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Preferred Stock Purchase Agreement

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Sectors: Computer Software and Services
Governing Law: California , View California State Laws
Effective Date: April 18, 1995
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EXHIBIT 10.01



DIGITAL CERTIFICATES INTERNATIONAL, INC.



SERIES A PREFERRED STOCK PURCHASE AGREEMENT

-------------------------------------------







This Series A Preferred Stock Purchase Agreement is made as of April 18, 1995, by and between Digital Certificates International, Inc. (the "COMPANY"),

------- RSA Data Security, Inc., a Delaware corporation ("RSA"), and the purchasers

--- listed on Exhibit A (collectively referenced as the "PURCHASERS" and

---------- individually as a "PURCHASER").

---------



Sale of Preferred Stock

-----------------------



Subject to the terms and conditions hereof, the Company will sell and issue to the Purchasers, and the Purchasers, severally and not jointly, will purchase from the Company, the number of shares of the Company's Series A Preferred Stock (the "PREFERRED STOCK") set forth opposite each Purchaser's name on Exhibit A,

--------------- at a price of One Dollar and Twenty Cents ($1.20) per share.



Closing; Delivery

-----------------



2.1 Closings. The closings of the purchase and sale of the Preferred Stock

-------- hereunder shall take place at such time or times as elected by the Company as set forth below. Each such closing is hereafter referenced as a "Closing". The Company shall schedule closings as it deems appropriate until such time as Four Million Three Hundred Six Thousand Eight Hundred Eighty-Three (4,306,883) shares of Preferred Stock have been sold or until December 31, 1995 whichever shall first occur. A majority of the holders of the Preferred Stock may approve an extension of such date. Each such closing shall be held at the offices of the Company or such other place as the Purchasers and the Company shall mutually agree.



2.2 Delivery. At each Closing, the Company shall deliver to each Purchaser

-------- a certificate representing the Preferred Stock which such Purchaser is purchasing at such Closing against delivery to the Company by such Purchaser of a bank check or bank wire (or other check acceptable to the Company) payable to the Company's order or by delivery of evidences of indebtedness of the Company for cancellation by the Company, all in the aggregate amount of the purchase price of such Preferred Stock. Digital Certificates International, Inc. Series A Preferred Stock Purchase Agreement Page 2



Representations and Warranties of the Company

---------------------------------------------



The Company and where specifically indicated RSA, hereby jointly and severally (only in those cases in which a representation or warranty is made as to the same matter by both the Company and RSA) represent and warrant to each Purchaser that all of the statements made below in this Section 3 are true and correct in all respects upon each Closing. These representations and warranties are subject to the exceptions set forth on Exhibit B (the "SCHEDULE OF

----------- EXCEPTIONS") furnished to each Purchaser, specifically identifying the relevant - ---------- Section hereof, which exceptions shall be deemed to be representations and warranties as if made hereunder.



3.1 Organization and Standing. The Company is a corporation duly

------------------------- organized, validly existing and in good standing under the laws of the State of Delaware and has full power and authority to own and operate its properties and assets, to execute and deliver this Agreement, the Registration Rights Agreement attached hereto as Exhibit C (the "REGISTRATION RIGHTS AGREEMENT"), the

----------------------------- Stockholders Agreement attached hereto as Exhibit D (the "STOCKHOLDERS

------------ AGREEMENT"), the OEM Master License Agreement attached hereto as Exhibit M (the - --------- "OEM AGREEMENT"), the Non-Compete and Non-Solicitation Agreement attached as

------------- Exhibit N (the "NON-COMPETE AGREEMENT"), the Assignment attached as Exhibit I

--------------------- (the "ASSIGNMENT"), and to carry on its business as now conducted and as

---------- proposed to be conducted in the Business Plan (Version 2.0) dated November, 1994 and attached hereto as Exhibit E, heretofore furnished to each Purchaser ("BUSINESS PLAN"). This Agreement, the Registration Rights Agreement, the

------------- Stockholders Agreement, the OEM Agreement, the Non-Compete Agreement and the Assignment are collectively referenced hereinafter as the "AGREEMENTS". The

---------- Company is not required to be qualified as a foreign corporation in any jurisdiction except California; provided, however, that the Company need not be qualified in any jurisdiction in which a failure to qualify would not have a material and adverse effect on its operations or financial condition. The Company is duly qualified as a foreign corporation in California.



