Stock Purchase Agreement - Odimo Inc. and SDG Marketing Inc.
AMENDED AND RESTATED
SERIES C CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
THIS AMENDED AND RESTATED SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE
AGREEMENT (the "AGREEMENT") is entered into as of this 30th day of March 2004 by
and among Odimo Incorporated, a Delaware corporation (the "COMPANY"), and SDG
Marketing, Inc. ("PURCHASER").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of an
aggregate of 6,728,331 shares of its Series C Preferred Stock, par value $0.001
per share (the "Shares");
WHEREAS, Purchaser desires to purchase, and the Company desires to
issue and sell the Shares to the Purchaser, on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. The Company has (i) duly authorized the
sale and issuance to Purchaser of the Shares (ii) duly authorized and reserved a
sufficient number of shares of common stock of the Company, $0.001 par value
(the "COMMON STOCK"), for issuance upon full conversion of the Shares (the
"CONVERSION SHARES"). The Shares and the Conversion Shares have the rights,
preferences, privileges and restrictions set forth in the Amended and Restated
Certificate of Incorporation of the Company, in the form attached hereto as
EXHIBIT A (the "CERTIFICATE"). The Company has adopted and filed with the
Secretary of State of the State of Delaware the Certificate and has taken all
necessary corporate action for the purpose of authorizing the issuance and sale
of the Shares pursuant hereto and the issuance of the Conversion Shares upon
conversion of the Shares.
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof, the
Company hereby issues and sells to Purchaser, and Purchaser hereby purchases
from the Company, 6,728,331 shares of the Company's Series C Preferred Stock
(the "Shares") for an aggregate purchase price of Two Million Seven Hundred
Fifty Thousand Dollars ($2,750,000) (the "Purchase Price").
1.3 CLOSING DELIVERIES AND PAYMENT.
(a) DELIVERY OF SHARES AND PURCHASE PRICE. Upon the execution
of this Agreement, the Company will deliver to the Purchaser stock certificates
representing the Shares, and Purchaser shall deliver the Purchase Price to the
Company no later than June 11, 2004 by check payable to the order of the Company
or by wire transfer of immediately available funds to the bank account of the
Company designated by the Company in writing.
(b) REGISTRATION RIGHTS AGREEMENT. Simultaneously with the
execution of this Agreement, the Amended and Restated Registration Rights
Agreement attached hereto as EXHIBIT B (THE "AMENDED REGISTRATION RIGHTS
AGREEMENT"), shall have been executed by the parties thereto.
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(d) AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT.
Simultaneously with the execution of this Agreement, an Amended and Restated
Stockholders' Agreement, substantially in the form attached hereto as EXHIBIT C
(THE "AMENDED STOCKHOLDERS' AGREEMENT"), shall have been executed and delivered
by the parties thereto
1.4 USE OF PROCEEDS. The proceeds received by the Company from the sale
of the Shares shall be used for marketing and advertising of diamonds and
diamond jewelry.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth on the SCHEDULE OF EXCEPTIONS attached hereto, the
Company hereby represents and warrants to Purchaser as follows:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, the Certificate, the Amended Registration Rights Agreement and
the Amended Stockholders' Agreement, to issue and sell the Shares and the
Conversion Shares and to carry out the provisions of this Agreement, the Amended
Registration Rights Agreement, the Amended Stockholders' Agreement and the
Certificate, and to carry on its business as presently conducted and as
presently proposed to be conducted. The Company is duly qualified and is
authorized to do business and is in good standing as a foreign corporation in
all jurisdictions in which the nature of its activities and of its properties
(both owned and leased) make such qualifications necessary, except for those
jurisdictions in which failure to do so would not have a material adverse effect
on the Company or its business. The Company is not a participant in any joint
venture, partnership or similar arrangement. The Company has made available to
Purchaser true, correct and complete copies of the Company's Certificate of
Incorporation and Bylaws, each as amended to date and presently in effect.
