EX-10.12



 





EXHIBIT 10.12




SYNACOR, INC.




SERIES B PREFERRED




STOCK PURCHASE AGREEMENT




OCTOBER 1, 2004














 








TABLE OF CONTENTS




	 	 	 	 	 
	 	 	 	Page
	 
	1. Purchase and Sale of Stock 
	 	 	1	 
	1.1 Sale and Issuance of Series B Preferred Stock
	 	 	1	 
	1.2 Closing
	 	 	1	 
	1.3 Subsequent Sale of Series B Preferred Stock
	 	 	1	 
	 
	 	 	 	 
	2. Representations and Warranties of the Company
	 	 	2	 
	2.1 Organization, Good Standing and Qualification
	 	 	2	 
	2.2 Corporate Power
	 	 	2	 
	2.3 Capitalization and Voting Rights
	 	 	2	 
	2.4 Subsidiaries
	 	 	4	 
	2.5 Authorization
	 	 	4	 
	2.6 Valid Issuance of Preferred and Common Stock
	 	 	4	 
	2.7 Governmental Consents
	 	 	5	 
	2.8 Offering
	 	 	5	 
	2.9 Litigation
	 	 	5	 
	2.10 Patents and Trademarks
	 	 	5	 
	2.11 Confidentiality Agreements
	 	 	6	 
	2.12 Compliance with Other Instruments
	 	 	6	 
	2.13 Agreements; Action
	 	 	7	 
	2.14 Related-Party Transactions
	 	 	7	 
	2.15 Related Persons
	 	 	8	 
	2.16 Disclosure
	 	 	8	 
	2.17 Registration Rights
	 	 	8	 
	2.18 Corporate Documents
	 	 	8	 
	2.19 Title to Property and Assets
	 	 	8	 
	2.20 Small Business Concern
	 	 	9	 
	2.21 Financial Statements
	 	 	9	 
	2.22 Changes
	 	 	9	 
	2.23 Employee Benefit Plans
	 	 	10	 
	2.24 Tax Returns, Payments and Elections
	 	 	11	 
	2.25 Insurance
	 	 	11	 
	2.26 Minute Books
	 	 	11	 
	2.27 Labor Agreements and Actions; Employee Compensation
	 	 	11	 
	2.28 Other Agreements of Employees
	 	 	12	 
	2.29 Section 83(b) Elections
	 	 	12	 
	2.30 Qualified Small Business Stock
	 	 	12	 
	2.31 Qualified Business
	 	 	12	 
	2.32 Representations Complete
	 	 	13	 
	 
	 	 	 	 
	3. Representations and Warranties of the Investors
	 	 	13	 
	3.1 Authorization
	 	 	13	 
	3.2 Purchase Entirely for Own Account
	 	 	13	 
	3.3 Disclosure of Information
	 	 	13	 






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	 	 	 	Page
	 
	3.4 Investment Experience
	 	 	13	 
	3.5 Accredited Investor
	 	 	14	 
	3.6 Restricted Securities
	 	 	14	 
	3.7 Further Limitations on Disposition
	 	 	14	 
	3.8 Legends
	 	 	14	 
	3.9 Exculpation Among Investors
	 	 	15	 
	 
	 	 	 	 
	4. Conditions of Investors’ Obligations at Closing
	 	 	15	 
	4.1 Representations and Warranties
	 	 	15	 
	4.2 Performance
	 	 	15	 
	4.3 Compliance Certificate
	 	 	15	 
	4.4 Qualifications
	 	 	15	 
	4.5 Proceedings and Documents
	 	 	15	 
	4.6 Secretary’s Certificate
	 	 	15	 
	4.7 Nondisclosure and Development Agreements
	 	 	16	 
	4.8 Board of Directors
	 	 	16	 
	4.9 Opinion of Company Counsel
	 	 	16	 
	4.10 Investors’ Rights Agreement
	 	 	16	 
	4.11 First Refusal and Co-Sale Agreement
	 	 	16	 
	4.12 Voting Agreement
	 	 	16	 
	4.13 Management Rights Letter
	 	 	16	 
	4.14 Indemnification Agreements
	 	 	16	 
	4.15 Minimum Investment Amount
	 	 	16	 
	4.16 Certificate of Incorporation
	 	 	16	 
	4.17 Approval of Stock Option Plan Increase
	 	 	16	 
	4.18 SBIC Forms
	 	 	17	 
	 
	 	 	 	 
	5. Conditions of the Company’s Obligations at Closing
	 	 	17	 
	5.1 Representations and Warranties
	 	 	17	 
	5.2 Payment of Purchase Price
	 	 	17	 
	5.3 Qualifications
	 	 	17	 
	 
	 	 	 	 
	6. Post Closing Covenants
	 	 	17	 
	6.1 Use of Proceeds
	 	 	17	 
	6.2 Key man Insurance
	 	 	17	 
	6.3 D&O Insurance
	 	 	17	 
	 
	 	 	 	 
	7. Miscellaneous
	 	 	17	 
	7.1 Survival of Warranties
	 	 	17	 
	7.2 Successors and Assigns
	 	 	18	 
	7.3 Governing Law
	 	 	18	 
	7.4 Counterparts
	 	 	18	 
	7.5 Titles and Subtitles
	 	 	18	 
	7.6 Notices
	 	 	18	 
	7.7 Finder’s Fee
	 	 	18	 
	7.8 Expenses
	 	 	18	 
	7.9 Amendments and Waivers
	 	 	19	 






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	 	 	 	Page
	 
	7.10 Severability
	 	 	19	 
	7.11 Aggregation of Stock
	 	 	19	 
	7.12 Entire Agreement
	 	 	19	 
	7.13 Publicity
	 	 	19	 
	7.14 Arbitration
	 	 	19	 






	 	 	 
	SCHEDULE A

	 	Schedule of Investors
	 
	 	 
	EXHIBIT A

	 	Third Amended and Restated Certificate of Incorporation
	EXHIBIT B

	 	Second Amended and Restated Investors’ Rights Agreement
	EXHIBIT C

	 	Second Amended and Restated Stock Restriction, First Refusal and Co-Sale Agreement
	EXHIBIT D

	 	Second Amended and Restated Voting Agreement
	EXHIBIT E

	 	Opinion of Counsel for the Company
	EXHIBIT F

	 	Management Rights Letter
	EXHIBIT G

	 	Indemnification Agreement









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SYNACOR, INC.




SERIES B PREFERRED STOCK PURCHASE AGREEMENT




     THIS STOCK PURCHASE AGREEMENT (the “Agreement”) is made as of the 1st day of October,
2004, by and among SYNACOR, INC., a Delaware corporation (the “Company”), and the investors
listed on Schedule A hereto, each of which is herein referred to as an “Investor.”



     THE PARTIES HEREBY AGREE AS FOLLOWS:



     1. Purchase and Sale of Stock.



          1.1 Sale and Issuance of Series B Preferred Stock.




                    (a) The Company shall adopt and file with the Secretary of State of the State of Delaware on
or before the Closing (as defined below) the Third Amended and Restated Certificate of
Incorporation in the form attached hereto as Exhibit A (the “Restated
Certificate”).



                    (b) On or prior to the Closing (as defined below), the Company shall have authorized (i) the
sale and issuance to the Investors of up to 3,500,000 shares of its Series B Preferred Stock (the
“Shares”) at a purchase price of $2.00 per share pursuant to this Agreement and (ii) the
issuance of the shares of Common Stock to be issued upon conversion of the Shares (the
“Conversion Shares”). The Shares and the Conversion Shares shall have the rights,
preferences, privileges and restrictions set forth in the Restated Certificate.



