Common Stock Purchase Agreement - Uproar Inc. and Trans Cosmos USA Inc.
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement (the "Agreement") is made as of
February 1, 2000 by and among Uproar Inc., a Delaware corporation (the
"Company"), and Trans Cosmos USA Inc., a Washington corporation (the
"Purchaser").
SECTION 1
Sale of Common Stock
Sale of Common Stock. Subject to the terms and conditions of this
Agreement, Purchaser agrees to purchase from the Company, and the Company agrees
to sell and issue to Purchaser, at the Closing (as defined below) such number of
shares of the Company's Common Stock (the "Common Stock") as shall equal Twenty
Five Million U.S. Dollars ($25,000,000) in aggregate Fair Market Value. For the
purpose of calculating such number of shares, the "Fair Market Value" of one (1)
share of the Common Stock shall be deemed to be the average of the last
per-share price at which shares of the Common Stock traded on each of the five
(5) trading days immediately preceding the Closing Date (as defined below), as
reported by the European Association of Securities Dealers Automated Quotation
(EASDAQ) system. The aggregate purchase price for such number of shares of the
Common Stock (the "Shares") shall be Twenty Five Million U.S. Dollars
($25,000,000.00).
SECTION 2
Closing Dates, Delivery
2.1 Closing Dates. The closing of the purchase of the Shares by
Purchaser shall be held at the offices of Brobeck, Phleger & Harrison LLP at
1633 Broadway, New York, NY 10019, U.S.A., on or before February 4, 2000, (the
"Closing") or at such other time and place as the Company and the Purchaser
shall agree. The date of the Closing is herein referred to as the "Closing
Date."
2.2 Delivery. At the Closing, the Company will deliver to Purchaser a
certificate or certificates, registered in the Purchaser's name, representing
the Shares to be issued to such Purchaser at Closing. At the Closing, delivery
of the certificates for the Shares will be made against delivery to the Company
of the purchase price therefor by (i) certified check payable to the Company or
(ii) wire transfer of immediately available funds according to the Company's
instructions.
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SECTION 3
Representations and Warranties of the Company
The Company hereby represents, warrants and covenants to and with the
Purchaser as follows:
3.1 Corporate Organization and Authority. The Company is a corporation
duly organized and existing under and is in good standing under the laws of the
State of Delaware. The Company is qualified to do business in the State of New
York, has the corporate power and corporate authority to own and operate its
properties and to carry on its business as now conducted and as proposed to be
conducted and is qualified to do business as a foreign corporation in all
jurisdictions except where a failure to so qualify would not have a material
adverse effect on the Company.
3.2 Capitalization. Immediately prior to the Closing, the authorized
capital stock of the Company shall consist of:
(a) Common Stock. A total of 112, 000,000 shares of Common Stock, of
which 11,986,234 shares are duly and validly issued and outstanding, fully-paid,
nonassessable. The Company has reserved 2,700,000 shares of Common Stock under
its 1999 Share Option/Share Issuance Plan for issuance to employees and
directors of, and consultants to, the Company ,of which 2,438,853 shares of
Common Stock are subject to outstanding options. The Company has also granted or
assumed options to purchase 514,353 shares of Common Stock not pursuant to any
plan. Except as set forth in the Company's Registration Statement filed with the
Securities and Exchange Commission (the "SEC") on Form S-1, there are no other
outstanding warrants, options, conversion privileges, preemptive rights, or
other rights or agreements to purchase or otherwise acquire or issue any equity
securities of the Company. (b) Preferred Stock. A total of 48,000,000 shares of
Preferred Stock, of which no shares have been issued or are outstanding as of
the date hereof; and none of which shares of Preferred Stock will be issued or
outstanding prior to the Closing.
3.3 Authorization. All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization, execution,
delivery and performance of all of its obligations under this Agreement and for
the sale, issuance and delivery of the Shares has been taken or will be taken
prior to the Closing. This Agreement and the Registration Rights Agreement in
the form attached hereto as Exhibit A (the "Registration Rights Agreement"),
when executed and delivered by the Company, will constitute legally binding and
valid obligations of the Company, enforceable in accordance with their terms.