2.2 CAPITALIZATION; VOTING RIGHTS. The authorized capital stock of the
Company consists of:
(a) 100,000,000 shares of Common Stock, of which: (i)
15,718,207 shares are issued and outstanding; (ii) 69,716,377 shares are
currently reserved for issuance to holders of the Company's Preferred Stock and
warrants; (iii) 477,777 shares are currently reserved for issuance to the
Company's suppliers; (iv) 11,379,373 shares are currently reserved for issuance
pursuant to outstanding option agreements; and (v) 13,984,771 shares are
authorized to be issued to key employees, consultants and others affiliated with
the Company pursuant to stock grant, stock purchase and/or option plans or any
other stock incentive program, arrangement or agreement approved by the
Company's Board of Directors; and
(b) 51,049,709 shares of Preferred Stock, par value $0.001 per
share (the "Preferred Stock"), of which: (i) 4,666,667 are designated Series A
Convertible Preferred Stock, all of which are issued and outstanding; (ii)
12,846,226 shares are designated Series B Convertible Preferred Stock, all of
which are issued and outstanding; (iii) 14,341,131 shares are designated Series
C Convertible Preferred Stock, 11,796,140 of which are issued and outstanding;
and (iv) 18,272,486 shares are designated Series D Convertible Preferred Stock,
15,596,183 of which are issued and outstanding.
All issued and outstanding shares of the Company's Common Stock and
Preferred Stock (i) have been duly authorized and validly issued, (ii) are fully
paid and nonassessable, (iii) are free of liens and encumbrances created by the
Company and (iv) were issued in compliance with all applicable state and federal
laws concerning the issuance of securities. The rights, preferences, privileges
and restrictions of the Shares are as stated in the Certificate. The Conversion
Shares have been duly and validly reserved for issuance in sufficient number for
issuance upon full conversion of the Shares. Except as set forth above or in
that certain Warrant dated as of December 6, 2002 in favor of GSI Commerce
Solutions, Inc., there are no
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outstanding options, warrants, puts, calls, rights (including conversion or
preemptive rights and rights of first refusal), proxy or stockholder agreements,
or agreements of any kind for the purchase or acquisition from the Company of
any of its securities or other restrictions on the incidents of ownership or
transfer created by statute, the charter documents of the Company or any
agreement to which the Company is a party or by which it is bound, other than
the Amended Stockholders' Agreement. The Shares and the Conversion Shares have
been duly authorized and, when issued in compliance with the provisions of this
Agreement and the Certificate, will be validly issued (including, without
limitation, issued in compliance with applicable state and federal securities
laws), fully paid and nonassessable and will be free of any liens or
encumbrances; provided, however, that the Shares and the Conversion Shares may
be subject to restrictions on transfer under state and/or federal securities
laws as set forth herein or as otherwise required by such laws at the time
transfer is proposed, or pursuant to the Amended Stockholders' Agreement.
2.3 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the
part of the Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the Amended
Registration Rights Agreement and the Amended Stockholders' Agreement, the
performance of all obligations of the Company hereunder and thereunder and the
authorization, sale, issuance and delivery of the Shares pursuant hereto and the
Conversion Shares pursuant to the Certificate has been taken, as applicable. The
Agreement, the Amended Registration Rights Agreement and the Amended
Stockholders' Agreement, when executed and delivered, will be valid and binding
obligations of the Company enforceable against the Company, in accordance with
their terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights; (ii) as limited by general principles of
equity that restrict the availability of specific performance, injunctive relief
or other equitable remedies; and (iii) to the extent that the enforceability of
the indemnification provisions of the Amended Registration Rights Agreement may
be limited by applicable federal and state securities laws.
2.4 FINANCIAL STATEMENTS; SUBSIDIARIES. The Company's unaudited balance
sheet as of December 31, 2003 and unaudited statements of operations and cash
flows of the Company for the year ended December 31, 2003 (the "FINANCIAL
STATEMENTS"), as delivered to Purchaser in connection with the investment
contemplated hereby, have been prepared in accordance with generally accepted
accounting principles consistently applied and fairly present in all material
respects the financial position and the results of operations of the Company for
the periods covered thereby, and the Company has no material liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise) that are
not either reflected or fully reserved against on the Financial Statements or
incurred in the ordinary course of the business of the Company subsequent to the
date thereof. Since the date of the Financial Statements, there has not been any
material adverse change in the business, financial condition, results of
operations or prospects of the Company. Except as provided on the Schedule of
Exceptions, the Company has no subsidiaries (the "Subsidiaries").