3.2 Capitalization. The authorized capital stock of the Company consists

-------------- of Fifteen Million Nine Hundred Forty Thousand Two Hundred Seventeen (15,940,217) shares of Common Stock and Six Million Eight Hundred Fifty-Six Thousand Eight Hundred Eighty-Four (6,856,884) shares of Preferred Stock, none of such Common or Preferred will be issued and outstanding prior to the first Closing. The Preferred Stock has the rights, preferences, privileges and restrictions set forth in the Certificate of Incorporation Digital Certificates International, Inc. Series A Preferred Stock Purchase Agreement Page 3





("CERTIFICATE") of the Company in the form of Exhibit F. The Company has

----------- reserved Six Million Eight Hundred Fifty-Six Thousand Eight Hundred Eighty-Four (6,856,884) shares of Common Stock for issuance upon conversion of the Preferred Stock. The Company has adopted a 1995 Stock Option Plan (the "PLAN") under which

---- Two Million One Hundred Forty-Five Thousand (2,145,000) shares of Common Stock are available for sale pursuant to stock options to employees, officers, directors, advisory board members and consultants. Copies of the Plan and form of option agreement have been delivered to counsel for Purchasers. There are no other preemptive rights, options, warrants, conversion privileges or other rights or agreements presently outstanding for the purchase or acquisition from the Company of any of its authorized but unissued stock, other than the rights created by this Agreement. The list of the Company's security holders attached as Exhibit G is a true, correct and complete list of the owners and number of shares held by each owner, of record and, to the best knowledge of the Company, beneficially, of all outstanding securities of the Company as of the first Closing. The list of the Company's option holders attached hereto as Exhibit G is a true, correct and complete list of all option holders of the Company, the number of shares under option to each such person, the exercise price per share for all shares subject to option and the vesting schedule for each option. All outstanding securities of the Company were issued in compliance with applicable federal and state securities laws.



3.3 Subsidiaries. The Company has no subsidiaries and does not otherwise

------------ own or control, directly or indirectly, any equity interest in any corporation, association, joint venture, partnership or other business entity.



3.4 Authorization. All corporate action on the part of the Company, its

------------- officers, directors and shareholders necessary for the authorization, execution, delivery and performance of the Agreements by the Company, the authorization, sale, issuance and delivery of the Preferred Stock sold to the Purchasers hereunder (and the shares of Common Stock issuable upon conversion of such Preferred Stock) and the performance of all of the Company's obligations thereunder has been taken. The Agreements, when executed and delivered by the Company, shall constitute a valid and binding obligation of the Company, enforceable in accordance with their terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies. The Preferred Stock sold to the Purchasers hereunder, when payment therefor has been received by the Company, will be validly issued, full paid and nonassessable; the shares of Common Stock issuable upon conversion of such Preferred Stock have been duly and validly reserved and, when issued in Digital Certificates International, Inc. Series A Preferred Stock Purchase Agreement Page 4





compliance with the provisions of the Certificate, will be validly issued, full paid and nonassessable; and such Preferred Stock and such shares of Common Stock will be free of any liens or encumbrances, other than those created by or imposed upon the holders thereof through no action of the Company; provided, however, that such Preferred Stock (and the shares of Common Stock issuable upon conversion thereof) may be subject to restrictions on transfer under state and federal securities laws as set forth herein and under the Stockholders Agreement and Registration Rights Agreement. The sale of Preferred Stock hereunder and its conversion into Common Stock are not subject to any preemptive rights or rights of first refusal.



3.5 Governmental Consent, Etc. No consent, approval or authorization of or

------------------------- designation, declaration or filing with any governmental authority on the part of the Company is required in connection with the valid execution and delivery of this Agreement, or the offer, sale or issuance of Preferred Stock hereunder or the shares of Common Stock issuable upon conversion of such Preferred Stock, or the consummation of any other transaction contemplated hereby, except, if required, the filing of Form D with the Securities and Exchange Commission and qualifications or filings under applicable state blue sky laws, which qualifications, if required, will have been obtained and will be effective on the Closing, and any such filings will be made within the time prescribed.