                    (c) Subject to the terms and conditions of this Agreement, each Investor agrees, severally and
not jointly, to purchase at the Closing or pursuant to Section 1.3 and the Company agrees to sell
and issue to each Investor at the Closing or pursuant to Section 1.3, that number of Shares set
forth opposite such Investor’s name on Schedule A hereto for $2.00 per share (the
“Series B Purchase Price”).



          1.2 Initial Closing. The purchase and sale of the Shares shall take place at the
offices of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP (“Gunderson
Dettmer”), 220 West 42nd Street, 20th Floor, New York, NY 10036, at 10
A.M. (local time), on the date hereof, or at such other time and place as the Company and Investors
acquiring in the aggregate a majority of the Shares sold pursuant to this Agreement agree upon
orally or in writing (which time and place are designated as the “Initial Closing”). At
the Initial Closing the Company shall deliver to each Investor participating therein (x) any
certificates, instruments and documents referred to in Section 4 below and (y) a share certificate
representing the Shares that such Investor is purchasing against payment of the purchase price
therefor by check, wire transfer or any combination thereof.




          1.3 Subsequent Sale of Series B Preferred Stock. The Company may sell the balance of
the Shares authorized in the Restated Certificate and to be sold pursuant to











 








this Agreement but not
sold at the Initial Closing to such investors (the “New Investors”) as may be approved by
the Board of Directors, at a price of not less than $2.00 per share, provided that the
agreement for such sale is executed within sixty (60) days after the Closing. All such purchases
of Shares shall be made on the terms and conditions set forth in this Agreement, including, without
limitation, satisfaction of the representations and warranties by the Investors as set forth in
Section 3. Such purchases of Shares shall be made by each subsequent purchaser by executing
counterpart signature pages to this Agreement and the Ancillary Agreements (as defined below),
making such purchaser a party and bound by the terms and conditions of this Agreement and the
Ancillary Agreements. Any Shares sold pursuant to this Section 1.3 shall be deemed to be “Shares”
for all purposes under this Agreement and any purchasers thereof shall be deemed to be “Investors”
under this Agreement and each of the Ancillary Agreements. Each sale of additional Shares pursuant
to this Section 1.3 shall be deemed a “Subsequent Closing,” and the Initial Closing or any
Subsequent Closing may be referred to herein as a “Closing.” At any Subsequent Closing,
the Company shall deliver to each New Investor a share certificate representing the shares that
such New Investor is purchasing against payment of the purchase price therefor by check or wire
transfer. Schedule A to this Agreement shall be updated to reflect the number of Shares
purchased at each Subsequent Closing and the parties purchasing such Shares and shall thereafter be
promptly delivered to each Investor who purchased shares at any Closing.




     2. Representations and Warranties of the Company. The Company hereby represents and
warrants to each Investor that, except as set forth on a Schedule of Exceptions (the “Schedule
of Exceptions”) furnished each Investor which exceptions shall be deemed to be representations
and warranties as if made hereunder:



          2.1 Organization, Good Standing and Qualification. The Company and its wholly-owned
subsidiaries CHEK International Holdings, Inc. and MyPersonal.com, Inc. (each a “Subsidiary” and
together the “Subsidiaries”) are corporations duly organized, validly existing and in good standing
under the laws of the State of Delaware and have all requisite corporate power and authority to
carry on its business as now conducted. Each of the Company and the Subsidiaries is duly qualified
to transact business and is in good standing in each jurisdiction in which the failure to so
qualify would have a material adverse effect on its respective business or properties.




          2.2 Corporate Power. The Company has all requisite legal and corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements, to sell and issue the
Shares, to issue the Conversion Shares and to carry out and perform its obligations under the terms
of this Agreement and the Ancillary Agreements.




          2.3 Capitalization and Voting Rights. The authorized capital of the Company consists,
or will consist immediately prior to the Closing, of:




                    (a) Preferred Stock. 9,779,982 shares of Preferred Stock, par value $0.01 (the
“Preferred Stock”), of which (i) 5,709,638 shares have been designated Series A Preferred
Stock (the “Series A Preferred Stock”), 5,470,322 of which are issued and outstanding and
239,316 of which are issuable upon conversion of interest under the Note and Warrant Purchase
Agreement dated November 18, 2002, (ii) 570,344 shares have been designated Series



2









 




A-1 Preferred
Stock (the “Series A-1 Preferred Stock”), all of which are issued and outstanding and (iii)
3,500,000 shares have been designated Series B Preferred Stock (the “Series B Preferred
Stock”), none of which are outstanding and all of which may be sold pursuant to this Agreement.
The rights, privileges and preferences of the Preferred Stock will be as stated in the Company’s
Restated Certificate.




          (b) Common Stock. 15,000,000 shares of common stock, par value $0.01 (“Common
Stock”), of which 82,260 shares are issued and outstanding.




          (c) The outstanding shares of Common Stock, Series A Preferred Stock, Series A-1 Preferred
Stock, and subject in part to the truth and accuracy of representations and warranties made by
purchasers of such shares, the Series B Preferred Stock, are all duly and validly authorized and
issued, fully paid and nonassessable, and were issued in accordance with the registration or
qualification provisions of the Securities Act of 1933, as amended (the “Act”) and any
relevant state securities laws, or pursuant to valid exemptions therefrom.




          (d) Except for (i) the conversion privileges of the Preferred Stock, (ii) the rights provided
in Section 2.4 of that certain Second Amended and Restated Investors’ Rights Agreement in the form
attached hereto as Exhibit B (the “Investors’ Rights Agreement”), (iii) warrants to
purchase 598,616 shares of Common Stock, (iv) currently outstanding options to purchase 714 shares
of Common Stock granted to employees and other service providers pursuant to the Chek, Inc. 1999
Stock Option Plan (the “1999 Stock Plan”) and (v) currently outstanding options to purchase
1,568,534 shares of Common Stock granted to employees and other service providers pursuant to the
Chek, Inc. 2000 Stock Plan (the “2000 Stock Plan” and, together with the 1999 Stock Plan,
the “Option Plans”), there are not outstanding any options, warrants, rights (including
conversion or preemptive rights) or agreements for the purchase or acquisition from the Company of
any shares of its capital stock. The Company has reserved an aggregate of 2,377,255 shares of its
Common Stock for purchase upon exercise of options under the 2000 Stock Plan. The Company has
reserved an aggregate of 3,054 shares of its Common Stock for purchase upon exercise of options
under the 1999 Stock Plan; however, the Company may not grant any new options from its 1999 Stock
Plan. The total number of shares permitted to be issued under the Option Plans equals 2,380,309.
Other than the Ancillary Agreements, the Company is not a party or subject to any agreement or
understanding, and, to the Company’s knowledge, there is no (i) proxy, stockholder agreement or
other agreement or understanding between any persons and/or entities, which affects or relates to
the transfer, voting or giving of written consents with respect to any security or by a director of
the
Company or (ii) co-sale, right of first refusal, first offer or other similar agreement with
any other person or entity.




          (e) All outstanding securities of the Company, including, without limitation, all outstanding
shares of the capital stock of the Company, all shares of the capital stock of the Company issuable
upon the conversion or exercise of all convertible or exercisable securities and all other
securities that the Company is obligated to issue, are subject to a one hundred eighty (180) day
“market stand-off” restriction upon an initial public offering of the Company’s securities pursuant
to a registration statement filed with the Securities and

3









 








Exchange Commission (“SEC”)
pursuant to the Act in a form substantially identical to Section 1.13 of the Investors’ Rights
Agreement.