2.5 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby,
there are no agreements, understandings or proposed transactions between the
Company and any of its officers, directors or affiliates or any affiliate
thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or to its knowledge by which it is bound which may
involve provisions restricting the development, manufacture or distribution of
the Company's products or services, or indemnification by the Company with
respect to infringements of proprietary rights.
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2.6 OBLIGATIONS TO RELATED PARTIES. There are no obligations of the
Company to officers, directors, stockholders, or employees of the Company other
than (a) for payment of salary for services rendered, (b) reimbursement for
reasonable expenses incurred on behalf of the Company and (c) for other standard
employee benefits made generally available to all employees (including stock
option agreements outstanding under any stock option plan approved by the Board
of Directors of the Company). No officer, director or, to the best of the
Company's knowledge, stockholder, or any member of their immediate families, are
indebted to the Company or have any direct or indirect ownership interest in any
firm or corporation with which the Company is affiliated or with which the
Company has a business relationship, or any firm or corporation which competes
with the Company, except that officers, directors and/or stockholders of the
Company may own stock in publicly traded companies which may compete with the
Company. No such officer, director or stockholder, or any member of their
immediate families is, directly or indirectly, interested in any material
contract with the Company (other than such contracts as relate to any such
person's ownership of capital stock or other securities of the Company). The
Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
2.7 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company and the
Subsidiaries have good and marketable title to their properties and assets, and
good title to their leasehold estates, in each case subject to no mortgage,
pledge, lien, lease, encumbrance or charge, other than (i) those resulting from
taxes which have not yet become delinquent, (ii) minor liens and encumbrances
which do not materially detract from the value of the property subject thereto
or materially impair the operations of the Company or the Subsidiaries, as the
case may be, (iii) those that have otherwise arisen in the ordinary course of
business, (iv) as described in the Amended and Restated Security Agreement,
dated as of the date hereof, between the Company and the persons set forth on
Schedule A thereto, (v) as described in the Patents, Trademarks, Copyrights, and
Licenses Security Agreement, dated as of December 6, 2002, between the Company,
Odimo Acquisition Corp. and Ashford.com, Inc. All facilities, machinery,
equipment, fixtures, vehicles and other properties owned, leased or used by the
Company are in good operating condition and repair and are reasonably fit and
usable for the purposes for which they are being used. The Company and the
Subsidiaries are in compliance in all material respects with the terms of each
lease to which they are a party or are otherwise bound.
2.8 PATENTS AND TRADEMARKS. The Company and the Subsidiaries own or
possess sufficient legal rights to all patents, trademarks, service marks, trade
names, copyrights, trade secrets, information and other proprietary rights and
processes necessary for their respective businesses as now conducted and to
their knowledge as proposed to be conducted, without any infringement known to
them of the rights of others. There are no outstanding options, licenses or
agreements of any kind relating to the foregoing, nor are the Company or the
Subsidiaries bound by or a party to any options, licenses or agreements of any
kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information and other proprietary rights
and processes of any other person or entity other than such licenses or
agreements arising from the purchase of "off the shelf" or standard products.
The Company or the Subsidiaries have not received any communications alleging
that the Company or the Subsidiaries have violated or, by conducting their
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary rights of
any other person or entity. The Company or the Subsidiaries are not aware that
any of their employees is obligated under any contract (including licenses,
covenants or commitments or any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with their duties to the Company's or the Subsidiaries' business. The
conduct of the Company's or the Subsidiaries' business as proposed to be
conducted, will not, to the Company's or the Subsidiaries' knowledge, conflict
with or result in a breach of the terms, conditions or provisions of, or
constitute a default under, any contract, covenant or instrument under which any
employee is now obligated. The Company or the Subsidiaries do not believe it is
or will be necessary to utilize any inventions, trade secrets or proprietary
information developed or acquired by any of its employees in the conduct of the
Company's or Subsidiaries' business prior to their employment
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by the Company or the Subsidiaries, except for inventions, trade secrets or
proprietary information that have been assigned to the Company or the
Subsidiaries.