3.6 Proprietary Rights. The Company and RSA hereby represent and warrant

------------------ that the Company possesses and has good, valid and marketable title, free and clear of all security interests, liens, claims, charges, encumbrances or any other defects in title of any nature whatsoever to, or has the valid, enforceable right to use (pursuant to written agreements, true and correct copies of which have been submitted to counsel for Purchasers), all trademarks, trademark rights, trade names, trade name rights, licenses, franchises, service marks, patents, patent applications, copyrights, inventions, discoveries, improvements, processes, trade secrets, formulae, proprietary rights or data, shop rights, ideas or know-how necessary to conduct its business as now being conducted or as proposed to be conducted in the Business Plan, without conflict with or infringement upon any valid rights of others and the lack of which could materially and adversely affect the operations or condition, financial or otherwise, of the Company. The Company has caused all present and past executive officers, directors, employees, consultants and other agents of the Company, and shall use its best efforts to cause all future officers, directors, employees, consultants and other agents of the Company, to execute proprietary information agreements substantially in the form of Exhibit H. There are no outstanding options, licenses or agreements of any kind relating to the foregoing, Digital Certificates International, Inc. Series A Preferred Stock Purchase Agreement Page 5





nor is the Company 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 has not received any communications alleging that the Company has violated or, by conducting its business as proposed, would violate any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of any other person or entity. None of the Company's employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with their duties to the Company or that would conflict with the Company's business as proposed to be conducted. Neither the execution nor delivery of the Agreements, nor the carrying on of the Company's business by the employees of the Company, nor the conduct of the Company's business as proposed to be conducted in the Business Plan, will conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which RSA, the Company or any employee of the Company is now obligated. The Company does not believe it is or will be necessary to utilize any inventions, trade secrets or proprietary information of any of its employees made prior to their employment by the Company, except for inventions, trade secrets or proprietary information that have been assigned to the Company. Digital Certificates International, Inc. Series A Preferred Stock Purchase Agreement Page 6





3.7 Labor Matters. The Company: (i) is not bound by or subject to any

------------- collective bargaining agreement with respect to any of its employees nor has any labor union requested or, to the best knowledge of the Company, sought to represent any of the employees, representatives or agents of the Company, (ii) does not have any current labor problems or disputes, pending or threatened, (iii) does not have in effect any "employee pension benefit plans" (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974) or employee benefit or similar plans qualified under Section 401 of the Internal Revenue Code of 1986, as amended, and (iv) does not maintain, has not in the past maintained and is not and has not been a contributor to any multi-employer plan or single employer plan, as defined in Section 4001 of the Employee Retirement Income Security Act of 1974, as amended, for the employees of the Company or any trade or business (whether or not incorporated) which, together with the Company, would be deemed to be a "single employer" within the meaning of such Section 4001. The Company has complied in all material respects with all laws relating to the employment of labor, including provisions relating to wages, hours, equal opportunity, collective bargaining and payment of Social Security and other taxes.



3.8 Certain Transactions. The Company is not indebted, directly or

-------------------- indirectly, to any of its officers or directors, or to their respective immediate family, in any amount whatsoever, except for salaries and fees accrued in the ordinary course of business; none of said officers or directors or members 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 except RSA Data Security, Inc., or any firm or corporation which competes with the Company (except with respect to any interest in less than five percent (5%) of the stock of any corporation whose stock is publicly traded). No officer, director or stockholder, or any member of their immediate families, is, directly or indirectly, interested in any material contract with the Company. The Company is not a guarantor or indemnitor of any indebtedness of any other person, firm or corporation.



