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EXHIBIT 10.22
RESTRICTED STOCK PURCHASE AGREEMENT
THIS RESTRICTED STOCK PURCHASE AGREEMENT (this "AGREEMENT") is
made and entered into as of August 28, 1998 (the "EFFECTIVE DATE") by and
between ProfitSource Corporation, a Delaware corporation (the "COMPANY") and
Mark Coleman (the "PURCHASER").
A. The Company has been formed for the purpose of providing cost
reduction, cost recovery and profit enhancement services and is acquiring, in a
series of transactions by means of mergers into the Company, or acquisitions by
the Company of all or substantially all of the assets or stock or other equity
interests, various companies providing such services (the "CONSOLIDATION
TRANSACTIONS").
B. The Purchaser has entered into an Employment Agreement with
the Company or its affiliate (the "EMPLOYMENT AGREEMENT").
C. The Purchaser and certain other persons responsible for
effecting the Consolidation Transactions and who are to serve as employees of
the Company (collectively, the "SPONSORS") are being offered an opportunity to
purchase shares of the Series B common stock of the Company, par value $0.00l
per share (the "COMMON STOCK") at a price of $0.02 per share. At the
consummation of the initial Consolidation Transactions, certain other persons
affiliated with certain companies being acquired by the Company in the
Consolidation Transactions and who are also to serve as employees of the.
Company (the "FOUNDERS") and the Sponsors will be offered the opportunity to
purchase additional shares.
D. The Shares (as hereinafter defined) shall be subject to
repurchase by the Company, in the Company's discretion, if certain
performance-related milestones described herein are not met.
E. The Shares shall be subject to certain additional restrictions
on transfer as set forth herein.
F. The Purchaser desires to purchase and the Company desires to
sell the Shares as set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants hereinafter set forth, the Company and the Purchaser hereby
agree as follows:
1. SALE AND PURCHASE OF THE SHARES.
1.1 SALE AND PURCHASE. Subject to the terms and conditions set forth
herein, the Company hereby sells and issues to the Purchaser, and the Purchaser
hereby purchases from the Company the number of shares of Common Stock set forth
on Schedule 1 (the "SHARES") for the per share and aggregate consideration set
forth on Schedule 1 (the "PURCHASE PRICE"), which is being paid by the Purchaser
to the Company concurrently herewith in the form described in Schedule 1.
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1.2 DELIVERIES. In exchange for the Purchase Price, the Company is
issuing the Shares in the Purchaser's name, or such other name as may be set
forth on Schedule 1, on the Company's stock transfer ledger, and valid stock
certificates representing the Shares (the "CERTIFICATES") shall be held by the
Company or its agent pending release pursuant to Section 4.1(g).
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser represents and warrants to the Company and its officers,
directors and agents as follows:
2.1 SECURITIES MATTERS.
(a) The Purchaser understands that (i) neither the Shares nor the offer
and sale thereof are registered or qualified under the Securities Act of 1933,
as amended (the "SECURITIES ACT") or any state securities or "blue Sky" laws, on
the ground that the sale provided for in this Agreement and the issuance of
securities hereunder is exempt from registration and qualification under
Sections 4(2) and 18 of the Securities Act, and (ii) the Company's reliance on
such exemptions is predicated on the Purchaser's representations set forth
herein.
(b) The Purchaser acknowledges that an investment in the Company
involves an extremely high degree of risk lack of liquidity and substantial
restrictions on transferability and that the Purchaser may lose the Purchaser's
entire investment in the Shares.
(c) The Company has made available to the Purchaser or the Purchaser's
advisors the opportunity to obtain information to evaluate the merits and risks
of the purchase of the Shares, and the Purchaser has received all information
requested from the Company. The Purchaser has had an opportunity to ask
questions and receive answers from the Company regarding the terms and
conditions of the offering of the Shares and the business, properties, plans,
prospects, and financial condition of the Company and to obtain such additional
information as the Purchaser has deemed appropriate for purposes of investing in
the Shares pursuant to this Agreement.
(d) The Shares to be acquired by the Purchaser hereunder will be
acquired for the Purchaser's own account, for investment purposes, not as a
nominee or agent, and not with a view to or for sale in connection with any
distribution of the Shares in violation of applicable securities laws.
(e) The Purchaser understands that no federal or state agency has passed
upon the Shares or made any finding or determination as to the fairness of the
investment in the Shares.
(f) The Purchaser, personally or through advisors, has expertise in
evaluating and investing in private placement transactions of securities of
companies in a similar stage of development to the Company and has sufficient
knowledge and experience in financial and business matters to assess the
relative merits and risks of an investment in the Shares. In connection with the
purchase of the Shares, the Purchaser has relied solely upon independent
investigations made by the Purchaser, and has consulted the Purchaser's own
investment advisors, counsel and accountants. The Purchaser has adequate means
of providing for current
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needs and personal contingencies, and has no need for liquidity and can sustain
a complete loss of the investment in the Shares.