2.9 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation
or default and the execution and delivery of this Agreement and the performance
of the Company's obligations hereunder will not put the Company in violation or
default of any term of its Certificate of Incorporation or Bylaws, or of any
provision of any mortgage, indenture, contract, agreement, instrument or
contract to which it is party or by which it is bound or of any judgment,
decree, order, writ or, to its knowledge, any statute, rule or regulation
applicable to the Company which, individually or in the aggregate, would
materially and adversely affect the business, financial condition, results of
operations or prospects of the Company. The execution, delivery, and performance
of and compliance with this Agreement and the related agreements, and the
issuance and sale of the Shares pursuant hereto and of the Conversion Shares
pursuant to the Certificate, will not, with or without the passage of time or
giving of notice, result in any such material violation, or be in conflict with
or constitute a default under any such term, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company or the suspension, revocation, impairment, forfeiture or
nonrenewal of any permit, license, authorization or approval applicable to the
Company, its business or operations or any of its assets or properties.
2.10 LITIGATION. There is no action, suit, proceeding or investigation
pending or to the Company's knowledge currently threatened against the Company
that questions the validity of this Agreement, the Amended Registration Rights
Agreement or the Amended Stockholders' Agreement or the right of the Company to
enter into any of such agreements, or to consummate the transactions
contemplated hereby or thereby, or which might result, either individually or in
the aggregate, in any material adverse change in the business, financial
condition, results of operations or prospects of the Company, financially or
otherwise, or any change in the current equity ownership of the Company, nor is
the Company aware that there is any basis for the foregoing. The Company is not
a party or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality.
2.11 TAX RETURNS AND PAYMENTS. The Company has timely filed all tax
returns (federal, state and local) required to be filed by it. All taxes shown
to be due and payable on such returns, any assessments imposed, and to the
Company's knowledge all other taxes due and payable by the Company on or before
the date hereof have been paid or will be paid prior to the time they become
delinquent. The Company has not been advised (i) that any of its returns,
federal, state or other, have been or are being audited as of the date hereof,
or (ii) of any deficiency in assessment or proposed adjustment to its federal,
state or other taxes. The Company has no knowledge of any liability of any tax
to be imposed upon its properties or assets as of the date of this Agreement
that is not adequately provided for.
2.12 EMPLOYEES. The Company has no collective bargaining agreements
with any of its employees. There is no labor union organizing activity pending
or, to the Company's knowledge, threatened with respect to the Company. No
employee has any agreement or contract, written or verbal, regarding his
employment. To the Company's knowledge, no employee of the Company, nor any
consultant with whom the Company has contracted, is in violation of any term of
any employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by, or to
contract with, the Company because of the nature of the business to be conducted
by the Company; and to the Company's knowledge the continued employment by the
Company of its present employees, and the performance of the Company's contracts
with its independent contractors, will not result in any such violation. The
Company has not received any notice alleging that any such violation has
occurred. No employee of the Company has been granted the right to continued
employment by the Company or to any material compensation following termination
of employment with the Company. The Company is not aware that any officer or key
employee intends to terminate their employment with the Company, nor does the
Company have a present intention to terminate the employment of any officer or
key employee.
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2.13 STOCK OPTIONS. The Company has authorized a Company stock option
plan and an allocation of common stock options to be issued to employees of the
Company (including directors of the Company who are employees of the Company)
and such plan is sufficient to provide incentive to management and key employees
of the Company for at least the next 12-month period.
2.14 PROPRIETARY INFORMATION AND INVENTIONS ASSIGNMENT AGREEMENTS. Each
employee, consultant and officer of the Company and/or any other person or
entity developing intellectual property on behalf of the Company has executed an
agreement with the Company regarding confidentiality and proprietary
information. The Company is not aware that any of its employees or consultants
is in violation thereof, and the Company will use its best efforts to prevent
any such violation.