3.9 Voting Arrangements. Except as set forth in this Agreement and the

------------------- Stockholders Agreement, to the best knowledge of the Company, there are no outstanding stockholder agreements, purchase agreements, voting trusts, proxies or other arrangements or understandings, either written or oral, among the stockholders of the Company relating to either the voting or the disposition of their respective shares. Digital Certificates International, Inc. Series A Preferred Stock Purchase Agreement Page 7





3.10 Compliance with Other Instruments, None Burdensome, Etc. The

-------------------------------------------------------- Company is not in violation of any term of its Certificate of Incorporation or Bylaws, as amended and in effect on and as of each Closing. The Company is not in violation in any respect of any term or provision of any mortgage, indebtedness, indenture, contract, agreement, instrument, judgment or decree, order, statute, rule or regulation applicable to it where such violation would adversely affect the Company, its operations or financial condition. The execution, delivery and performance of and compliance with this Agreement, and the issuance of the Preferred Stock sold hereunder and the shares of Common Stock issuable upon conversion of such Preferred Stock, have not resulted and will not result in any violation of or conflict with, or constitute a material default under, any mortgage, indebtedness, indenture, contract, agreement, instrument, judgment or decree, order, statute, rule or regulation applicable to it, or result in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Company; and there is no such term or provision which adversely affects the Company, its operations or financial condition as presently conducted or as contemplated to be conducted. The Company and, to the best knowledge of the Company, its officers, directors and key employees, are not parties to any mortgage, indebtedness, indenture, contract, agreement, instrument, judgment, decree or order restricting its ability to enter or compete in any line of business or market.



3.11 Litigation, Etc. The Company and RSA hereby represent and warrant

--------------- that there are no actions, suits, proceedings or investigations pending against the Company or its properties, before any court or governmental agency (nor, to the best knowledge of the Company or RSA, is there any reasonable basis therefor or threat thereof), which, either in any case or in the aggregate, might result in any material adverse change in the business or financial condition of the Company, or in any material impairment of the right or ability of the Company to carry on its business as now conducted or as proposed to be conducted in the Business Plan or in any material liability on the part of the Company, or any change in the current equity ownership of the Company, and none which questions the validity of this Agreement or any action taken or to be taken in connection herewith. The foregoing includes, without limiting its generality, actions pending or threatened (or any basis therefor known to the Company or RSA) involving the prior employment of any of the Company's employees, their use in connection with the Company's business of any information or techniques allegedly proprietary to any of their former employers or third parties or their obligations under any agreements with prior employers or the execution and delivery of the Assignment.



3.12 Financial Statements.

-------------------- Digital Certificates International, Inc. Series A Preferred Stock Purchase Agreement Page 8





3.12.1 Attached hereto as Exhibit J is the Company's pro forma unaudited balance sheet as of the first Closing (the "BALANCE SHEET").

-------------



3.12.2 The Company has no debt, liability or obligation of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, that is not reflected or reserved against in the Balance Sheet, except for those (i) that may have been incurred after the date thereof and (ii) that are not required by generally accepted accounting principles to be included in a balance sheet or the notes thereto. All debts, liabilities and obligations incurred after the date of the Balance Sheet were incurred in the ordinary course of business and are usual and normal in amount, both individually and in the aggregate.



3.12.3 The Balance Sheet was prepared according to generally accepted accounting principles consistently applied to the extent they apply to pro forma balance sheets and presents fairly the financial position of the Company, except that it does not contain all of the footnotes required by generally accepted accounting principles.



3.13 Material Liabilities. The Company has no liabilities which are,

-------------------- individually or in the aggregate, material to the financial condition or operating results of the Company which have not been disclosed on the Balance Sheet.



3.14 Taxes. The Company has prepared and filed all federal, state and

----- local income, withholding, sales, real property, personal property and other tax returns that are required to be filed by it and has paid or made provision for the payment of all taxes that have become due pursuant to such returns. None of such returns has been audited by any state or federal agency. No deficiency assessment or proposed adjustment of the Company's federal, state and or local taxes is pending, and the Company has no knowledge of any proposed liability for any tax to be imposed upon the Company for which there is not an adequate reserve reflected in the Balance Sheet.