(g) The Purchaser is an "Accredited Investor" as defined in Rule 501(a)
under the Securities Act and has documented his or her accredited status by
delivery to the Company of a completed questionnaire in the form of Exhibit A
hereto attesting thereto (the "ACCREDITED INVESTOR QUESTIONNAIRE").
(h) The Purchaser has not received any general solicitation or general
advertising concerning the Shares, nor is the Purchaser aware of any such
solicitation or advertising.
2.2 REVOCATION, CANCELLATION. The Purchaser acknowledges that the
Purchaser shall not have any right to cancel, terminate or revoke this
Agreement, or rescind purchase of the Shares, or return the Shares for a refund.
2.3 THE COMPANY AND THE CONSOLIDATION TRANSACTIONS.
(a) The Purchaser is aware that:
(i) The Company has recently been organized and has no financial
or operating history.
(ii) There can be no assurance that any particular Consolidation
Transactions will occur, that the Company will be successful in accomplishing
the purpose for which it was formed or that it will ever be profitable. No
assurances can be given regarding what companies will ultimately participate in
the Consolidation Transactions. No company is obligated to participate in the
Consolidation Transactions unless a written agreement to such effect is entered
into by the Company.
(iii) No assurances can be given that an initial public offering
("IPO") of the Company's securities will occur. If an IPO does occur, no
assurances can be given as to timing of the IP0, whether the Purchaser will be
able to participate, or the price at which any shares of Common Stock would be
sold.
(iv) No assurances can be given to the ultimate value of the
Common Stock or the Shares or the liquidity thereof.
(v) All decisions regarding the Consolidation Transactions, any
IPO, and the Company's management and operations will be made by the Company's
management, and certain individuals involved in planning the Consolidation
Transactions and managing the business of the Company will have the right to
vote the Shares pursuant to the voting agreement referenced in Section 4.1(h).
(b) The Purchaser acknowledges that no assurances have been made to the
Purchaser with respect to any of the foregoing and no representations, oral or
written, have been made to the Purchaser by the Company or any of its employees,
representatives or agents concerning the Shares, their potential value or the
prospects of the Company, except as set forth herein.
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(c) The proceeds from the sale of the Common Stock to the Sponsors and
the Founders are intended to be used by the Company for general and
administrative expenses and working capital. The proceeds from such sales may be
exhausted notwithstanding failure of the Company to achieve its objectives.
2.4 ENFORCEABILITY OF TRANSACTION DOCUMENTS. This Agreement and all
other documents to be delivered in connection herewith (collectively, the
"TRANSACTION DOCUMENTS") have been (or upon execution and delivery will have
been) duly executed and delivered by the Purchaser, and (assuming due execution
and delivery by the other parties thereto) constitute (or upon execution by the
Purchaser will constitute) legal, valid and binding obligations of the
Purchaser, except as such enforceability may be limited by general principles of
equity and bankruptcy, insolvency, reorganization and moratorium and other
similar laws relating to creditors' rights (the "BANKRUPTCY EXCEPTION").
2.5 BROKERS. No broker, finder, investment banker, or other person is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Purchaser.
2.6 TAX MATTERS. The Purchaser has received tax advice from the
Purchaser's own advisors and has not received, and is not relying upon, any tax
representations or advice from the Company or any representative of the Company.
2.7 ACCURACY OF INFORMATION. No representation or warranty made by the
Purchaser contained in this Agreement or in any other Transaction Document
contains or will contain an untrue statement of a material fact or omits or will
omit to state a material fact required to be stated herein or therein or
necessary to make the statements and facts contained herein or therein, in light
of the circumstances in which they were or are made, not materially false or
misleading.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to the Purchaser that:
3.1 ORGANIZATION AND CORPORATE AUTHORITY. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. This
Agreement and the other Transaction Documents to be executed and delivered by
the Company have been (or upon execution and delivery by the Company will have
been) duly executed and delivered by the Company, have been effectively
authorized by all necessary action of the Company, corporate or otherwise, and
(assuming due execution and delivery by the other parties thereto) constitute
(or upon execution and delivery by the Company will constitute) legal, valid and
binding obligations of the Company, except as such enforceability may be limited
by the Bankruptcy Exception.
3.2 NO CONFLICT OR VIOLATION. The execution, delivery and performance by
the Company of the Transaction Documents to be executed and delivered by the
Company and the consummation of the transactions contemplated hereby and thereby
do not and will not: (i) violate or conflict with any provision of the charter
documents or bylaws of the Company; or (ii) violate any provision or requirement
of any domestic or foreign, national,
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state or local law, statute, judgment, order, writ, injunction, decree, award,
rule, or regulation of any court, arbitrator, state, local or foreign government
agency, regulatory body, or other governmental authority or any department,
agency, board, commission, bureau or instrumentality of any of the foregoing
(each a "GOVERNMENTAL ENTITY," and collectively "GOVERNMENTAL ENTITIES")
applicable to the Company.