3.4 Validity of Shares. The Shares, when issued, sold and delivered in
accordance with the terms and for the consideration expressed in this Agreement,
shall be duly and validly issued (including, without limitation, issued in
compliance with applicable U.S. federal and state securities laws, assuming the
accuracy of the representations and warranties of the Purchaser set forth
herein), fully-paid and non-assessable and free and clear of all liens and
encumbrances (other than those, if any, created or imposed by a Purchaser).
3.5 Financial Statements. The Company has delivered to Purchaser
audited balance sheet, profit and loss statement, statement of shareholders'
equity and statement of cash flows including notes thereto at December 31, 1999
and for the fiscal year then ended (the "Company Financial Statements"), which
comply as to form in all material respects with all applicable accounting
requirements with respect thereto and have been prepared in accordance with
generally accepted accounting principles consistently applied (except as may be
indicated in the notes thereto) and fairly present the financial position of
Company as at the date thereof and the results of its operations and cash flows
for the period then ended.
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SECTION 4
Representations and Warranties of the Purchaser
Purchaser hereby represents, warrants and covenants to and with the
Company as follows:
4.1 Experience. Purchaser has substantial experience in evaluating and
investing in private placement transactions so that Purchaser is capable of
evaluating the merits and risks of Purchaser's investment in the Company.
Purchaser, by reason of its business or financial experience or the business or
financial experience of its professional advisors who are unaffiliated with and
who are not compensated by the Company or any affiliate or selling agent of the
Company, directly or indirectly, has the capacity to protect its own interests
in connection with the purchase of the Shares under this Agreement.
4.2 Purchase Entirely for Own Account. This Agreement is made with the
Purchaser in reliance upon the Purchaser's representation to the Company, which
by the Purchaser's execution of this Agreement the Purchaser hereby confirms,
that the Shares to be received by the Purchaser will be acquired for investment
for the Purchaser's own account, not as a nominee or agent, and not with a view
to the resale or distribution of any part thereof, and that the Purchaser has no
present intention of selling, granting any participation in or otherwise
distributing the same. By executing this Agreement, the Purchaser further
represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Shares.
4.3 Restricted Securities. The Purchaser understands that the Shares it
is purchasing are characterized as "restricted securities" under the U.S.
federal securities laws inasmuch as they are being acquired from the Company in
a transaction not involving a public offering and that under such laws and
applicable regulations such Shares may be resold without registration under the
Securities Act of 1933, as amended (the "Securities Act"), only in certain
limited circumstances. In the absence of an effective registration statement
covering the Shares or an available exemption from registration under the
Securities Act, the Shares must be held indefinitely. In this connection, the
Purchaser represents that it is familiar with Rule 144 under the Securities Act,
as presently in effect, and understands the resale limitations imposed thereby
and by the Securities Act, including without limitation the Rule 144 condition
that current information about the Company be available to the public, and
further understands that such information is not now available.
4.4 Access to Data. Purchaser and its representatives have met with
representatives of the Company and have had the opportunity to ask questions of,
and receive answers from, said representatives concerning the Company and the
terms and conditions of this transaction as well as to obtain any information
requested by Purchaser. Any questions raised by Purchaser or its representatives
concerning the transaction have been answered to the satisfaction of Purchaser
and its representatives. Purchaser's decision to purchase the Shares is based in
part on the answers to such questions as Purchaser and its representatives have
raised concerning the transaction and on its own evaluation of the risks and
merits of the purchase and the Company's proposed business activities.
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4.5 Accredited Investor. The Purchaser is either (i) a "qualified
institutional buyer" within the meaning of such term under paragraph (a) of Rule
144A under the Securities Act, or (ii) a large institutional "accredited
investor" within the meaning of such term under paragraph (a)(1), (a)(2),
(a)(3), (a)(7) or (a)8 of Rule 501 of Regulation D under the Securities Act as
further discussed in SEC No-Action Letter regarding Black Box Incorporated, 1992
WL 55818 (S.E.C.), dated February 28, 1992 and SEC No-Action Letter regarding
Black Box Incorporated, 1990 WL 286633 (S.E.C.), dated June 26, 1990.