                    (f) The Schedule of Exceptions sets forth a complete list of each security of the Company
owned by any officer, director or, in the Company’s reasonable belief, key employee of the Company,
or by any affiliate or any member of the immediate family of any such individual, together with a
description of the material terms of the vesting provisions and, to the Company’s knowledge, the
rights of first refusal and rights of repurchase applicable to each such security. Except as
contemplated by this Agreement or as set forth on the Schedule of Exceptions, there are no
agreements, written or oral, between the Company and any holder of its capital stock, or, to the
knowledge of the Company, among any holder of its capital stock, relating to the acquisition,
disposition, or voting of the capital stock of the Company.



                    (g) The Company has not: (i) issued any securities in violation of the requirements of Section
5 of the Act or any other law; (ii) violated any rule, regulation or requirement under the
Securities Act or Exchange Act; (iii) issued any securities in violation of any state securities
laws; or (iv) redeemed any securities in violation of any applicable state or federal securities
law or any agreement or contract governing the redemption of such securities.



          2.4 Subsidiaries. Except for the Subsidiaries, the Company does not presently own or
control, directly or indirectly, any interest in any other corporation, association, or other
business entity. The Company is not a participant in any joint venture, partnership, or similar
arrangement.




          2.5 Authorization. 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 Investors’ Rights Agreement, that certain Second Amended and Restated Stock
Restriction, First Refusal and Co-Sale Agreement in the form attached hereto as Exhibit C
(the “First Refusal and Co-Sale Agreement”) and that certain Second Amended and Restated
Voting Agreement in the form attached hereto as Exhibit D (the “Voting Agreement”,
and together with the Investors’ Rights Agreement and the First Refusal and Co-Sale Agreement, the
“Ancillary Agreements”), the performance of all obligations of the Company hereunder and
thereunder, and the authorization, issuance (or reservation for issuance), sale and delivery of the
Shares being sold hereunder and the Conversion Shares has been taken or will be taken prior to the
Initial Closing, and this Agreement and the Ancillary Agreements constitute valid and legally
binding obligations of the Company, enforceable in accordance with their respective terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general
application affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in the Investors’ Rights
Agreement may be limited by applicable federal or state securities laws.




          2.6 Valid Issuance of Preferred and Common Stock. The Shares being purchased by the
Investors hereunder, when issued, sold and delivered in accordance with the terms of this Agreement
for the consideration expressed herein, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than restrictions on transfer
under this Agreement and the Ancillary Agreements and under applicable state and

4









 








federal securities
laws. The Conversion Shares have been duly and validly reserved for issuance and, upon issuance in
accordance with the terms of the Restated Certificate, will be duly and validly issued, fully paid,
and nonassessable and will be free of restrictions on transfer other than restrictions on transfer
under this Agreement and the Ancillary Agreements and under applicable state and federal securities
laws.




          2.7 Governmental Consents. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any federal, state or local
governmental authority on the part of the Company is required in connection with the consummation
of the transactions contemplated by this Agreement, except (i) the filing of the Restated
Certificate with the Secretary of State of the State of Delaware which will be filed by the Company
prior to the Initial Closing; (ii) the filing pursuant to the Regulation D, promulgated by the
Securities and Exchange Commission under the Act, which filing will be effected within 15 days of
the sale of the Shares hereunder, (iii) the filings required by applicable state “blue sky”
securities laws, rules and regulations which will be filed by the Company in a timely manner
following the Initial Closing and each Subsequent Closing, and (iv) such other post closing filings
as may be required.




          2.8 Offering. Subject in part to the truth and accuracy of each Investor’s
representations set forth in Section 3 of this Agreement, the offer, sale and issuance of the
Shares as contemplated by this Agreement are exempt from the registration requirements of any
applicable state and federal securities laws, and neither the Company nor any authorized agent
acting on its behalf will take any action hereafter that would cause the loss of such exemption.




          2.9 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 or any Ancillary Agreement, or the right of the Company to enter into such
agreements, or to consummate the transactions contemplated hereby or thereby, or that might result,
either individually or in the aggregate, in any material adverse changes in the assets, condition
or affairs of the Company or any Subsidiary, financially or otherwise, or any change in the current
equity ownership of the Company or any Subsidiary, nor is the Company or any Subsidiary aware that
there is any basis for the foregoing. The foregoing includes, without limitation, actions, suits,
proceedings or investigations pending or threatened (or any basis therefor known to the Company or
any Subsidiary) involving the prior employment of any of the Company’s or the Subsidiaries’
employees, their use in connection with the Company’s or any Subsidiary’s business of any
information or techniques allegedly proprietary to any of their former employers, or their
obligations under any agreements with prior employers. Neither the Company nor any Subsidiary is a
party or subject to the provisions of any order, writ, injunction, judgment or decree of any court
or government agency or instrumentality. There is no action, suit, proceeding or investigation by
the Company or any Subsidiary currently pending or that the Company or any Subsidiary intends to
initiate.




          2.10 Patents and Trademarks. To its knowledge, the Company and each Subsidiary has
sufficient title and ownership of or licenses to all patents, trademarks, service marks, trade
names, domain names, copyrights, trade secrets, information, proprietary rights and processes
(collectively, “IP”) necessary for its respective business as now conducted and as

5









 








proposed
to be conducted without any violation or infringement of the rights of others, except for such
items as have yet to be conceived or developed or that are expected to be available for licensing
on reasonable terms from third parties. The Schedule of Exceptions contains a complete list of
patents and pending patent applications and registrations and applications for trademarks,
copyrights and domain names of, or exclusively licensed to, the Company and each Subsidiary. There
are no outstanding options, licenses, agreements, claims, encumbrances or shared ownership of
interests of any kind relating to anything referred to above in this Section 2.10 that is to any
extent owned by or exclusively licensed to the Company or any Subsidiary, nor is the Company or any
Subsidiary bound by or a party to any options, licenses or agreements of any kind with respect to
the patents, trademarks, service marks, trade names, domain names, copyrights, trade secrets,
licenses, information, proprietary rights and/or processes of any other person or entity, except,
in either case, for standard “off-the-shelf” end-user, object code, internal-use software license
and support/maintenance agreements. Neither the Company nor any Subsidiary has received any
communications alleging that the Company or any Subsidiary has violated any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of
any other person or entity and neither the Company nor any Subsidiary is aware of any potential
basis for such an allegation or of any specific reason to believe that such an allegation may be
forthcoming. Neither the Company nor any Subsidiary is aware of any infringement upon or
misappropriation of any IP of the Company or any Subsidiary. Neither the Company nor any
Subsidiary is aware that any of its 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 the use of his or her best
efforts to promote the interests of the Company or such Subsidiary or that would conflict with the
Company’s or any Subsidiary’s business as presently conducted or as proposed to be conducted.
Neither the execution nor delivery of this Agreement or the Ancillary Agreements, nor the carrying
on of the Company’s or any Subsidiary’s business by its respective employees, nor the conduct of
the Company’s or any Subsidiary’s business as proposed, will, to the Company’s 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 of such employees is now obligated.
Neither the Company nor any Subsidiary believes it is or will be necessary to utilize any
inventions of any of its employees made prior to or outside the scope of their employment by the
Company or such Subsidiary.