3.3 LITIGATION. There is no litigation, claim, action, proceeding or
investigation pending against the Company or, to the knowledge of the Company,
any basis therefor or threat thereof.
3.4 CAPITALIZATION. The authorized capital stock of the Company consists
of 240,000,000 shares of Common Stock, of which 200,000,000 are Series A Common
Stock and 40,000,000 are Series B Common Stock; and 10,000,000 shares of
undesignated preferred stock. All capital stock of the Company has a par value
of $0.00l per share. Holders of Series B Common Stock are entitled to elect all
the directors in one of the Company's three classes of directors, with the
holders of the Series A Common Stock entitled to elect the remaining directors.
In all other respects, the Series A Common Stock and the Series B Common Stock
is identical. The Shares, when issued, sold, and delivered in accordance with
the terms of this Agreement will be duly and validly issued, fully paid, and
nonassessable.
3.5 ACCURACY OF INFORMATION. No representation or warranty made by the
Company contained in this Agreement or in any other Transaction Document
delivered by the Company contains or will contain an untrue statement of a
material fact or omits or will omit to state a material fact required to be
stated herein or therein or necessary to make the statements and facts contained
herein or therein, in light of the circumstances in which they were or are made,
not materially false or misleading.
4. CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES.
4.1 PERFORMANCE RESTRICTIONS; STOCKHOLDER AGREEMENT AND VOTING
AGREEMENT.
(a) The Shares are subject to "RESTRICTIONS" and may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of; alienated
or encumbered until the Shares "vest" as set forth in Section 4.1(b), and any
additional requirements or restrictions contained herein have been satisfied.
terminated or expressly waived by the Company in writing.
(b) The Restrictions will lapse and the Shares will vest in accordance
with Schedule 4 (the "VESTING SCHEDULE"), provided, however, that the Company,
in its discretion, may from time to time accelerate the vesting of any Shares or
restricted shares owned by any other Sponsor, and Founder or other third party
at any time, or forgive Restrictions and allow Shares or restricted shares owned
by any other Sponsor, any Founder or other third party to vest notwithstanding
that the conditions to vesting thereof may not have been satisfied. Any Shares
that have not vested by the Vesting Deadline set forth in Schedule 4 shall on
such Vesting Deadline become subject to repurchase by the Company in its
discretion at the price per share that the Purchaser paid to the Company
therefor, at any time and from time to time for a period of thirty (30) days
following the date that the Shares become subject to such repurchase.
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(c) If the employment of the Purchaser by the Company or its affiliate
terminates for any reason other than a reason that causes vesting as described
in Schedule 4 the Company or its assignee may, in the Company's discretion at
any time and from time to time for a period of thirty (30) days following the
termination of employment, repurchase from the Purchaser at the price per share
that the Purchaser paid to the Company therefor, all Shares not vested as of the
date of termination of employment.
(d) Any Shares that are subject to repurchase by the Company hereunder
shall be subject to repurchase regardless of the services performed, or other
consideration given, by the Purchaser to the Company. The purchase price for any
repurchase pursuant to this Section 4.1 shall be paid in the Company's
discretion, in cash or by a promissory note bearing interest at 7% and payable
in up to 12 equal monthly amortizing installments of principal and accrued
interest, or by any combination of cash and such a promissory note. Shares that
are subject to repurchase by the Company hereunder but that are not repurchased
by the Company within thirty (30) days of the date they become repurchasable by
the Company as described herein shall vest.
(e) The exercise of the Company's right to repurchase Shares or to
accelerate vesting or forgive Restrictions pursuant to this Section 4.1 and its
right to repurchase Common Stock purchased by other Sponsors, the Founders or
other third parties that are subject to restrictions, or to accelerate vesting
or forgive Restrictions applicable to such Common Stock, shall be within the
discretion of the Company. The Company may ("but will not be required to)
exercise its right to repurchase, accelerate, or forgive Restrictions with
respect to any or all Shares or restrictions applicable to Common Stock owned by
any other Sponsor, Founder or other third party without incurring any obligation
to repurchase, accelerate, or forgive Restrictions with respect to any other
Shares or restrictions applicable to Common Stock owned by any other Sponsor,
Founder or other third party.
(f) The Shares shall be subject to a Stockholder Agreement in the form
attached hereto as Exhibit B (the "STOCKHOLDER AGREEMENT") restricting transfers
and imposing certain obligations upon the Purchaser, which must be executed and
delivered by the Purchaser as described in Section 5.2(b). Shares that have
vested shall nevertheless be governed by the Stockholder Agreement. The
Company's repurchase rights hereunder will supersede the purchase provisions of
the Stockholder Agreement
(g) The Company will release the Certificates representing Shares as
such Shares become free of both the Restrictions and the Stockholder Agreement,
provided that (a) the Purchaser has paid to the Company the full Purchase Price
for such Shares, and an amount sufficient to satisfy any taxes or other amounts
required by any Governmental Entity to be withheld and paid over to such
Governmental Entity for the Purchaser's account, or otherwise made arrangements
satisfactory to the Company for payment of such amounts through withholding or
otherwise, and (b) the Purchaser has, if requested by the Company, made
appropriate representations in a form satisfactory to the Company that such
Shares will not be transferred other than (i) pursuant to an effective
registration statement under the Securities Act, or an applicable exemption from
the registration requirements of the Securities Act; (ii) in compliance with all
applicable state securities laws and regulations; and (iii) in compliance with
all terms and conditions of the Stockholder Agreement.