2.15 REGISTRATION RIGHTS. Except as required pursuant to the Amended
Registration Rights Agreement and the Existing Registration Agreement (as
defined in the Registration Rights Agreement), the Company is presently not
under any obligation, and has not granted any rights, to register any of the
Company's securities under the Securities Act of 1933, as amended (the
"Securities Act").
2.16 COMPLIANCE WITH LAWS; PERMITS. The Company is not in violation and
the execution and delivery of this Agreement and the performance of the
Company's obligations hereunder will not put the Company in violation of any
applicable statute, rule, regulation, order or restriction of any domestic or
foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties which violation would
materially and adversely affect the business, financial condition, results of
operations or prospects of the Company. No governmental orders, permissions,
consents, approvals or authorizations are required to be obtained and no
registrations or declarations are required to be filed in connection with the
execution and delivery of this Agreement and the offer, issuance, sale and
delivery of the Shares or the Conversion Shares, or the other transactions as
contemplated in this Agreement. The Company has all franchises, permits,
licenses and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which, individually or in the aggregate,
could materially and adversely affect the business, financial condition, results
of operations or prospects of the Company, and believes it can obtain, without
undue burden or expense, any similar authority necessary for the conduct of its
business as currently proposed to be conducted.
2.17 ENVIRONMENTAL AND SAFETY LAWS. The Company is not in violation of
any applicable statute, law or regulation relating to the environment or
occupational health and safety, and to its knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation.
2.18 OFFERING VALID. Assuming the accuracy of the representations and
warranties of Purchaser contained in Section 3.2 hereof, the offer, sale and
issuance of the Shares and the Conversion Shares will be exempt from the
registration requirements of the Securities Act, and will have been registered
or qualified (or are exempt from registration and qualification) under the
registration, permit or qualification requirements of all applicable state
securities laws. Neither the Company nor any agent on its behalf has solicited
or will solicit any offers to sell or has offered to sell or will offer to sell
all or any part of the Shares to any person or persons so as to bring the sale
of such Shares by the Company within the registration provisions of the
Securities Act or any state securities laws.
2.19 MINUTE BOOKS. The minute books of the Company provided to counsel
for Purchaser contain an accurate summary of all meetings of, and any actions
taken by, the directors and stockholders of the Company since the date of the
Company's incorporation.
2.20 DISCLOSURE. The Company has fully provided Purchaser with all the
information Purchaser have requested for deciding whether to acquire the Shares
and the Conversion Shares and all the information that the Company believes is
reasonably necessary to enable Purchaser to make such a decision. The written
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materials, taken as a whole, furnished by the Company to Purchaser do not
contain any material misstatements or omissions, provided, however, that the
Company does not represent or warrant that it will achieve such financial
projections.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser hereby represents and warrants to the Company as follows:
3.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver this
Agreement, the Amended Registration Rights Agreement and the Amended
Stockholders' Agreement and to carry out its obligations hereunder and
thereunder. All actions on the part of the Purchaser required for the lawful
execution and delivery of this Agreement, the Amended Registration Rights
Agreement and the Amended Stockholders' Agreement have been or will be
effectively taken prior to the date hereof, as applicable. Upon their execution
and delivery, this Agreement, the Amended Registration Rights Agreement and the
Amended Stockholders' Agreement will be valid and binding obligations of
Purchaser, enforceable in accordance with their terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights and (ii) as
limited by general principles of equity that restrict the availability of
specific performance, injunctive relief or other equitable remedies.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Purchaser is acquiring the
Shares for its own account, not as a nominee or agent, for investment and not
with a view to the resale or distribution of any part thereof except as
specifically contemplated by Section 6.3 hereof.
3.3 INVESTMENT EXPERIENCE. Purchaser is an "accredited investor" as
defined in Rule 501(a) under the Securities Act. Purchaser believes it has
acquired sufficient information about the Company to reach an informed decision
to purchase the Shares. Purchaser has such business and financial experience as
are required to give it the capacity to protect its own interests in connection
with the purchase of the Shares.