          2.11 Confidentiality Agreements. Since November 18, 2002, each employee, officer and
consultant of the Company and each Subsidiary has executed a Confidentiality Agreement or
Consulting Agreement, as applicable, in substantially the forms previously provided to counsel for
the Investors. Neither the Company nor any Subsidiary is aware that any of its respective
employees, officers or consultants is in violation thereof, and the Company and each Subsidiary
will use its commercially reasonable efforts to prevent any such violation.




          2.12 Compliance with Other Instruments. The Company is not in violation or default in
any material respect of any provision of its Restated Certificate or Bylaws, or in any material
respect of any instrument, judgment, order, writ, decree or contract to which it is a party or by
which it is bound, or, to its knowledge, of any provision of any federal or state statute, rule or
regulation applicable to the Company. The execution, delivery and performance

6









 








of this Agreement
and the Ancillary Agreements, and the consummation of the transactions contemplated hereby and
thereby will not result in any such violation or default or be in conflict with or constitute, with
or without the passage of time and giving of notice, either a default under any such provision,
instrument, judgment, order, writ, decree or contract or an event that results in the creation of
any lien, charge or encumbrance upon any assets of the Company or the suspension, revocation,
impairment, forfeiture, or nonrenewal of any material permit, license, authorization, or approval
applicable to the Company, its business or operations or any of its assets or properties.




     2.13 Agreements; Action.



          (a) Except for agreements explicitly contemplated hereby and by the Ancillary Agreements,
there are no agreements, understandings or proposed transactions between the Company or any
Subsidiary and any of their officers, directors, affiliates, or any affiliate thereof.




          (b) There are no agreements, understandings, instruments, contracts, proposed transactions,
judgments, orders, writs or decrees to which the Company or any Subsidiary is a party or by which
it is bound that may involve (i) obligations (contingent or otherwise) of, or payments to the
Company or any Subsidiary in excess of, $50,000, or (ii) any material license of any patent,
copyright, trade secret or other proprietary right to or from the Company or any Subsidiary (other
than (A) the license of the Company’s software and products in object code form in the ordinary
course of business pursuant to standard end-user agreements the form of which has been provided to
special counsel for the Investors or (B) the license to the Company or any Subsidiary of standard,
generally commercially available, “off-the-shelf” third party products that are not and will not to
any extent be part of any product, service or intellectual property offering of the Company or any
Subsidiary).




          (c) Neither the Company nor any Subsidiary has (i) declared or paid any dividends or
authorized or made any distribution upon or with respect to any class or series of its capital
stock, (ii) incurred any indebtedness for money borrowed or any other liabilities individually in
excess of $50,000 or, in the case of indebtedness and/or liabilities individually less than
$25,000, in excess of $100,000 in the aggregate, (iii) made any loans or advances to any person,
other than ordinary advances for travel expenses, or (iv) 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.




          (d) For the purposes of subsections (b) and (c) above, all indebtedness, liabilities,
agreements, understandings, instruments, contracts and proposed transactions involving the same
person or entity (including persons or entities the Company or any Subsidiary has reason to believe
are affiliated therewith) shall be aggregated for the purpose of meeting the individual minimum
dollar amounts of such subsections.




     2.14 Related-Party Transactions.



          (a) No employee, officer, or director of the Company or any Subsidiary (a “Related
Party”) or member of such Related Party’s immediate family, or any

7









 








corporation, partnership or
other entity in which such Related Party is an officer, director or partner, or in which such
Related Party has significant ownership interests or otherwise controls, is indebted to the Company
or any Subsidiary, nor is the Company or any Subsidiary indebted (or committed to make loans or
extend or guarantee credit) to any of them. To the Company’s knowledge, none of such persons has
any direct or indirect ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company or any Subsidiary has a business relationship, or any firm or
corporation that competes with the Company or any Subsidiary, except that employees, officers, or
directors of the Company and members of such Related Party’s immediate families may own stock in
publicly traded companies that may compete with the Company. No Related Party or member of their
immediate family is directly or indirectly interested in any material contract with the Company or
any Subsidiary.




                    (b) The following persons, in each person’s capacity as an individual, are not direct
stockholders of the Company: Allen F. Grum, Luiz F. Kahl, Erland E. Kailbourne, Ross B. Kenzie,
Willis S. McLeese, Reginald B. Newman, Daniel P. Penberthy and Jayne K. Rand.



          2.15 Related Persons. To the Company’s knowledge, no director or officer of the
Company or any Subsidiary, and no relative by blood or marriage of any director or officer of the
Company or any Subsidiary, is employed directly or indirectly by or with, or has any financial
interest in, the Company, any Subsidiary or any supplier, service organization, customer or other
entity that has or is presently expected to have a business relationship with the Company or any
Subsidiary.




          2.16 Disclosure. The Company has fully provided each Investor with all the
information that such Investor has requested for deciding whether to purchase the Shares. No
certificates made or delivered in connection with this Agreement or the Ancillary Agreements
contain any untrue statement of a material fact or, to the Company’s knowledge omits to state a
material fact necessary to make the statements herein or therein not misleading.




          2.17 Registration Rights. Except as provided in the Investors’ Rights Agreement, the
Company has not granted or agreed to grant any registration rights, including piggyback rights, to
any person or entity.




          2.18 Corporate Documents. Except for amendments necessary to satisfy the
representations, warranties or conditions contained in this Agreement (the form of which amendments
has been approved by the Investors), the Restated Certificate and Bylaws of the Company are in the
form previously provided to the Investors.




          2.19 Title to Property and Assets. The Company owns its property and assets free and
clear of all mortgages, liens, loans and encumbrances, except such encumbrances and liens that
arise in the ordinary course of business and do not materially impair the Company’s ownership or
use of such property or assets. With respect to the property and assets it leases, the Company is
in compliance with such leases and, to its knowledge, holds a valid leasehold interest free of any
liens, claims or encumbrances. The Subsidiaries do not own or lease any property.




8









 








          2.20 Small Business Concern. The Company acknowledges that one or more of the
Investors are small business investment companies (an “SBIC”) licensed by the U.S. Small
Business Administration (the “SBA”), and represents and warrants to each such Investor that
is an SBIC that the Company, taken together with its “affiliates” (as that term is defined in 13
C.F.R. §121.103), is a “Small Business Concern” within the meaning of 15 U.S.C. §622(5), that is
Section 103(5) of the Small Business Investment Act of 1958, as amended (the “SBIC Act”),
and the regulations thereunder, including 13 C.F.R. §107, and meets the applicable size eligibility
criteria set forth in 13 C.F.R. §121.301(c)(1) or the industry standard covering the industry in
which the Company is primarily engaged as set forth in 13 C.F.R. §121.301(c)(2). Neither the
Company nor any of its subsidiaries presently engages in any activities for which an SBIC is
prohibited from providing funds by the SBIC Act, including 13 C.F.R. §107. The information set
forth in the Small Business Administration Forms 480, 652 and Part A of Form 1031 regarding the
Company and its affiliates, when delivered to each Investor that is an SBIC, will be accurate and
complete.