4.6 Further Limitations on Disposition. Without in any way limiting the
representations set forth above, the Purchaser further agrees not to make any
disposition of all or any portion of the Shares unless and until the transferee
has agreed in writing for the benefit of the Company to be bound by this Section
4, and: (a) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or (b) (i) The Purchaser shall
have notified the Company of the proposed disposition and shall have furnished
the Company with a detailed statement of the circumstances surrounding the
proposed disposition, and (ii) if requested by the Company, the Purchaser shall
have furnished the Company with an opinion of counsel, reasonably satisfactory
to the Company that such disposition will not require registration of such
Shares under the Securities Act. It is agreed that the Company will not require
opinions of counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
Notwithstanding the provisions of subsections (a) and (b) above, no
such registration statement or opinion of counsel shall be necessary for a
transfer by the Purchaser, if it is a partnership, to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner or the transfer
by gift, will or intestate succession of any partner to his or her spouse or to
the siblings, lineal descendants or ancestors of such partner or his or her
spouse, if the transferee agrees in writing to be subject to the terms hereof to
the same extent as if he or she were the original Purchaser hereunder.
4.7 Legends. It is understood that the certificates evidencing the
Shares may bear one or all of the following legends: (a) These securities have
not been registered under the Securities Act of 1933, as amended (the "Act").
They may not be sold, offered for sale, pledged or hypothecated in the absence
of a registration statement in effect with respect to the securities under such
Act or an opinion of counsel satisfactory to the Company that such registration
is not required or unless sold pursuant to Rule 144 of such Act.
(b) Any legend required by the laws of the State of Delaware, including
any legend required by the Delaware General Corporation Law.
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4.8 Further Representations by Foreign Investors. If it is not a United
States person, the Purchaser hereby represents that it has satisfied itself as
to the full observance of the laws of its jurisdiction in connection with any
purchase of the Shares or any use of this Agreement, including (i) the legal
requirements within its jurisdiction for the purchase of the Shares, (ii) any
foreign exchange restrictions applicable to such purchase, (iii) any
governmental or other consents that may need to be obtained and (iv) the income
tax and other tax consequences, if any, that may be relevant to the purchase,
holding, redemption, sale or transfer of the Shares. The Purchaser further
represents that its purchase and payment for, and its continued beneficial
ownership of the Shares, will not violate any applicable securities or other
laws of its jurisdiction
4.9 Organization; Authorization. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of Washington.
All corporate action on the part of Purchaser, its officers, directors and
stockholders necessary for the authorization, execution, delivery and
performance of all of its obligations under this Agreement has been taken or
will be taken prior to the Closing. This Agreement when executed and delivered
by the Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms.
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SECTION 5
Conditions to Closing of Purchaser
Purchaser's obligation to purchase the Shares at the Closing is, at the
option of the Purchaser, subject to the fulfillment or waiver as of the Closing
Date of the following conditions:
5.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 3 of this Agreement shall be true and
correct in all material respects when made, and shall be true and correct in all
material respects on the Closing Date with the same force and effect as if they
had been made on and as of said date.
5.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all respects.
5.3 Registration Rights Agreement. The Company shall have entered into
the Registration Rights Agreement.
5.4 Authorization of Stock Issuance. The Board of Directors shall have
authorized the sale and issuance of the Shares to Purchaser.
5.5 Election of Board Member. The Board of Directors of the Company
shall have elected Purchaser's representative James Geddes as a director of the
Company effective upon the consummation of the Closing, to hold office until the
next annual meeting of stockholders and until his successor is elected and
qualified, or until his earlier death, resignation or removal. The Company shall
also use all reasonable efforts to cause the Board of Directors to nominate Mr.
Geddes for re-election to the Board of Directors of the Company at the next
annual meeting of stockholders.
SECTION 6
Conditions to Closing of Company
The Company's obligation to sell and issue the Shares at the Closing
is, at the option of the Company, subject to the fulfillment or waiver of the
following conditions:
6.1 Representations. The representations made by Purchaser in Section 4
of this Agreement shall be true and correct when made, and shall be true and
correct on the Closing Date.