3.4 RESTRICTED SECURITIES. Purchaser understands that the Shares are
being offered in a transaction not involving any public offering in the United
States within the meaning of the Securities Act, that such Shares have not been
registered under the Securities Act and that it may not resell, pledge or
otherwise transfer any such Shares except (A) pursuant to an effective
registration statement under the Securities Act, (B) in an offshore transaction
complying with Rule 904 of Regulation S under the Securities Act, or (C)
pursuant to another applicable exemption from registration.
3.5 LEGENDS. Purchaser understands that the Shares and any securities
issued in respect thereof or exchanged therefor, may bear the following legend
until such time, if any, as (A) the Shares or such securities (i) are sold in
compliance with Rule 144 under the Securities Act (or a comparable successor
provision) or pursuant to an effective registration statement under the
Securities Act or (ii) pursuant to Rule 144(k) under the Securities Act (or a
comparable successor provision), or (B) the Company receives an opinion of
counsel reasonably acceptable to it to the effect that such legend may be
removed:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
(A) PURSUANT TO AN EXEMPTION PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF
THE STATES OF THE UNITED STATES."
4. INTENTIONALLY OMITTED.
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5. COVENANTS.
5.1 RESERVATION OF COMMON STOCK. The Company will at all times reserve
and keep available, solely for issuance and delivery upon conversion of the
Shares, a sufficient number of shares of Common Stock to be issuable from time
to time upon such conversion.
5.2 PREEMPTIVE RIGHTS.
(a) If the Company proposes to issue, grant or sell equity
securities or Rights, the Company shall first give to the Purchaser and any
transferee of Shares from the Purchaser (each a "Securityholder") written notice
setting forth in reasonable detail the price and other terms on which such
equity securities or Rights are proposed to be issued or sold, the terms of any
such Rights and the amount thereof proposed to be issued, granted or sold. Each
Securityholder shall thereafter have the preemptive right, exercisable by
written notice to the Company no later than fifteen (15) days after the
Company's notice is given, to purchase the number of such equity securities or
Rights set forth in the Securityholder's notice (but in no event more than the
Securityholder's Proportionate Share (as defined below) thereof, as of the date
of the Company's notice), at the price and on the other terms set forth in the
Company's notice. Any notice by a Securityholder exercising the right to
purchase equity securities or Rights pursuant to this Section 5.2 shall
constitute an irrevocable commitment to purchase from the Company the equity
securities or Rights specified in such notice, subject to the maximum set forth
in the preceding sentence. If all the Securityholders exercise their preemptive
rights set forth in this Section 5.2(a) to the full extent of their
Proportionate Share or if for any other reason the Company shall not issue,
grant or sell equity securities or Rights to persons other than Securityholders,
then the closing of the purchase of equity securities or Rights by
Securityholders shall take place on such date, no less than ten (10) and no more
than thirty (30) days after the expiration of the 15-day period referred to
above, as the Company may select, and the Company shall notify the
Securityholders of such closing at least seven (7) days prior thereto. If all
persons entitled thereto do not exercise their preemptive rights to the full
extent of their Proportionate Share and, as contemplated by Section 5.2(b), the
Company shall issue, grant or sell equity securities or Rights to persons other
than Securityholders, then the closing of the purchase of equity securities
shall take place at the same time as the closing of such issuance, grant or
sale.
(b) If all persons entitled thereto do not exercise their
preemptive rights to the full extent of their Proportionate Share, the Company
shall use its good faith and commercially reasonable efforts to issue, grant or
sell the remaining subject equity securities or Rights on the terms set forth in
its notice to Securityholders, unless the Company is advised by its financial
advisors that the remaining number or amount is too small to be reasonably sold.
From the expiration of the 15-day period first referred to in Section 5.2(a) and
for a period of 90 days thereafter, the Company may offer, issue, grant and sell
to any person or entity equity securities or Rights having the terms set forth
in the Company's notice relating to such equity securities or Rights at a price
and on other terms no less favorable to the Company, and including no less cash,
than those set forth in such notice (without deduction for reasonable
underwriting, sales agency and similar fees payable in connection therewith);
provided, however, that the Company may not issue, grant or sell equity
securities or Rights in an amount greater than the amount set forth in such
notice minus the amount purchased or committed to be purchased by
Securityholders.