          2.21 Financial Statements. The Company has delivered to each Investor its
consolidated unaudited financial statements (balance sheet and income and cash flow statements,
including notes thereto) at December 31, 2003 and for the fiscal year then ended, and its
consolidated unaudited financial statements (balance sheet and income statement) as at and for the
eight-month period ended August 31, 2004 (the “Financial Statements”). The Financial
Statements have been prepared in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods indicated and with each other, except that the
unaudited Financial Statements may not contain all footnotes required by generally accepted
accounting principles. The Financial Statements fairly present the financial condition and
operating results of the Company as of the dates, and for the periods, indicated therein, subject
in the case of the unaudited Financial Statements to normal year-end audit adjustments. Except as
set forth in the Financial Statements, the Company has no material liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to
August 31, 2004 (the
“Financial Statement Date”) and (ii) obligations under contracts and commitments
incurred in the ordinary course of business and not required under generally accepted accounting
principles to be reflected in the Financial Statements, which, in both cases, individually or in
the aggregate, are not material to the financial condition or operating results of the Company.
Except as disclosed in the Financial Statements, the Company is not a guarantor or indemnitor of
any indebtedness of any other person, firm or corporation. The Company maintains and will continue
to maintain a standard system of accounting established and administered in accordance with
generally accepted accounting principles.




          2.22 Changes. Since the Financial Statement Date there has not been:




                    (a) any change in the assets, liabilities, financial condition or operating results of the
Company from that reflected in the Financial Statements, except changes in the ordinary course of
business that have not been, in the aggregate, materially adverse;



                    (b) any damage, destruction or loss, whether or not covered by insurance, materially and
adversely affecting the assets, properties, financial condition, operating results, prospects or
business of the Company (as such business is presently conducted and as it is proposed to be
conducted);



9









 





          (c) any waiver by the Company of a valuable right or of a material debt owed to it;




          (d) any satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by the Company, except in the ordinary course of business and that is not material to
the assets, properties, financial condition, operating results or business of the Company (as such
business is presently conducted and as it is proposed to be conducted);




          (e) any material change or amendment to a material contract or arrangement by which the
Company or any of its assets or properties is bound or subject;




          (f) any material change in any compensation arrangement or agreement with any employee;




          (g) any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or
other intangible assets;




          (h) any resignation or termination of employment of any key officer of the Company; and the
Company, to its knowledge, does not know of the impending resignation or termination of employment
of any such officer;




          (i) receipt of notice that there has been a loss of, or material order cancellation by, any
major customer of the Company;




          (j) any mortgage, pledge, transfer of a security interest in, or lien, created by the Company,
with respect to any of its material properties or assets, except liens for taxes not yet due or
payable;




          (k) any loans or guarantees made by the Company to or for the benefit of its employees,
officers or directors, or any members of their immediate families, other than travel advances and
other advances made in the ordinary course of its business;




          (l) any declaration, setting aside or payment or other distribution in respect of any of the
Company’s capital stock, or any direct or indirect redemption, purchase or other acquisition of any
of such stock by the Company;




          (m) to the Company’s knowledge, any other event or condition of any character that might
materially and adversely affect the assets, properties, financial condition, operating results or
business of the Company (as such business is presently conducted and as it is proposed to be
conducted); or




          (n) any agreement or commitment by the Company to do any of the things described in this
Section 2.22.




     2.23 Employee Benefit Plans. Neither the Company nor any Subsidiary has any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.



10









 





          2.24 Tax Returns, Payments and Elections. The Company has filed all tax returns and
reports (including information returns and reports) as required by law. These returns and reports
are true and correct in all material respects except to the extent that a reserve has been
reflected on the Financial Statements in accordance with generally accepted accounting principles.
The Company has paid all taxes and other assessments due, except those contested by it in good
faith that are listed in the Schedule of Exceptions and except to the extent that a reserve has
been reflected on the Financial Statements in accordance with generally accepted accounting
principles. The provision for taxes of the Company as shown in the Financial Statements is
adequate for taxes due or accrued as of the date thereof. The Company has not elected pursuant to
the Internal Revenue Code of 1986, as amended (the “Code”), to be treated as a Subchapter S
corporation or a collapsible corporation pursuant to Section 1362(a) or Section 341(f) of the Code,
nor has it made any other elections pursuant to the Code (other than elections that relate solely
to methods of accounting, depreciation or amortization) that would have a material effect on the
Company, its financial condition, its business as presently conducted or proposed to be conducted
or any of its properties or material assets. The Company has never had any tax deficiency proposed
or assessed against it and has not executed any waiver of any statute of limitations on the
assessment or collection of any tax or governmental charge. None of the Company’s federal income
tax returns and none of its state income or franchise tax or sales or use tax returns has ever been
audited by governmental authorities. Since the Financial Statement Date, the Company has not
incurred any taxes, assessments or governmental charges other than in the ordinary course of
business and the Company has made adequate provisions on its books of account for all taxes,
assessments and governmental charges with respect to its business,
properties and operations for such period. The Company has withheld or collected from each
payment made to each of its employees, the amount of all taxes (including, but not limited to,
federal income taxes, Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act
taxes) required to be withheld or collected therefrom, and has paid the same to the proper tax
receiving officers or authorized depositories.




          2.25 Insurance. The Company has in full force and effect workers’ compensation
insurance required by the applicable law, fire and casualty insurance policies, with extended
coverage customary for companies similarly situated and, in the case of fire and casualty
insurance, sufficient in amount (subject to reasonable deductibles) to allow it to replace any of
its properties that might be damaged or destroyed.




          2.26 Minute Books. The minute books of the Company provided or made available to the
Investors contain a complete summary of all meetings and actions taken by written consent of
directors and any committee thereof and stockholders since the time of incorporation and reflect
all transactions referred to in such minutes or consents accurately in all material respects. The
stock ledger of the Company as provided to counsel to the Investors is complete and reflects all
issuances, transfers, repurchases and cancellations of shares of capital stock of the Company.




          2.27 Labor Agreements and Actions; Employee Compensation. Neither the Company nor any
Subsidiary is bound by or subject to (and none of their assets or properties is bound by or subject
to) any written or oral, express or implied, contract, commitment or arrangement with any labor
union, and no labor union has requested or, to the Company’s knowledge, has sought to represent any
of the employees, representatives or agents of the

11









 








Company or any Subsidiary. There is no strike
or other labor dispute involving the Company or any Subsidiary pending, or to the Company’s
knowledge, threatened, that could have a material adverse effect on the assets, properties,
financial condition, operating results, or business of the Company or any Subsidiary (as such
businesses are presently conducted and as it is proposed to be conducted), nor is the Company or
any Subsidiary aware of any labor organization activity involving its employees. Neither the
Company nor any Subsidiary is aware that any officer or key employee, or that any group of key
employees, intends to terminate their employment with the Company or such Subsidiary, nor does the
Company or any Subsidiary have a present intention to terminate the employment of any of the
foregoing. The employment of each officer and employee of the Company and each Subsidiary is
terminable at the will of the Company. To the knowledge of the Company, the Company and each
Subsidiary has complied in all material respects with all applicable state and federal equal
employment opportunity and other laws related to employment. Neither the Company nor any
Subsidiary is a party to or bound by any currently effective employment contract, deferred
compensation agreement, bonus plan, incentive plan, profit sharing plan, retirement agreement, or
other employee compensation agreement.




          2.28 Other Agreements of Employees. To the Company’s knowledge, no officer, director,
stockholder, or employee of the Company or any Subsidiary is a party to or bound by any agreement,
contract, or commitment that materially and adversely affects the business, operations or prospects
of the
Company or any Subsidiary, or the right of any such person to participate in the Company’s or
any Subsidiary’s affairs and perform the duties of his office or capacity in connection therewith,
or that obligates any such person to perform any duty for any prior employer or principal.




          2.29 Section 83(b) Elections. To the Company’s knowledge, all individuals who have
purchased unvested shares of the Company’s Common Stock have timely filed elections under Section
83(b) of the Code and any analogous provisions of applicable state tax laws.