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(h) The Shares shall be subject to a Voting Agreement in the form
attached hereto as Exhibit C (the "VOTING AGREEMENT"), which must be executed
and delivered by the Purchaser as described in Section 5.2(b).
4.2 SECURITIES RESTRICTIONS.
(a) In addition to the contractual restrictions on transfer set forth in
this Agreement and the Stockholder Agreement, the Shares (or interests therein)
cannot be offered, sold or transferred unless the Shares are registered and
qualified under the Securities Act and applicable state securities laws or
exemptions from such registration and qualification requirements are available,
or such registration and qualification requirements are inapplicable, as
reflected in an opinion of counsel to the Purchaser in form and substance
reasonably satisfactory to the Company. In the absence of an effective
registration statement covering the Shares or an available exemption from
registration under the Securities Act and applicable state securities laws, the
Shares must be held indefinitely, and may not be sold pursuant to Rule 144
promulgated under the Securities Act unless all of the conditions of that rule
are met.
(b) In addition to any legends required by the Stockholder Agreement and
the Voting Agreement, the Certificates will bear a legend to the effect set
forth below and appropriate stop transfer instructions against the Shares will
be placed with any transfer agent of the Company to ensure compliance with the
restrictions set forth herein.
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW AND MAY
NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES
LAWS, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO THE
HOLDER OF THE SHARES OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND
ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
(c) Each recipient of Shares or interests therein shall, as a condition
to transfer of any Shares or interest therein, cause the transferee to enter
into the Stockholder Agreement and the Voting Agreement, provided that, with
respect to each such agreement, this requirement will not apply to transfers
made after the agreement has terminated.
4.3 STOCKHOLDER RIGHTS. During the period prior to the lapse and removal
of the Restrictions, except as otherwise provided herein, and subject to the
Voting Agreement and the Stockholder Agreement, the Purchaser will have all of
the rights of a stockholder of the Company with respect to all of the Shares,
including without limitation the right to receive all dividends or other
distributions with respect to such Shares. In connection with the payment of
such dividends or other distributions, the Company will be entitled to deduct
any taxes or other amounts required by any Governmental Entity to be withheld
and paid over to such Governmental Entity for the Purchaser's account.
4.4 MERGER, CONSOLIDATION TRANSACTIONS OR REORGANIZATION. In the event
of a merger, consolidation or reorganization of the Company in which the Common
Stock of the
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Company is exchanged for cash, securities or other property (the "EXCHANGE
CONSIDERATION"), the Purchaser will be entitled to receive a proportionate share
of the Exchange Consideration in exchange for the Shares the Purchaser owns at
the time of such merger, consolidation or reorganization; provided, however,
that the Purchaser's share of the Exchange Consideration shall be subject to the
Restrictions not yet satisfied, unless the Board of Directors of the Company, in
its discretion, forgives the Restrictions.
4.5 SECTION 83(b) ELECTION. The Purchaser may make an election pursuant
to Section 83(b) of the Internal Revenue Code, or comparable provisions of any
state tax law, to include in the Purchaser's gross income the amount by which
the fair market value of the Shares the Purchaser acquires exceeds the price
paid therefor only if, prior to making any such election, the Purchaser (a)
notifies the Company of the Purchaser's intention to make such election, by
delivering to the Company a copy of the fully-executed Section 83(b) Election
Form attached hereto as Exhibit D and (b) pays to the Company an amount
sufficient to satisfy any taxes or other amounts required by any Governmental
Entity to be withheld or paid over to such Governmental Entity for the
Purchaser's account, or otherwise makes arrangements satisfactory to the Company
for the payment of such amounts through withholding or otherwise.
4.6 NO RIGHT TO CONTINUED EMPLOYMENT. Neither this Agreement nor the
ownership of the Shares confers upon the Purchaser any right to continue as an
employee of the Company, or limits in any way the right of the Company to
terminate the Purchaser's services to the Company at any time, with or without
cause. Such matters are addressed, if at all, only pursuant to the Employment
Agreement.