(c) The rights set forth in this Section 5.2 shall terminate
upon successful consummation of a firm underwritten initial public offering of
Common Stock by the Company pursuant to an effective registration statement
under the Securities Act which results in net proceeds to the corporation of at
least $30 million and the value of the corporation immediately prior to such
offering is at least $150 million.
(d) The provisions of this Section 5.2 shall not apply to the
following issuances of securities: (i) pursuant to an approved employee stock
option plan, stock purchase plan, or similar benefit
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program or agreement, where the primary purpose is not to raise additional
equity capital for the Company, (ii) as direct consideration for the acquisition
by the Company of another business entity or the merger of any business entity
with or into the Company, (iii) in connection with a stock split or dividend or
a recapitalization or reorganization of the Company, (iv) upon the exercise of
warrants or options, or upon the conversion of convertible securities,
outstanding on the date hereof or as to which Securityholders have been
previously offered the right to participate as contemplated hereby or (v)
securities issued in a transaction registered under the Securities Act.
(e) For purposes of this Agreement, the following terms shall
have the corresponding meanings set forth herein: "Proportionate Share" means,
with respect to each Securityholder, a fraction the numerator of which is the
total number of shares of Common Stock owned and the number of shares of Common
Stock issuable upon exercise of Rights owned by such Securityholder, and the
denominator of which is the total number of shares of Common Stock outstanding
plus the number of shares of Common Stock issuable upon exercise of all Rights
outstanding. "Right" means any option, warrant, security, right or other
instrument convertible into or exchangeable or exercisable for, or otherwise
giving the holder thereof the right to acquire, directly or indirectly, from the
Company any Common Stock or any other such option, warrant, security, right or
instrument, including any instrument issued by the Company or any subsidiary
thereof the value of which is measured by reference to the value of the Common
Stock.
5.3 ANTI-DILUTION PROTECTION. As set forth in the Certificate, if the
Company issues additional equity securities (or rights to acquire such equity
securities or securities convertible into, or exchangeable for such equity
securities) at a purchase price less than the price per share paid for the
Shares (as may be adjusted), Purchaser shall be entitled to a broad-based
weighted average adjustment (based on their Proportionate Share). Such
anti-dilution protection shall not apply to the following issuances of
securities: (i) pursuant to an approved employee stock option plan, stock
purchase plan, or similar benefit program or agreement, where the primary
purpose is not to raise additional equity capital for the Company, and in which
the options issued or issuable do not exceed 13,984,771 within twelve months
from the date hereof, (ii) as direct consideration for the acquisition by the
Company of another business entity or the merger of any business entity with or
into the Company, (iii) in connection with a stock split or dividend, or a
recapitalization or reorganization of the Company (iv) upon the exercise of
warrants or options, or upon the conversion of convertible securities,
outstanding on the date hereof or as to which the Investors have been previously
offered the right to participate as contemplated hereby, (v) securities issued
in a transaction registered under the 1933 Act or (vi) in connection with an
agreement with a lending or leasing institution approved by the Board of
Directors. These rights shall expire upon the successful consummation of firm
underwritten initial public offering of the Common Stock of the Company pursuant
to an effective Registration Statement under the Securities Act which results in
net proceeds to the corporation of at least $30 million and the value of the
corporation immediately prior to such offering is at least $150 million.
5.4 INFORMATION RIGHTS. The Company shall deliver to Purchaser (a)
within 90 days after the end of each fiscal year of the Company, unaudited
annual financial statements, (b) within thirty (30) days after the end of each
of the first three quarters of each fiscal year, unaudited financial reports,
(c) within fifteen (15) days of the end of each month or other relevant period,
unaudited financial reports and management reports explaining significant
variances from forecasts and all other significant developments, and (d) any
other financial or other information that Purchaser may reasonably request.
These rights will terminate upon the consummation of an initial public offering
of the Company's Common Stock.
5.5 FURTHER ASSURANCES. The Company and the Purchaser shall use their
respective reasonable efforts at any time and from time to time to execute and
deliver to the applicable parties such further documents and instruments and to
take all such further actions as such other parties to this Agreement reasonably
may request to consummate the transactions contemplated by this Agreement, the
Certificate, the Amended Stockholders' Agreement and the Amended Registration
Rights Agreement.
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6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of New York without regard to principles of conflict of
laws.
6.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive for a period of three (3) years, unless the
representation, warranty, covenant or agreement, by its terms survives for a
different period, any investigation made by any Purchaser and the closing of the
transactions contemplated hereby.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the rights and obligations hereunder may not be assigned or delegated by
the Purchaser or the Company without the prior written consent of the other;
provided, however, that Purchaser may assign its rights and delegate its
obligations hereunder, in whole or in part; provided, further, that any such
assignee that acquires any Shares shall, as a condition to acquiring such
Shares, agree to be bound by the provisions of any agreement applicable to the
Shares. The provisions hereof shall inure to the benefit of, and be binding
upon, the successors and permitted assigns of the parties hereto.
6.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, including the Amended Registration Rights Agreement and the Amended
Stockholders' Agreement, and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subject matter hereof and thereof.
6.5 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
6.6 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and holders of at least a majority of the Shares
(treated as if converted and including any Conversion Shares into which the
Shares have been converted that have not been sold to the public).
(b) The obligations and rights of the Company and the
Purchaser may be waived only by a writing signed by such party.
6.7 DELAYS OR OMISSIONS It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, the Amended
Registration Rights Agreement, the Amended Stockholders' Agreement or the
Certificate, shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance thereafter
occurring. It is further agreed that any waiver, permit, consent or approval of
any kind of character on any Purchaser's part of any breach, default or
noncompliance under this Agreement, the Amended Registration Rights Agreement,
the Amended Stockholders' Agreement or under the Certificate or any waiver on
such party's part of any provisions or conditions of the Agreement, the Amended
Registration Rights Agreement, the Amended Stockholders' Agreement, or the
Certificate must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, the Amended Registration Rights Agreement, the Amended Stockholders'
Agreement, the Certificate, by law, or otherwise afforded to any party, shall be
cumulative and not alternative.
6.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (iii) five
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(5) days after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (iv) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the Company at the
address as set forth on the signature page hereof and to Purchaser at the
address set forth on the signature page hereto or at such other address as the
Company or Purchaser may designate by ten (10) days advance written notice to
the other parties hereto.
6.9 TITLES AND SUBTITLES. The titles of the sections and subsections of
the Agreement are for convenience of reference only and are not to be considered
in construing this Agreement.
6.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.11 BROKER'S FEES. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section being untrue.
6.12 EXPENSES. The Company and the Purchaser shall pay all costs and
expenses that it incurs with respect to the negotiation, execution, delivery and
performance of this Agreement and all of the transactions contemplated herein;
provided, however, that if the Purchaser consummate the purchase of the Shares,
the Company shall reimburse all reasonable legal fees and all expenses of the
Purchaser incurred in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement and all of the transactions
contemplated herein.
6.13 SPECIFIC ENFORCEMENT. Any Purchaser shall be entitled to specific
enforcement of its rights under this Agreement. Then Company acknowledges that
money damages would be an inadequate remedy for its breach of this Agreement and
consents to an action for specific performance or other injunctive relief in the
event of any such breach.
6.14 ATTORNEY'S FEES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
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IN WITNESS WHEREOF, the parties hereto have executed the Series C
Convertible Preferred Stock Purchase Agreement as of the date set forth in the
first paragraph hereof.
ODIMO INCORPORATED SDG MARKETING, INC.
By: /s/ Alan Lipton By: /s/ Pavlo Protopapa
---------------------------------- ------------------------------------
Name: Alan Lipton Name: Pavlo Protopapa
Title: President ----------------------------------
Title: Attorney in Fact
---------------------------------
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