          2.30 Qualified Small Business Stock. As of the Closing: (i) the Company will be an
eligible corporation as defined in Section 1202(e)(4) of the Internal Revenue Code of 1986, as
amended (the “Code”), (ii) the Company will not have made any purchases of its own stock
during the one-year period preceding the Closing having an aggregate value exceeding 5% of the
aggregate value of all its stock as of the beginning of such period and (iii) the Company’s
aggregate gross assets, as defined by Code Section 1202(d)(2), at no time between the inception of
the Company and through the Closing have exceeded or will exceed $50 million, taking into account
the assets of any corporations required to be aggregated with the Company in accordance with Code
Section 1202(d)(3); provided however, that in no event shall the Company be liable
to the Investors for any damages arising from any subsequently proven or identified error in the
Company’s determination with respect to the applicability or interpretation of Section 1202 unless
such determination shall have been given by the Company in a manner either negligent or fraudulent.




          2.31 Qualified Business. The Company is a “Qualified Business” as defined under
Section 11(a)(6) of the New York Tax Law.





12









 








          2.32 Representations Complete. No representation or warranty of the Company made in
this Agreement or any Ancillary Agreement, or in any schedule, document or certificate furnished
pursuant to this Agreement or any Ancillary Agreement, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact necessary to make any
statement of fact contained herein or therein not misleading. There is no fact or circumstance
which is not disclosed in this Agreement or the schedules hereto which could reasonably be expected
to have a material adverse effect on the Company’s financial condition, operating results, assets,
supplier relations, customer relations, employee relations or business prospects.




     3. Representations and Warranties of the Investors. Each Investor, severally and not
jointly, hereby represents and warrants that:



          3.1 Authorization. Such Investor has full power and authority to enter into this
Agreement and the Ancillary Agreements, and each such Agreement constitutes its valid and legally
binding obligation, enforceable in
accordance with its terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the extent the
indemnification provisions contained in the Investors’ Rights Agreement may be limited by
applicable federal or state securities laws.




          3.2 Purchase Entirely for Own Account. This Agreement is made with such Investor in
reliance upon such Investor’s representation to the Company, which by such Investor’s execution of
this Agreement such Investor hereby confirms, that the Shares to be received by such Investor and
the Conversion Shares (collectively, the “Securities”) will be acquired for investment for
such Investor’s own account, not as a nominee or agent, and not with a view to the distribution of
any part thereof, and that such Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this Agreement, such Investor
further represents that such Investor 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 Securities.




          3.3 Disclosure of Information. Such Investor believes it has received all the
information it considers necessary or appropriate for deciding whether to purchase the Shares.
Such Investor further represents that it has had an opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of the offering of the Shares and the
business, properties, prospects and financial condition of the Company. The foregoing, however,
does not limit or modify the representations and warranties of the Company in Section 2 of this
Agreement or the right of the Investors to rely thereon.




          3.4 Investment Experience. Such Investor is an investor in securities of companies in
the development stage and acknowledges that it is able to fend for itself, can bear the economic
risk of its investment, and has such knowledge and experience in financial or business matters that
it is capable of evaluating the merits and risks of the investment in the Shares. If other than an
individual, Investor also represents it has not been organized for the purpose of acquiring the
Shares.





13









 










          3.5 Accredited Investor. Such Investor is an “accredited investor” within the meaning
of SEC Rule 501 of Regulation D, as presently in effect.




          3.6 Restricted Securities. Such Investor understands that the Securities will be
characterized as “restricted securities” under the 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 securities may be resold without registration under the
Act, only in certain limited circumstances. In this connection, such Investor represents that it
is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations
imposed thereby and by the Act.




          3.7 Further Limitations on Disposition. Without in any way limiting the
representations set forth above, such Investor further agrees not to make any disposition of all or
any portion of the Securities unless and until:




                    (a) There is then in effect a Registration Statement under the Act covering such proposed
disposition and such disposition is made in accordance with such Registration Statement; or



                    (b) (i) Such Investor 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 reasonably requested by the Company, such Investor 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 Act. It is agreed that the
Company will not require opinions of counsel for transactions made pursuant to Rule 144 except in
unusual circumstances.



                    (c) Notwithstanding the provisions of subsections (a) and (b) above, no such registration
statement or opinion of counsel shall be necessary for a transfer by an Investor that 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 prospective transferee agrees
in all such instances in writing to be subject to the terms hereof to the same extent as if he or
she were an original Investor hereunder.



          3.8 Legends. It is understood that the certificates evidencing the Securities may
bear one or all of the following legends:




                    (a) “THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. 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. THIS CERTIFICATE MUST BE SURRENDERED TO THE CORPORATION OR ITS TRANSFER
AGENT AS A CONDITION PRECEDENT TO THE SALE, PLEDGE OR OTHER TRANSFER OF ANY INTEREST IN ANY
SECURITIES REPRESENTED BY THIS CERTIFICATE.”



14









 





                         (b) Any legend required by applicable state “blue sky” securities laws, rules and regulations.



                    3.9 Exculpation Among Investors. Each Investor acknowledges that it is not relying
upon any person, firm or corporation, other than the Company and its officers and directors, in
making its investment or decision to invest in the Company. Each Investor agrees that no Investor,
nor the respective controlling persons, officers, directors, partners, agents, or employees of any
Investor, shall be liable to any other Investor for any action heretofore or hereafter taken or
omitted to be taken by any of them in connection with the purchase of the Securities.



          4. Conditions of Investors’ Obligations at Closing. The obligations of each Investor
under subsection 1.1(c) of this Agreement are subject to the fulfillment on or before the Closing
of each of the following conditions, the waiver of which shall not be effective against any
Investor who does not consent thereto, except that Sections 4.1, 4.3, 4.6 and 4.9 need not be
fulfilled for subsequent sales of the Shares pursuant to Section 1.3 hereof:




                    4.1 Representations and Warranties. The representations and warranties of the Company
contained in Section 2 shall be true on and as of the Initial Closing.



                    4.2 Performance. The Company shall have performed and complied with all agreements,
obligations and conditions contained in this Agreement that are required to be performed or
complied with by it on or before the Closing.



                    4.3 Compliance Certificate. The President of the Company shall deliver to each
Investor at the Initial Closing a certificate stating that the conditions specified in Sections 4.1
and 4.2 have been fulfilled and stating that there shall have been no material adverse change in
the business, affairs, operations, properties, assets or condition of the Company since the date of
the Financial Statements.



                    4.4 Qualifications. All authorizations, approvals, or permits, if any, of any
governmental authority or regulatory body of the United States or of any state that are required in
connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be
duly obtained and effective as of the Closing.



                    4.5 Proceedings and Documents. All corporate and other proceedings in connection with
the transactions contemplated at the Closing and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Investors, and they shall have received all such
counterpart original and certified or other copies of such documents as they may reasonably
request.



                    4.6 Secretary’s Certificate. The Secretary or Assistant Secretary of the Company shall
deliver to each Investor at the Initial Closing a certificate stating that the copies of the
Company’s Restated Certificate and Bylaws and Board of Director and stockholder resolutions
relating to the sale of the Shares attached thereto are true and complete copies of such documents
and resolutions.



15









 





          4.7 Nondisclosure and Development Agreements. Each key manager, as determined by the
Board of Directors, each founder, officer, and key employee of the Company shall have
entered into a non-disclosure and development agreement substantially in the form previously
provided or made available to the Investors.