3.15 Title. The Company and RSA hereby represent and warrant that the

----- Company has good and marketable title to its property and assets. Such properties and assets are not subject to any material liens, mortgages, pledges, encumbrances or charges of any kind, except (a) as reflected in the Company's Balance Sheet, (b) for liens for current taxes not yet delinquent, (c) for liens imposed by law and incurred in the ordinary course of business for obligations not yet due to carriers, warehousemen, laborers, materialmen and the like, (d) for liens in respect of pledges or deposits under workers' Digital Certificates International, Inc. Series A Preferred Stock Purchase Agreement Page 9



compensation laws or similar legislation or (e) for minor defects in title, none of which individually or in the aggregate materially interferes with the use of such property. All leases, if any, pursuant to which the Company leases real or personal property are in good standing and are valid and effective in accordance with their respective terms, assuming due execution by the other parties to such agreements, and, to the best knowledge of the Company, there exists no default or other occurrence or condition which could result in a material default or termination of any thereof.



3.16 Agreements; Action.

------------------



3.16.1 Except for agreements explicitly contemplated hereby, indemnity agreements, agreements with RSA copies of which have been provided to counsel for the Purchasers, and agreements between the Company and its employees with respect to the sale of the Company's Common Stock, there are no agreements, understandings or proposed transactions between the Company and any of its officers, directors, affiliates or any affiliate thereof.



3.16.2 There are no agreements, understandings, instruments, contacts, proposed transactions, judgments, orders, writs or decrees to which the Company is a party or to its knowledge by which it is bound which may involve (i) obligations (contingent or otherwise) of, or payments to, the Company in excess of $10,000 (other than obligations of, or payments to, the Company arising from purchase and sale agreements entered into in the ordinary course of business), except agreements assigned to the Company by RSA copies of which have been provided to counsel for Purchasers, or (ii) the license of any patent, copyright, trade secret or other proprietary right to or from the Company (other than licenses arising from the purchase of "off the shelf" or other standard products), except agreements with RSA copies of which have been provided to Company for Purchasers, or (iii) provisions restricting or affecting the development, manufacture or distribution of the Company's product or service, except agreements with RSA copies of which have been provided to Company for Purchasers or (iv) indemnification by the Company with respect to infringements of proprietary rights (other than indemnification obligations arising from purchase or sale agreement entered into in the ordinary course of business), except agreements with RSA copies of which have been provided to counsel for Purchasers.



3.16.3 The Company has not (i) incurred any indebtedness for money borrowed or any other liabilities (other than with respect to dividend obligations, distributions, indebtedness or other obligations incurred in the ordinary course of business or as disclosed in the Balance Sheet) individually in excess of $10,000 or, Digital Certificates International, Inc. Series A Preferred Stock Purchase Agreement Page 10



in the case of indebtedness and/or liabilities individually less than $10,000, in excess of $25,000 in the aggregate, (ii) made any loans or advances to any person, other than ordinary advances for travel expenses, or (iv) after the date of the Balance Sheet sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of its inventory in the ordinary course of business.



3.17 Compliance with Laws; Permits. To its knowledge, the Company is not

----------------------------- in violation of any applicable statute, rule, regulation, order or restriction of any domestic or foreign government or any instrumentality or agency thereof in respect of the conduct of its business or the ownership of its properties which violation would materially and adversely affect the business, assets, liabilities, financial condition, operations or prospects of the Company. The Company has all franchises, permits, licenses and any similar authority necessary for the conduct of its business as now being conducted by it, the lack of which could materially and adversely affect the business, properties, prospects or financial condition of the Company and believes it can obtain, without undue burden or expense, any similar authority for the conduct of its business as planned to be conducted.



3.18 Environmental and Safety Laws. To its knowledge, the Company is not

----------------------------- in violation of any applicable statute, law or regulation relating to the environment or occupational health and safety, and to its knowledge, no material expenditures are or will be required in order to comply with any such existing statute, law or regulation.



3.19 Offering Valid. Assuming the accuracy of the representations and

-------------- warranties of the Purchasers contained in Section 4 hereof, the offer, sale and issuance of the Preferred Stock and the Common Stock issued upon conversion thereof (the "Conversion Shares") will be exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act") and will have been registered or qualified (or are exempt from re
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