasers shall inure to the benefit
of any and all subsequent holders from time to time of Preferred Shares or
Conversion Shares.
SECTION 6.5 Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered in person,
mailed by certified or registered mail, return receipt requested, or sent by
telecopier or telex, addressed as follows:
(a) if to the Company, at ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Executive Officer, with a copy to ▇▇▇▇ ▇.
▇▇▇▇▇▇, Esq., ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P. C., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇;
(b) if to ▇▇▇▇▇▇▇ ▇▇▇▇▇ Group, Inc., at c/o Merrill, ▇▇▇▇▇ & Co.,
Inc., World Financial Center, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇; and
(c) if to any Purchaser other ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ Group, Inc., at the
address of such Purchaser set forth in Schedule I, with, in the case of notices
to ARCH, Venrock or ▇▇▇▇▇▇▇, a copy to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., ▇▇▇▇▇, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, High Street Tower, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇;
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
SECTION 6.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois.
SECTION 6.7 Entire Agreement. This Agreement, including the Schedules
and Exhibits hereto, constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto
are hereby incorporated herein by reference.
SECTION 6.8 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.
SECTION 6.9 Amendments. This Agreement may not be amended or modified,
and no provisions hereof may be waived, without the written consent of the
Company and the holders of at least two-thirds of the outstanding shares of
Common Stock issued or issuable upon conversion of the Preferred Shares.
SECTION 6.10 Severability. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
-20-
25
SECTION 6.11 Titles and Subtitles. The titles and subtitles used in
this Agreement are for convenience only and are not to be considered in
construing or interpreting any term or provision of this Agreement.
SECTION 6.12 Waiver and Termination of Certain Provisions of Series A
Purchase Agreement and the Series B Purchase Agreement. The Company, the
holders of a majority of the outstanding Common Stock issuable upon conversion
of the Series A Convertible Preferred Stock and the holders of a majority of
the outstanding Common Stock issuable upon conversion of the Series B Preferred
Stock hereby agree that (i) effective immediately prior to the consummation of
the Closing, the covenants of the Company in Article V of the Series B Purchase
Agreement shall be terminated in their entirety, shall be of no further force
or effect, and shall be replaced in their entirety by Article V of this
Agreement, and (ii) the provisions of Section 5.2 of the Series B Purchase
Agreement are hereby waived with respect to the transactions contemplated
herein. The parties hereto agree that solely for purposes of Article V of this
Agreement. (i) the term "Purchasers" shall be deemed to mean the Purchasers,
the holders of the Series A Convertible Preferred Stock, the holders of the
Series B Preferred Stock, and the holders of the Series C Preferred Stock, (ii)
the term "Preferred Shares" shall be deemed to mean the Preferred Shares, the
shares of Series A Preferred Stock, the shares of Series B Preferred Stock, and
the shares of the Series C Preferred Stock, (iii) the term "Conversion Shares"
shall be deemed to mean the Conversion Shares and the shares of Common Stock
issuable upon conversion of the Series A Convertible Preferred Stock, the
Series B Preferred Stock, or the Series C Preferred Stock.
SECTION 6.13 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "person" shall mean an individual, corporation, trust,
partnership, joint venture, unincorporated organization, government
agency or any agency or political subdivision thereof, or other entity.
(b) "subsidiary" shall mean, as to the Company, any
corporation of which more than 50% of the outstanding stock having
ordinary voting power to elect a majority of the Board of Directors of
such corporation (irrespective of whether or not at the time stock of
any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned by the Company, or by one or more of
its subsidiaries, or by the Company and one or more of its subsidiaries.
-21-
26
IN WITNESS WHEREOF, the Company, certain officers and employees of the
Company and the Purchasers have executed this Agreement as of the day and year
first above written.
New Era Of Networks, Inc.
By:
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
President
PURCHASERS:
ARCH VENTURE FUND II, L.P.,
a Delaware limited partnership
By: ARCH VENTURE PARTNERS, L.P., a
Delaware limited partnership,
its General partner
By: ARCH Venture Corporation,
an Illinois corporation, its
General Partner
By:
---------------------------------
Managing Director
VENROCK ASSOCIATES
By:
---------------------------------
General Partner
[MORE SIGNATURES FOLLOW]
-22-
27
VENROCK ASSOCIATES II, L.P.
By:
---------------------------------
General Partner
------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ GROUP, INC.,
a Delaware corporation
By:
--------------------------------
THE ▇▇▇▇▇▇▇▇ COMPANIES, L.L.C., a
Colorado limited liability company
By:
--------------------------------
For purposes of 6.12:
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
SIGNATURE PAGE TO SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
NEW ERA OF NETWORKS, INC.
-23-
28
SCHEDULE I
PURCHASERS
AGGREGATE
NUMBER OF PURCHASE PRICE
PREFERRED SHARES FOR PREFERRED
NAME AND ADDRESS OF PURCHASER TO BE PURCHASED SHARES
--------------------------------------- --------------------------- --------------------------
ARCH Venture Fund II, L.P.