6.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Purchaser on or prior to the Closing Date
shall have been performed or complied with in all material respects.
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SECTION 7
Joint Venture Partners
Japanese Joint Venture. The Company and the Purchaser covenant and
agree that Purchaser or an affiliate of Purchaser will be the exclusive joint
venture or Japanese KK partner for all the Company's operations in Japan. The
Company and Purchaser shall negotiate a Joint Venture or KK Agreement ("KK
Agreement"), using good faith negotiations, during the 180 day period following
the Closing Date, which KK Agreement shall include the substantive terms set
forth in the Joint Venture Term Sheet attached hereto as Exhibit B.
SECTION 8
Miscellaneous
8.1 Entire Agreement. This Agreement and the Exhibits hereto constitute
the entire agreement of the parties, and supersede all prior written or oral
understandings between the parties, with respect to the matters set forth
herein.
8.2 Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties and their respective successors and
permitted assigns.
8.3 No Assignment. Without the prior written consent of the other
party, neither party may assign any of its rights or delegate any of its duties
under this Agreement except to an entity controlling, controlled by or under
common control with the assigning party (an "Affiliate"); provided, however,
that no assignment to an Affiliate shall relieve the assigning party of its
liabilities to the other party hereunder.
8.4 Amendment; Waiver. No amendment or waiver of any provision of this
Agreement shall be effective except to the extent set forth in a writing signed
on behalf of the party against whom the enforcement of such amendment or waiver
is sought.
8.5 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of New York without giving effect to the conflicts of laws
principles thereof, and by the General Corporation Law of the State of Delaware
to the extent applicable to any corporate action related to the Company
hereunder.
8.6 Expenses. The Company and the Purchaser shall each bear their own
expenses incurred on their behalf with respect to this Agreement and the
transactions contemplated hereby.
8.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
8.8 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
<PAGE>
The foregoing COMMON STOCK PURCHASE AGREEMENT is hereby executed as of
the date first above written.
"COMPANY" UPROAR INC.
a Delaware corporation
By: /s/ Kenneth D. Cron
-------------------------
Kenneth D. Cron
Chairman and CEO
"PURCHASER" TRANS COSMOS USA INC.
a Washington corporation
By: /s/ Shozo Okuda
-------------------------
Name: Shozo Okuda
Title: Chairman
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EXHIBIT B
Trans Cosmos/Uproar
Joint Venture Term Sheet
o Formation. As soon as practicable but in no event later than 180 days
after Trans Cosmos' investment of $25 million in Uproar, Uproar and
Trans Cosmos would form a Japanese joint venture ("Uproar KK") to
produce a Japanese-localized version of Uproar's www.uproar.com game
site (the "KK Game Site").
o Ownership. Uproar KK would be owned 50% each by Uproar and Trans
Cosmos.
o Capital Contributions. Uproar would contribute US$500,000 in capital to
Uproar KK and Trans Cosmos would contribute US$4,500,000. (Based on $1
- 100 yen conversion rate.)
o Uproar Intellectual Property.
o License. Uproar would grant Uproar KK an exclusive and perpetual
license in Japan to use Uproar's trademarks, technology and content
("Intellectual Property") on the KK Game Site. Uproar would also
license Uproar KK any Intellectual Property which Uproar develops in
the future and which Uproar KK wishes to utilize on the KK Game Site.
o Fee. For the first 2 years of the license term, Uproar KK would pay
Uproar a license fee of $1 million per year (payable in equal quarterly
installments). Thereafter, Uproar KK shall pay Uproar 15% of the
revenue Uproar KK derives from the Intellectual Property.
o Uproar will pay Uproar KK 15% of revenue Uproar derives from its
distribution of content licensed by Uproar from Uproar KK.
o Board of Directors. The Board of Directors of Uproar KK would consist
of 5 members: 2 appointed by Uproar, 2 appointed by Trans Cosmos, and 1
appointed by mutual agreement of the partners.
o Management. Uproar KK would be managed day-to-day by a President who
would be jointly appointed by the partners and who would be the fifth
Board member.
o Employee Options. Uproar KK would grant share options to its employees
for up to 10% of its equity.