4.7 REGISTRATION. The Purchaser will have no rights to demand
registration of any of the Shares, or to participate in any registration
undertaken by the Company except as set forth in this Section 4.7. If the
Company files a registration statement with the Securities and Exchange
Commission for an IP0 of its equity securities or any subsequent public offering
within twelve (12) months of the closing of the IPO (not including a
registration statement filed in connection with an acquisition or employee
benefit plan). and if the managing underwriter of such offering believes that
the market will accommodate selling stockholders in the offering, then the
Purchaser shall have the right to include in such registration statement and
offering up to that number of Shares listed on Schedule 1 under the item
"Maximum IP0 Shares." Other stockholders (including but not limited to
stockholders who acquired Common Stock in the Consolidation Transactions and
stockholders who acquired Common Stock in the formation, or work on behalf of,
the Company) will have rights to include shares of Common Stock in such
offering, and if the aggregate shares that all stockholders desire to include
exceeds the number of shares that can be sold by all selling stockholders, then
all stockholders desiring to sell in the offering will participate pro-rata on
the basis of the relative numbers of shares they originally sought to include.
In no case, however, will the Purchaser be permitted to include, in the
aggregate, more than half of the aggregate of all Shares and other Common Stock
owned by the Purchaser in such offerings, or any Shares subject to
performance-related restrictions. Shares may only be included pursuant to the
underwriting agreement negotiated between the Company and the underwriters, and
the Purchaser must enter into the underwriting agreement with respect to any
Shares to be included in the offering. The Purchaser shall pay (i) all
underwriting discounts and commissions applicable to any such sale of shares,
(ii) the Purchaser's ratable shares based on the relative number of shares of
Common Stock included in the offering) of any
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fees and disbursements of a single counsel for all selling stockholders, which
counsel shall be selected by the two (2) stockholders (or affiliated stockholder
groups) selling the most shares in the offering, and (iii) the fees and costs of
any separate counsel retained by the Purchaser alone.
4.8 INDEMNIFICATION. The Purchaser shall indemnify, defend and hold
harmless the Company, its affiliates, their successors and assigns, and the
officers, directors, employees and agents of any of them, from and against any
and all losses, liabilities, claims, damages, obligations, assessments,
penalties, interests, demands, actions and expenses (including, without
limitation, settlement costs and any and all expenses reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim) arising out of or in connection with or based upon any
false acknowledgment, representation or warranty, or breach or failure by the
Purchaser to comply with any covenant or agreement, made by the Purchaser herein
or in any other Transaction Document.
4.9 ENFORCEMENT OF THE AGREEMENT.
(a) The Company and the Purchaser acknowledge that irreparable damage
would occur if any of the obligations of the Purchaser under this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. The Company shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement by the Purchaser and to enforce specifically
the terms and provisions hereto, this being in addition to any other remedy to
which the Company is entitled at law or in equity.
(b) Concurrent herewith, the Purchaser shall deliver a stock power
executed by the Purchaser and the Purchaser's spouse, if applicable (the "STOCK
POWER"), in blank to the Secretary of the Company, to hold in escrow to
facilitate the enforcement of restrictions on transfer of the Shares set forth
herein or in the Stockholder Agreement. The Company shall have the right, in its
discretion, to exercise the Stock Power if the Company becomes entitled to
repurchase any or all of the Shares pursuant to the provisions of this Agreement
or the Stockholder Agreement.
4.10 SUPPLEMENTAL DISCLOSURE. Until the second anniversary of the
Effective Date, the Purchaser shall promptly provide written notice to the
Company with particularity of any breach or inaccuracy of any representation,
warranty, agreement or covenant contained herein or in any other Transaction
Document.
5. CONCURRENT DELIVERIES.
5.1 DELIVERIES OF THE COMPANY. Concurrent herewith, the Company shall
deliver to the Purchaser a photocopy of the Certificates issued in the
Purchaser's name or such other name as may be set forth on Schedule 1.
5.2 DELIVERIES OF THE PURCHASER.
(a) The Purchase Price. Concurrent herewith, the Purchaser shall deliver
to the Company the Purchase Price in the form described in Schedule 1.
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(b) Documents of the Purchaser. In addition to the Accredited Investor
Questionnaire, concurrent herewith and as a condition to receipt of any Shares,
the Purchaser shall cause the Purchaser's spouse to execute and deliver to the
Company a spousal consent in the form of Exhibit E, and shall execute and
deliver to the Company, each dated the Effective Date:
(i) The Stockholder Agreement described in Section 4.1(f);
(ii) The Voting Agreement described in Section 4.1(h); and
(iii) The Stock Power described in Section 4.9(b).
(c) Other Closing Documents. The Company shall receive such other duly
executed certificates, instruments and documents in furtherance of the
transactions contemplated by this Agreement and the other Transaction Documents
as the Company may reasonably request. Without limiting the foregoing, the
Company may require the Purchaser to execute and deliver to the Company an
acknowledgment of certain disclosures and risks in the form executed and
delivered by Founders in connection with their acquisition of Common Stock, and
failure or refusal of the Purchaser to execute and deliver such an
acknowledgment upon request by the Company will entitle the Company to
repurchase the Shares at their original issue price.