          4.8 Board of Directors. The Company and its stockholders shall have taken all
necessary corporate action such that, immediately following the Initial Closing, the Board of
Directors of the Company shall be constituted as set forth in the Voting Agreement.




          4.9 Opinion of Company Counsel. Each Investor shall have received from Gunderson
Dettmer, counsel for the Company, an opinion, dated as of the Initial Closing, in the form attached
hereto as Exhibit E.




          4.10 Investors’ Rights Agreement. The Company and the other parties thereto (other
than such Investor) sufficient to amend and restate the Amended and Restated Investors’ Rights
Agreement dated October 7, 2003 shall have executed and delivered the Investors’ Rights Agreement
in the form attached as Exhibit B.




          4.11 Stock Restriction, First Refusal and Co-Sale Agreement. The Company and the
other parties thereto (other than such Investor) sufficient to amend and restate the Amended and
Restated Stock Restriction, First Refusal and Co-Sale Agreement dated October 7, 2003 shall have
executed and delivered the Stock Restriction, First Refusal and Co-Sale Agreement in the form
attached hereto as Exhibit C.




          4.12 Voting Agreement. The Company and the other parties thereto (other than such
Investor) sufficient to amend and restate the Amended and Restated Voting Agreement dated October
7, 2003 shall have executed and delivered the Voting Agreement in the form attached hereto as
Exhibit D.




          4.13 Management Rights Letter. The Company shall have entered into a Management
Rights Letter, in the form attached hereto as Exhibit F, with certain of the Investors.




          4.14 Indemnification Agreements. The Company shall have entered into prior to the
closing an indemnification agreement in substantially the form attached hereto as Exhibit G
with each member of the Board of Directors as of and immediately following the Initial Closing.




          4.15 Minimum Investment Amount. The Initial Closing shall include an aggregate
investment amount of at least $4,000,000.




          4.16 Certificate of Incorporation. The Restated Certificate shall have been accepted
for filing by the Secretary of State of the State of Delaware.




          4.17 Approval of Stock Option Plan Increase. The Board of Directors of the Company
and the Company’s stockholders shall have duly and validly approved an increase in the number of
shares reserved for issuance under the 2000 Stock Plan such that the




16









 







aggregate number of shares of
Common Stock authorized to be issued under the 2000 Stock Plan shall be 2,377,255 shares as of the
Initial Closing.




                    4.18 SBIC Forms. On or before the closing of the transactions contemplated by this
Agreement, each Investor that is an SBIC shall have received the following SBA documents: (a) SBA
Form 480 (Size Status Declaration), (b) SBA Form 652 (Assurance of Compliance) completed and
executed by the Company and (c) SBA Form 1031 (Portfolio Finance Report), Parts A and B completed
by the Company.



          5. Conditions of the Company’s Obligations at Closing. The obligations of the Company
to each Investor under this Agreement are subject to the fulfillment on or before the Closing of
each of the following conditions by that Investor:




                    5.1 Representations and Warranties. The representations and warranties of the
Investors contained in Section 3 shall be true on and as of the Closing.



                    5.2 Payment of Purchase Price. The Investors shall have delivered the purchase price
specified in Section 1.1(c), including by cancellation of indebtedness to the Company.



                    5.3 Qualifications. All authorizations, approvals, or permits, if any, of any
governmental authority or regulatory body of the United States or of any state that are required in
connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be
duly obtained and effective as of the Closing.



          6. Post Closing Covenants.




                    6.1 Use of Proceeds. The Company shall use proceeds from the sale of the Shares for
working capital and general corporate purposes including expansion and new product development and
for such other purposes as the Board of Directors shall so determine.



                    6.2 Key Man Insurance. The Company shall maintain term life insurance on the lives of
certain key employees of the Company, as determined by the Board of Directors, in the amount of
$1,000,000 each. Such policies shall name the Company as loss payee and shall not be cancelable by
the Company without prior approval of the Board of Directors.



                    6.3 D&O Insurance. The Company shall establish D&O insurance, including prior acts
coverage so long as, in the opinion
of the Board of Directors of the Company, the cost of such prior acts coverage is not
prohibitive, on terms and conditions satisfactory to the Investors.



          7. Miscellaneous.




                    7.1 Survival of Warranties. The warranties, representations and covenants of the
Company and Investors contained in or made pursuant to this Agreement shall survive the execution
and delivery of this Agreement and the Closing and shall in no way be



17









 




affected by any investigation
of the subject matter thereof made by or on behalf of the Investors or the Company.




                    7.2 Successors and Assigns. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties (including transferees of any Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than the parties hereto
or their respective successors and assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided in this Agreement.



                    7.3 Governing Law. This Agreement shall be governed by and construed under the laws
of the State of New York as applied to agreements among New York residents entered into and to be
performed entirely within New York.



                    7.4 Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.



                    7.5 Titles and Subtitles. The titles and subtitles used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting this Agreement.



                    7.6 Notices. All notices and other communications given or made pursuant hereto 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 electronic mail or facsimile if sent during normal business
hours of the recipient; if not, then on the next business day, (iii) five (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 respective parties
at the addresses set forth on the signature pages attached hereto (or at such other addresses as
shall be specified by notice given in accordance with this Section 7.6) (and in the case of the
Investors, with a copy to Haynes and Boone, L.L.P., 2505 N. Plano Road, Suite 4000, Richardson,
Texas 75082, ATTN: Bo Sartain).



                    7.7 Finder’s Fee. Each party represents that it neither is nor will be obligated for
any finders’ fee or commission in connection with this transaction. Each Investor agrees to
indemnify and to hold harmless the Company from
any liability for any commission or compensation in the nature of a finders’ fee (and the
costs and expenses of defending against such liability or asserted liability) for which such
Investor or any of its officers, partners, employees, or representatives is responsible.



          The Company agrees to indemnify and hold harmless each Investor from any liability for any
commission or compensation in the nature of a finders’ fee (and the costs and expenses of defending
against such liability or asserted liability) for which the Company or any of its officers,
employees or representatives is responsible.




                    7.8 Expenses. Irrespective of whether the Closing is effected, the Company shall pay
all costs and expenses that it incurs with respect to the negotiation,



18









 




execution, delivery and
performance of this Agreement. If the Closing is effected, the Company shall, at the Closing, (a)
pay the legal, accounting, consulting and out-of-pocket expenses incurred at the direction of
Advantage Capital New York Partners I, L.P. (the “Lead Investor”) with respect to the
negotiating, execution and delivery of this Agreement, including the costs incurred with respect to
the review of this Agreement by the other Investors; provided, that such fees and expenses
shall not exceed $30,000 in the aggregate, with up to an additional $5,000 paid to counsel to Intel
Capital Corporation for their review of this Agreement and (b) pay a sum not to exceed $1,000 for
due diligence costs incurred with respect to the transactions contemplated hereby. If any action
at law or in equity is necessary to enforce or interpret the terms of this Agreement, the Ancillary
Agreements or the Restated Certificate, the prevailing party shall be entitled to reasonable
attorney’s fees, costs and necessary disbursements in addition to any other relief to which such
party may be entitled.




     7.9 Amendments and Waivers. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written consent of the Company
and the holders of at least sixty percent (60%) of the Conversion Shares issued or issuable upon
conversion of the Shares purchased hereunder. Any amendment or waiver effected in accordance with
this section shall be binding upon each holder of any securities purchased under this Agreement at
the time outstanding (including securities into which such securities are convertible), each future
holder of all such securities, and the Company.