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ 745,342 $ 1,200,000
Venrock Associates, II, L.P.
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ 457,888 $ 737,199.68
Venrock Associates
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇. ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ 747,081 $1,202,800.41
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
c/o Venrock Associates
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ 37,267 $ 59,999.87
▇▇▇▇▇▇▇ ▇▇▇▇▇ Group, Inc.
World Financial Center
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ 1,863,354 $ 3,000,000
The ▇▇▇▇▇▇▇▇ Companies, L.L.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ 813,664 $ 1,310,000
--------- -------------
Total 4,664,596 $ 7,510,000
========= =============
29
SCHEDULE II
DISCLOSURE SCHEDULE
I. LITIGATION
A. None
II. INTELLECTUAL PROPERTY
A. The Company has patent applications in process for the NEONet
Rules Engine and NEONet Queuing.
B. The Company has applied to the U.S. Patent and Trademark
Office for trademarks for New Era of Networks, Inc., the NEON
logo, and NEONet.
III. STOCK OPTIONS AND WARRANTS
A. The Company maintains a Employee Stock Option Plan, the terms
of which have been previously provided to the purchasers and
which will be amended to conform with the terms of this
Agreement. The Plan provides the Company with a right of
first refusal and repurchase rights with respect to certain
transfers of stock by recipients of the Employee Stock Options
as well. As of the date of this Agreement, the Company has
granted options to purchase 3,032,300 shares of Common Stock
pursuant to this Plan.
B. The Company has granted options to purchase a total 398,334
shares of common stock to certain consultants and suppliers.
C. The Company issued 31,056 warrants to Silicon Valley Bank at
an exercise price of $1.61 per share.
IV. FINANCING
A. ▇▇▇▇▇▇ ▇. ▇▇▇▇ currently holds a revolving note from the
Company for an amount up to $500,000. As of May 31, 1996, the
principal amount outstanding under such note is approximately
$318,158, accrued interest is approximately $1,700.
B. The Company maintains a $1,000,000 line of credit with Silicon
Valley Bank.
C. The Company maintains a $150,000 line of credit with Guaranty
Bank.
V. MATERIAL AGREEMENTS (EXPECTED REVENUES OVER $100,000)
A. Froedtert Memorial Lutheran Hospital Agreement dated July 28,
1995.
30
▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., Master Agreement for Professional
Services dated February 7, 1996.
▇. ▇▇▇▇▇▇▇ Financial Services Agreement dated February 13, 1996.
D. ADP Financial Information Services, Inc. Agreement dated April
4, 1996.
E. Fidelity Assets Services Group Agreement dated March 5, 1996.
▇. ▇▇▇▇▇▇▇ Health System, Development Contract for Universal
Medical Record Number System, dated June 17, 1995.
G. ▇▇ ▇▇▇▇▇▇ Agreement dated January 15, 1996.
VI. MATERIAL CONTRACTS AND OBLIGATIONS
A. At this time, the Company has three separate leases on 19,512
square feet for its administrative and development operations
in Denver. The aggregate monthly rent is $13,944 a month.
The leases run primarily to the year 2000.
B. The Company also holds a lease for a portion of the 29th floor
at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ (4,300 square feet)
for its New York Operations. The month rent is $7,621 per
month. The lease runs to the year 1998.
C. The Company is a party to the agreements described in Section
2.4 of this Purchase Agreement and all agreements attached to
the Purchase Agreement as Exhibits.
D. The Company has entered into Employee Nondisclosure and
Developments Agreements with each of ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇ and all other employees of the Company. Additionally,
the Company has entered into a Non-Competition Agreement with
▇▇▇▇▇▇ ▇. ▇▇▇▇.
E. The Company is a party to Stock Option Agreements with all
parties listed on Schedule III hereof.
VII. LIENS
A. In connection with the $1,000,000 line of credit with Silicon
Valley Bank, the Bank holds a first security interest in
substantially all assets of the Company.
-2-
31
SCHEDULE III
SECURITY HOLDERS
No. Of Options
Name Granted
---- --------------
A. COMMON STOCKHOLDERS
-------------------
▇▇▇▇, ▇▇▇▇▇▇ ▇. 5,495,486
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 600,000
----------
Total 6,095,486
---------
B. SERIES A CONVERTIBLE PREFERRED STOCKHOLDERS
-------------------------------------------
ARCH Venture Fund II, L.P. 2,292,257
▇▇▇▇, ▇▇▇▇ ▇. 6,876,771
---------
Total 9,169,028
---------
C. SERIES B CONVERTIBLE PREFERRED STOCKHOLDERS
-------------------------------------------
ARCH, Venture Fund II, L.P. 1,236,668
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ 468,285
Venrock Associates 3,080,714
Venrock Associates II 1,397,672
---------
Total 6,183,339
---------
D. EMPLOYEE OPTIONS
----------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 48,000
▇▇▇▇, ▇▇▇▇▇▇ 27,000
Albuquerque, ▇▇▇▇▇▇ 7,500
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 13,000
▇▇▇, ▇▇▇ 2,100
▇▇▇▇, ▇▇▇▇ 24,000
▇▇▇▇, ▇▇▇▇▇ 1,200
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 5,400
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 4,200
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. 30,000
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 12,000
▇▇▇▇▇▇, ▇▇▇▇ 15,000
▇▇▇▇▇▇, ▇▇▇ 18,000
▇▇▇▇▇▇, ▇▇▇▇ 30,000
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ 27,300
▇▇▇▇, ▇▇▇▇ 12,000
32
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ 21,000
▇▇▇▇▇, ▇▇▇▇ 33,000
▇▇▇▇▇, ▇▇▇▇▇ 24,000
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 2,400
▇▇▇▇▇, ▇▇▇▇▇ 30,000
Day-▇▇▇▇, ▇▇▇▇▇▇▇▇ 5,100
▇▇▇▇▇, ▇▇▇▇▇ 3,000
▇▇▇▇▇▇, ▇▇▇▇▇ 2,100
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 42,000
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ 2,100
▇▇▇▇▇▇▇, ▇▇▇ 27,000
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 2,400
▇▇▇▇▇▇, ▇▇▇▇▇▇ 3,600
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ 50,600
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 1,200
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ 21,000
▇▇▇▇▇▇-▇▇▇▇▇, ▇▇▇▇▇▇▇ 13,200
▇▇▇▇▇▇▇, ▇▇▇▇▇ 3,000
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ 72,300
▇▇▇▇▇, ▇▇▇▇ 12,600
▇▇▇▇▇▇, ▇▇▇▇▇▇ 3,800
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 60,000
Just, ▇▇▇▇ 8,400
▇▇▇▇▇▇▇, ▇▇▇▇▇ 111,000
▇▇▇▇▇▇▇, ▇▇▇▇▇ 1,800
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ 30,000
▇▇▇, ▇▇▇ 39,000
▇▇▇▇, ▇▇▇▇▇ 24,000
▇▇▇▇▇, ▇▇▇▇ 90,000
▇▇▇▇▇▇, ▇▇▇▇▇▇ 15,000
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ 30,300
▇▇▇▇, ▇▇▇▇▇▇▇ 4,800
▇▇▇▇▇, ▇▇▇▇ 1,500
▇▇▇, ▇▇▇▇▇▇ 51,300
▇▇▇▇▇▇, ▇▇▇▇ 36,000
▇'▇▇▇▇▇, ▇▇▇▇▇ 33,600
▇▇▇▇▇▇, ▇▇▇▇ 1,200
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 21,000
▇▇▇▇▇, ▇▇▇▇▇ ▇. 210,000
▇▇▇▇▇▇, ▇▇▇▇▇▇ 30,000
Pelizzoli, Paolo 51,000
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ 30,000
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 300,000
▇▇▇▇▇▇▇, ▇▇▇ 11,100
-2-
33
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ 57,600
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ 2,400
▇▇▇▇▇▇, ▇▇▇ 10,200
▇▇▇▇, ▇▇▇▇ 15,300
▇▇▇▇▇▇▇▇, ▇▇▇▇ 3,000
▇▇▇▇▇, ▇▇▇▇ 12,000
▇▇▇▇▇, ▇▇▇▇▇ 210,000
Sadim, Amir 15,000
▇▇▇▇▇▇, ▇▇▇▇▇▇ 6,900
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ 30,000
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ 7,500
▇▇▇▇▇▇, ▇▇▇▇▇ 213,600
▇▇▇▇▇, ▇▇▇▇▇▇▇ 15,000
▇▇▇▇▇, ▇▇▇▇▇ 9,000
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ 12,000
▇▇▇▇▇▇▇▇, ▇▇▇ 36,000
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ 30,000
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 2,100
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ 24,000
▇▇▇▇▇, ▇▇▇ 2,100
▇▇▇▇▇, ▇▇▇▇ 66,600
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ 2,100
▇▇▇▇▇, ▇▇▇▇▇ 3,600
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ 210,000
▇▇▇▇▇▇, ▇▇▇▇ Shy 13,200
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 12,000
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 120,000
Wine, ▇▇▇▇ 42,000
Wisdom, Don 2,400
Wu, Litao 3,600
---------
Total 3,032,300
---------
E. NON-EMPLOYEE OPTIONS
--------------------
▇▇▇▇▇ & Associates 10,000
Panther Beach Tech 7,000
Careers, Ltd. 12,000
▇▇▇▇▇▇▇, ▇▇▇▇▇ 234,334
▇▇▇▇▇▇, ▇▇▇▇ 60,000
▇▇▇▇▇, ▇▇▇ 15,000
▇▇▇▇, ▇▇▇ 60,000
---------
Total 398,334
---------
-3-
34
F. WARRANTS
Silicon Valley Bank 31,056
-4-