6. MISCELLANEOUS.
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Regardless of any
party's investigations prior to the date hereof, the representations and
warranties contained herein and in the other Transaction Documents shall survive
the execution and delivery hereof and the purchase and sale of the Shares.
6.2 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed given upon personal delivery
or three (3) days after being mailed by certified or registered mail, postage
prepaid, return receipt requested, or one (1) business day after being sent via
a nationally recognized overnight courier service if overnight courier service
is requested from such service or upon receipt of electronic or other
confirmation of transmission if sent via facsimile, to the parties, their
successors in interest or their assignees at the addresses and telephone numbers
set forth on the signature page hereof or at such other addresses or telephone
numbers as the parties may designate by written notice in accordance with this
Section 6.2.
6.3 ASSIGNABILITY AND PARTIES IN INTEREST. This Agreement and any of the
rights, interests or obligations hereunder may not be assigned by any of the
parties hereto except that the Company may assign this Agreement or any of its
rights hereunder to its affiliates or to successors to all or substantially all
of its business. Nothing in this Agreement will confer upon any person or entity
not a party to this Agreement, or the legal representatives of such person or
entity, any rights or remedies of any nature or kind whatsoever under or by
reason of this Agreement.
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6.4 GOVERNING LAW. This Agreement, shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware, without
regard to its conflicts-of-law principles.
6.5 COUNTERPARTS. This Agreement and the other Transaction Documents may
be executed in counterparts, each of which shall be deemed an original, but all
of which shall constitute but one and the same instrument.
6.6 COMPLETE AGREEMENT. This Agreement, the exhibits and schedules
hereto, and the other Transaction Documents contain the entire agreement between
the parties hereto with respect to the subject matter contemplated herein and
therein and supersede all previous oral and written and all contemporaneous oral
negotiations, commitments, and understandings with respect thereto. The parties
acknowledge that their agreements hereunder were not procured through
representations or agreements not set forth herein or therein.
6.7 AMENDMENTS. This Agreement and the other Transaction Documents may
be amended only by written instrument duly executed and delivered by the parties
hereto or thereto, as the case may be.
6.8 CONSTRUCTION. The headings contained in this Agreement and the other
Transaction Documents are for reference purposes only and shall not affect in
any way the meaning or interpretation hereof or thereof. References herein or
therein to Articles, Sections, Schedules and Exhibits refer to the referenced
Articles, Sections, Schedules or Exhibits hereof or thereof as the case may be,
unless otherwise specified. This Agreement and the other Transaction Documents
shall be deemed the joint work product of the parties hereto or thereto without
regard to the identity of the draftsperson, and any rule of construction that a
document shall be interpreted or construed against the drafting party shall not
be applicable.
6.9 SEVERABILITY. Any provision of this Agreement or any other
Transaction Document which is invalid, illegal, or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity, illegality, or unenforceability, without affecting in any way
the remaining provisions hereof in such jurisdiction or rendering that or any
other provision of this Agreement or any other Transaction Document invalid,
illegal, or unenforceable in any other jurisdiction.
6.10 EXPENSES OF TRANSACTIONS. All fees, costs and expenses incurred by
the Company or the Purchaser in connection with the transactions contemplated by
this Agreement and the other Transaction Documents shall be borne by the party
incurring the same.
6.11 ARBITRATION.
(a) Any controversy or claim arising out of or relating to this
Agreement shall be solely and finally settled by arbitration administered by the
American Arbitration Association (the "AAA") in accordance with its Commercial
Arbitration Rules as then in effect (the "RULES"), except to the extent such
Rules vary from the following provisions. The arbitration shall be conducted by
one independent and impartial arbitrator, appointed by the AAA; provided
however, if the claim and any counterclaim, in the aggregate, together with
other arbitrations that are consolidated pursuant to Section 6.11(f) exceed Five
Hundred Thousand Dollars ($500,000)
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(the "THRESHOLD"), exclusive of interest and attorneys' fees, the dispute shall
be heard and determined by three (3) arbitrators as provided herein (such
arbitrator or arbitrators are hereinafter referred to as the "Arbitrator"). The
judgment of the award rendered by the Arbitrator may be entered in any court
having jurisdiction thereof. The arbitration proceedings shall be held in Orange
County, California unless the parties agree to another location.
(b) If a party hereto determines to submit a dispute for arbitration
pursuant to this Section 6.11 such party shall furnish the other party with whom
it has the dispute with a notice of arbitration as provided in the Rules (an
"ARBITRATION NOTICE") which, in addition to the items required by the Rules,
shall include a statement of the nature, with reasonable detail, of the dispute.
A copy of the Arbitration Notice shall be concurrently provided to the AAA,
along with a copy of this Agreement, and if pursuant to Section 6.11 (a) one (1)
Arbitrator is to be appointed, a request to appoint the Arbitrator. If a party
has a counterclaim against the other party, such party shall furnish the party
with whom it has the dispute a notice of such claim as provided in the Rules (a
"NOTICE OF COUNTERCLAIM") within ten (10) days of receipt of the Arbitration
Notice, which, in addition to the items required by the Rules, shall include a
statement of the nature, with reasonable detail, of the dispute. A copy of the
Notice of Counterclaim shall be concurrently provided to the AAA. If the claim
set forth in the Notice of Counterclaim causes the aggregate amount in dispute
to exceed the Threshold, the Notice of Counterclaim shall so state. If pursuant
to Section 6.11(a) three (3) Arbitrators are to be appointed, within fifteen
(15) days after receipt of the Arbitration Notice or the Notice of Counterclaim
as applicable, each party shall select one person to act as Arbitrator and the
two (2) selected shall select a third arbitrator within ten (10) days of their
appointment. If the Arbitrators selected by the parties are unable or fail to
agree upon the third arbitrator within such time, the third arbitrator shall be
selected by the AAA. Each arbitrator shall be a practicing attorney or a retired
or former judge with at least twenty (20) years experience with and knowledge of
securities laws, complex business transactions, and mergers and acquisitions.
(c) Once the Arbitrator is selected, the Arbitrator shall schedule a
pre-hearing conference to reach agreement on procedural and scheduling matters,
arrange for the exchange of information, obtain stipulations and attempt to
narrow the issues.
(d) At the pre-hearing conference, the Arbitrator shall have the
discretion to order, to the extent the Arbitrator deems relevant and
appropriate, that each party may (i) serve a maximum of one set of no more than
twenty (20) requests for production of documents and one set of ten (10)
interrogatories (without subparts) upon the other parties; and (ii) depose a
maximum of three (3) witnesses. All objections to discovery are reserved for the
arbitration hearing except for objections based on privilege and proprietary or
confidential information. The responses to the document demand, the documents to
be produced thereunder, and the responses to the interrogatories shall be
delivered to the propounding party thirty (30) days after receipt by the
responding party of such document demand or interrogatory. Each deposition shall
be taken on reasonable notice to the deponent, and must be concluded within four
(4) hours and all depositions must be taken within forty-five (45) days
following the pre-hearing conference. Any party deposing an opponent's expert
must pay the expert's fee for attending the deposition. All discovery disputes
shall be decided by the Arbitrator.
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(e) The parties must file briefs with the Arbitrator at least three (3)
days before the arbitration hearing, specifying the facts each intends to prove
and analyzing the applicable law. The parties have the right to representation
by legal counsel throughout the arbitration proceedings. The presentation of
evidence at the arbitration hearing shall be governed by the Federal Rules of
Evidence. Oral evidence given at the arbitration hearing shall be given under
oath. Any party desiring a stenographic record may secure a court reporter to
attend the arbitration proceedings. The party requesting the court reporter must
notify the other parties and the Arbitrator of the arrangement in advance of the
hearing, and must pay for the cost incurred.
(f) Any arbitration can be consolidated with one or more arbitrations
involving other parties, which arise under agreement(s) between the Company and
such other parties, if more than one such arbitration is commenced and any party
thereto contends that two or more arbitrations are substantially related and
that the issues should be heard in one proceeding, the Arbitrator selected in
the first-filed of such proceedings shall determine whether, in the interests of
justice and efficiency, the proceedings should be consolidated before that
Arbitrator.
(g) The Arbitrator's award shall be in writing, signed by the Arbitrator
and shall contain a concise statement regarding the reasons for the disposition
of any claim.
(h) To the extent permissible under applicable law, the award of the
Arbitrator shall be final. It is the intent of the parties that the arbitration
provisions hereof be enforced to the fullest extent permitted by applicable law.
6.12 SUBMISSION TO JURISDICTION. All actions or proceedings arising in
connection with this Agreement or any other Transaction Document for preliminary
or injunctive relief or matters not subject to arbitration, if any, shall be
tried and litigated exclusively in the state or federal courts located in the
County of Orange, State of California. The aforementioned choice of venue is
intended by the parties to be mandatory and not permissive in nature, thereby
precluding the possibility of litigation between the parties with respect to or
arising out of this Agreement or any other Transaction Document in any
jurisdiction other than that specified in this paragraph. Each party hereby
waives any right it may have to assert the doctrine of forum non conveniens or
similar doctrine or to object to venue with respect to any proceeding brought in
accordance with this paragraph, and stipulates and acknowledges that it has had
sufficient minimum contacts with California such that the State and Federal
courts located in the County of Orange, State of California shall have in
personam jurisdiction over each of them for the purpose of litigating any such
dispute, controversy, or proceeding. Each party hereby authorizes and accepts
service of process sufficient for personal jurisdiction in any action against it
as contemplated by this Section by registered or certified mail, return receipt
requested, postage prepaid, to its address for the giving of notices as set
forth in Section 6.2. Nothing herein shall affect the right of any party to
serve process in any other manner permitted by law.
6.13 ATTORNEYS' FEES. If the Purchaser brings any action, suit,
counterclaim, cross-claim, appeal, arbitration, or mediation for any relief
against the Company, or if the Company brings any action, suit, counterclaim,
cross-claim, appeal, arbitration, or mediation for any relief against the
Purchaser, declaratory or otherwise, to enforce the terms of or to declare
rights under this Agreement or any other Transaction Document (collectively, an
"ACTION"), in addition to any damages and costs which the Prevailing Party
otherwise would be entitled, the non-
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Prevailing Party shall pay to the Prevailing Party a reasonable sum for
attorneys' fees and costs (at the Prevailing Party's attorneys' then-prevailing
rates) incurred in bringing and prosecuting or defending such Action and/or
enforcing any judgment, order, ruling, or award (collectively, a "DECISION")
granted therein, all of which shall be deemed to have accrued on the
commencement of such Action and shall be paid whether or not such action is
prosecuted to a Decision. Any Decision entered in such Action shall contain a
specific provision providing for the recovery of attorneys' fees and costs
incurred in enforcing such Decision.
For the purposes of this Section, attorneys' fees shall include, but not
be limited to, fees incurred in the following: (1) post judgment motions and
collection actions; (2) contempt proceedings; (3) garnishment, levy and debtor
and third party examinations; (4) discovery; and (5) bankruptcy litigation.
"PREVAILING PARTY" within the meaning of this Section includes, without
limitation, a party who agrees to dismiss an action on the other party's payment
of the sum allegedly due or performance of the covenants allegedly breached, or
who obtains substantially the relief sought by it. If there are multiple claims,
the Prevailing Party shall be determined with respect to each claim separately.
The Prevailing Party shall be the party who has obtained the greater relief in
connection with any particular claim, although, with respect to any claim, it
may be determined that there is no Prevailing Party.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
PROFITSOURCE CORPORATION PURCHASER
By: /s/ ERIK WATTS By: /s/ MARK C. COLEMAN
------------------------------ ----------------------------
Name: Erik Watts Name: Mark Coleman
----------------------------
Title: President
---------------------------
Address: Address:
695 Town Center Drive, Suite 400 210 Orchid Avenue
Costa Mesa, California 92626 Corona del Mar, CA 92625
Telephone No.: (714) 429-5500 Telephone No.: (949) 644-0386
Facsimile No.: (714) 429-5559 Facsimile No.: (949) 644-1905
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SCHEDULES
1 Shares and Purchase Price
4 Vesting Schedule
EXHIBITS
A. Form of the Accredited Investor Questionnaire
B. Form of the Stockholder Agreement
C. Form of the Voting Agreement
D. Section 83(b) Election Form
E. Spousal Consent
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SCHEDULE 1
SHARES AND PURCHASE PRICE
Aggregate Number of Shares: 12,151
Purchase Price per Share: $0.02
Aggregate Purchase Price: $243.02
Maximum IPO Shares: 12,151
Name in which Shares are to be issued: _______
Form of Payment of Purchase Price (cash or promissory note in the
form of Exhibit A to this Schedule 1) Cash
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SCHEDULE 4
VESTING SCHEDULE
Subject to the terms and conditions set forth in this Agreement, if and
when a "Target Company" listed below consummates a Consolidation Transaction in
a transaction accounted for as a purchase a "PURCHASE CLOSING"), the
"Attributable Shares" associated with such Target Company shall vest. If any
particular Target Company determines not to participate in a Purchase Closing,
the Company may in its discretion (but will not be required to) assign any or
all of the Attributable Shares associated with that non-participating Target
Company to one or more replacement "Target Companies" identified by the Company
that may participate in a Purchase Closing. If and when such a replacement
Target Company consummates a Purchase Closing, the Attributable Shares
associated with that replacement Target Company shall vest, provided that the
maximum aggregate number of Attributable Shares may not exceed the Total set
forth below. Any allocation of Attributable Shares to a replacement Target
Company may be effected only by a written amendment to this Agreement executed
and delivered by the Company and the Purchaser.
TARGET COMPANY ATTRIBUTABLE SHARES
Profit Technologies (PTC & PTIC) 12,151
------
Total 12,151
======
VESTING UPON CERTAIN TERMINATION OF EMPLOYMENT: If employment of the
Purchaser with the Company or its affiliate is terminated by death, by
"Disability," by the Company without "Cause," or by the Purchaser for "Good
Reason" (all as defined in the Employment Agreement), and if any Target Company
participates in a Purchase Closing prior to the Vesting Deadline and prior to
the earlier of (i) the date that is 180 days after the date of termination of
the Purchaser's employment with the Company or its affiliate, and (ii) the
filing of a registration statement for an IPO of the Company's securities, upon
consummation of such transaction the Attributable Shares associated with such
Target Company shall vest.
VESTING DEADLINE: The earlier of (i) the consummation of the first
Consolidation Transactions accounted for as purchasers, or (ii) December 31,
1999.
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