     7.10 Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this Agreement and the
balance of the Agreement shall be interpreted as if such provision were so excluded and shall be
enforceable in accordance with its terms.



     7.11 Aggregation of Stock. All shares of the Preferred Stock held or acquired by
affiliated entities or persons shall be aggregated together for the purpose of determining the
availability of any rights under this Agreement.



     7.12 Entire Agreement. This Agreement and the documents referred to herein constitute
the entire agreement among the
parties and no party shall be liable or bound to any other party in any manner by any
warranties, representations, or covenants except as specifically set forth herein or therein.



     7.13 Publicity. Each party hereto may publicly disclose the transactions described in
this Agreement in the ordinary course of business.



     7.14 Arbitration. Any controversy between the parties hereto involving any claim
arising out of or relating to the termination of this Agreement, will be submitted to and be
settled by final and binding arbitration in New York, New York, in accordance with the then current
Commercial Arbitration Rules of the American Arbitration Association (the “AAA”), and
judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction
thereof; provided, however, that (i) this Section 7.14 shall not apply to
Intel Capital Corporation (“Intel Capital”) and its affiliates, and (ii) this Section
7.14 shall apply to any transferee of Shares that is not a partner or affiliate of Intel
Capital. Such arbitration shall be



19









 




conducted by three (3) arbitrators chosen by the Company and
the Lenders, or failing such agreement, an arbitrator experienced in the sale of similarly sized
companies appointed by the AAA. There shall be limited discovery prior to the arbitration hearing
as follows: (a) exchange of witness lists and copies of documentary evidence and documents relating
to or arising out of the issues to be arbitrated, (b) depositions of all party witnesses, and (c)
such other depositions as may be allowed by the arbitrators upon a showing of good cause.
Depositions shall be conducted in accordance with the New York Code of Civil Procedure, the
arbitrator(s) shall be required to provide in writing to the parties the basis for the award or
order of such arbitrator(s), and a court reporter shall record all hearings, with such record
constituting the official transcript of such proceedings.




(Remainder of page intentionally left blank)




20









 





     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.



	 	 	 	 	 	 	 
	 	 	COMPANY:	 	 
	 
	 	 	 	 	 	 
	 	 	SYNACOR, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Ron Frankel	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Ron Frankel	 	 
	 

	 	 	 	President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 

	Address:
	 	50 Fountain Plaza, Suite 1520	 	 
	 

	 	 	 	Buffalo, NY 14202
	 	 
	 
	 	 	 	 	 	 
	 	 	INVESTORS:	 	 
	 
	 	 	 	 	 	 
	 	 	ADVANTAGE CAPITAL NEW YORK PARTNERS I, L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ M. Scott Murphy	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Scott Murphy	 	 
	 

	 	Title:
	 	Sr. Vice President	 	 
	 
	 	 	 	 	 	 
	 

	Address:
	 	521 Madison Avenue, 7th Floor	 	 
	 

	 	 	 	New York, NY 10022	 	 
	 
	 	 	 	 	 	 
	 	 	ACCESS TECHNOLOGY CAPITAL, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Peter L. Thoren	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 Peter L. Thoren	 	 
	 

	 	Title:	 	 Vice President	 	 
	 
	 	 	 	 	 	 
	 

	Address:
	 	730 Fifth Avenue, 20th Floor	 	 
	 

	 	 	 	New York, NY 10019	 	 




 SIGNATURE PAGE TO SYNACOR, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT



 









 






	 	 	 	 	 	 	 
	 	 	INTEL CAPITAL CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Ravi Jacob	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Ravi Jacob	 	 
	 

	 	Title:
	 	Vice President, Finance & Enterprise Services	 	 
	 

	 	 	 	Group, Assistant Treasurer, M&A	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:
	 	c/o Intel Corporation	 	 
	 

	 	 	 	Attn: Intel Capital Portfolio Manager	 	 
	 

	 	 	 	2200 Mission College Blvd., M/S RN6-46	 	 
	 

	 	 	 	Santa Clara, CA 95052	 	 
	 

	 	 	 	Facsimile: (408) 765-6038	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	With a copy by e-mail to:	 	 
	 

	 	 	 	portfolio.manager@intel.com	 	 
	 
	 	 	 	 	 	 
	 	 	CRYSTAL INTERNET VENTURE FUND II (BVI), L.P.	 	 
	 
	 	 	 	 	 	 
	 	 	CRYSTAL INTERNET VENTURE FUND II (BVI),	 	 
	 	 	CRYSTAL VISION, L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Crystal Venture II, Ltd.	 	 
	 

	 	Its:
	 	General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Daniel Kellogg	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 Daniel Kellogg	 	 
	 

	 	Title:	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 

	Address:
	 	1120 Chester Avenue, Suite 418	 	 
	 

	 	 	 	Cleveland, OH 44114	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	/s/ Jeremy M. Jacobs, Jr.	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Jeremy M. Jacobs, Jr.	 	 
	 
	 	 	 	 	 	 
	 

	Address:
	 	c/o Delaware North Co.	 	 
	 

	 	 	 	40 Fountain Plaza	 	 
	 

	 	 	 	Buffalo, NY 14202	 	 
	 

	 	 	 	Attn: Mike Gallagher	 	 
	 
	 	 	 	 	 	 
	 	 	SIGNATURE PAGE TO THE SERIES B PREFERRED STOCK PURCHASE AGREEMENT ENTERED INTO BY AND AMONG SYNACOR, INC. AND THE INVESTORS LISTED ON THE SIGNATURE PAGES HERETO.	 	 





 SIGNATURE PAGE TO SYNACOR, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT


 









 






	 	 	 	 	 	 	 
	 

	 	RAND CAPITAL SBIC, L.P.
	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Daniel Penberthy	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Daniel Penberthy	 	 
	 

	 	Title:
	 	Manager	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:
	 	2200 Rand Building	 	 
	 

	 	 	 	Buffalo, NY 14203	 	 
	 
	 	 	 	 	 	 
	 	 	PACVEN WALDEN VENTURES IV ASSOCIATES FUND, L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Lip-Bu Tan	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Lip-Bu Tan	 	 
	 

	 	Title:
	 	Director	 	 
	 
	 	 	 	 	 	 
	 	 	of Pacven Walden Management Co., Ltd.	 	 
	 	 	as General Partner of Pacven Walden Management II, L.P.	 	 
	 	 	as General Partner of Pacven Walden Ventures IV	 	 
	 	 	Associates Fund, L.P.	 	 
	 
	 	 	 	 	 	 
	 	 	PACVEN WALDEN VENTURES IV, L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Lip-Bu Tan	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Lip-Bu Tan	 	 
	 

	 	Title:
	 	Director	 	 
	 
	 	 	 	 	 	 
	 	 	of Pacven Walden Management Co., Ltd.	 	 
	 	 	as General Partner of Pacven Walden Management II, L.P.	 	 
	 	 	as General Partner of Pacven Walden Ventures IV, L.P.	 	 
	 
	 	 	 	 	 	 
	 

	Address:
	 	One California Street, 28th Floor	 	 
	 

	 	 	 	San Francisco, CA 94111	 	 
	 
	 	 	 	 	 	 
	 	 	JORON MANAGEMENT LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Jordan Levy	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Jordan Levy	 	 
	 

	 	Title:
	 	Manager	 	 
	 
	 	 	 	 	 	 
	 

	Address:
	 	50 Fountain Plaza, Suite 1320	 	 
	 

	 	 	 	Buffalo, NY 14202	 	 







SIGNATURE PAGE TO SYNACOR, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT