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EXHIBIT 10.3
HEALTHSTREAM, INC.
SERIES C CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
THIS SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this
"Agreement") is made as of the 18th day of August, 1999, by and between
HealthStream, Inc., a Tennessee corporation (the "Company"), and the persons and
entities designated as an investor on Schedule A, Schedule B and Schedule C
hereto (each an "Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF SERIES C CONVERTIBLE PREFERRED STOCK.
(a) The Company shall adopt and file with the Secretary of State of the
State of Tennessee on or before the First Closing (as hereinafter defined) a
Third Amended and Restated Charter in the form attached hereto as Exhibit A (the
"Restated Charter").
(b) On or prior to the First Closing (as hereinafter defined), the
Company shall have authorized (i) the sale and issuance to the Investors of the
shares of Series C Convertible Preferred Stock and (ii) the issuance of such
shares of Common Stock to be issued upon conversion of such shares (the
"Conversion Shares"). The shares of Series C Convertible Preferred Stock and the
Conversion Shares shall have the rights, preferences, privileges and
restrictions set forth in the Restated Charter.
(c) Subject to the terms and conditions of this Agreement, each
Investor listed on Schedule A hereto (a "Schedule A Investor") agrees, severally
and not jointly, to purchase and the Company agrees to sell and issue to each
Schedule A Investor, severally and not jointly, the number of shares of the
Company's Series C Convertible Preferred Stock set forth opposite such Schedule
A Investor's name on Schedule A hereto at a purchase price of $10.00 per share.
The Series C Convertible Preferred Stock will be sold at the Closings as set
forth in paragraph 1.2 herein.
1.2 CLOSINGS.
(a) The purchase and sale of the number of shares of Series C
Convertible Preferred Stock set forth opposite each Schedule A Investor's name
on Schedule A hereto shall take place at the offices of the Company at 10:00
a.m., on August 18th, 1999, or at such other time and place as the Company and
Investors acquiring in the aggregate more than half the shares of Series C
Convertible Preferred Stock being sold pursuant hereto shall mutually agree,
either orally or in writing (the "First Closing").
(b) The Investors listed on Schedule B hereto ("Schedule B Investors")
shall have the right to purchase up to the number of shares of Series C
Convertible Preferred Stock set forth opposite each Schedule B Investor's name
on Schedule B hereto. Any unpurchased shares shall be allocated to the investors
listed on Schedule C hereto ("Schedule C Investors"). The Schedule C Investors
shall have the right to purchase up to 60,000 shares of Series C Convertible
Preferred Stock. This amount may be increased by the number of shares not
purchased by the Schedule B Investors. The purchase and sale of the total number
of shares of Series C Convertible Preferred Stock listed on Schedule B and
Schedule C hereto shall take place at the offices of the Company within twenty
(20) business days of the First Closing ("Second Closing," together with the
First Closing, the "Closings"). The Company shall determine the
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number of shares the individual Schedule C Investors have the right to purchase
at the Second Closing. The Company shall also have the right to add additional
Schedule C Investors until the Second Closing.
(c) At the Closings, the Company shall deliver to each Investor a
certificate representing the shares of Series C Convertible Preferred Stock that
such Investor is purchasing against payment of the purchase price therefor by
check, wire transfer, or such other form of payment as shall be mutually agreed
upon by such Investor and the Company.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each Investor that as of
the date of each Closing, except as set forth on a Schedule of Exceptions
furnished to each Investor and special counsel for the Investors, specifically
identifying the relevant subparagraph(s) hereof, which exceptions shall be
deemed to be representations and warranties as if made hereunder:
2.1 ORGANIZATION; GOOD STANDING, QUALIFICATION.
The Company is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Tennessee, has all requisite
corporate power and authority to own and operate its properties and assets and
to carry on its business as now conducted and as presently proposed to be
conducted, to execute and deliver this Agreement and any other agreement to
which the Company is a party the execution and delivery of which is contemplated
hereby (the "Ancillary Agreements"), to issue and sell the Series C Convertible
Preferred Stock and the Common Stock issuable upon conversion thereof, and to
carry out the provisions of this Agreement, the Restated Charter and any
Ancillary Agreement. The Company is duly qualified and is authorized to transact
business and is in good standing as a foreign corporation in each jurisdiction
in which the failure so to qualify would have material adverse effect on its
business, properties, prospects, or financial condition.
2.2 AUTHORIZATION.
All action on the part of the Company, its officers, directors and
stockholders necessary for the authorization, execution and delivery of this
Agreement and any Ancillary Agreement, the performance of all obligations of the
Company hereunder and thereunder at the Closings and the authorization, issuance
(or reservation for issuance), sale, and delivery of the Series C Convertible
Preferred Stock being sold hereunder and the Common Stock issuable upon
conversion thereof has been taken or will be taken prior to the Closings, and
this Agreement, and any Ancillary Agreement, when executed and delivered, will
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, and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies.
2.3 VALID ISSUANCE OF PREFERRED AND COMMON STOCK.
The Series C Convertible Preferred Stock that is 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, any
Ancillary Agreement and under applicable state and federal securities laws. The
Common Stock issuable upon conversion of
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the Series C Convertible Preferred Stock being purchased under this Agreement
has been duly and validly reserved for issuance and, upon issuance in accordance
with the terms of the Restated Charter, 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, any Ancillary Agreement and under
applicable state and federal securities laws.
2.4 GOVERNMENTAL CONSENTS.
No consent, approval, qualification, order or authorization of, or
filing with, any local, state, or federal governmental authority is required on
the part of the Company in connection with the Company's valid execution,
delivery, or performance of this Agreement, the offer, sale or issuance of the
Series C Convertible Preferred Stock by the Company or the issuance of Common
Stock upon conversion of the Series C Convertible Preferred Stock, except (i)
the filing of the Restated Charter with the Secretary of State of the State of
Tennessee, and (ii) such filings as have been made prior to the Closings, except
any notices of sale required to be filed with the Securities and Exchange
Commission under Regulation D of the Securities Act of 1933, as amended (the
"Securities Act"), or such post-closing filings as may be required under
applicable state securities laws, which will be timely filed within the
applicable periods therefor.
2.5 CAPITALIZATION AND VOTING RIGHTS.
The authorized capital of the Company consists, or will consist
immediately prior to the First Closing, of:
(a) Preferred Stock. 5,000,000 shares of Preferred Stock, no par value,
of which 76,000 shares have been designated as Series A Convertible Preferred
Stock, all of which are outstanding, and 1,436,961 shares have been designated
as Series B Convertible Preferred Stock, 736,801 of which are outstanding. The
rights, privileges and preferences of the Series A and Series B Convertible
Preferred Stock are as stated in the Company's Second Amended and Restated
Charter dated as of May 10, 1999 (the "Second Charter").
(b) Common Stock. 20,000,000 shares of common stock, no par value
("Common Stock"), of which 2,245,743 shares are issued and outstanding. An
additional 4,000,000 shares of Common Stock are reserved for issuance pursuant
to the Employee Stock Option Plan, dated April 15, 1994 (the "Option Plan"). The
Company has granted options under the Option Plan to acquire a total of 823,066
shares of Common Stock.
(c) The outstanding shares of Common Stock and options granted under
the Option Plan are owned by the stockholders and option holders in the numbers
specified in Exhibit B hereto.
(d) The outstanding shares of Common Stock have been duly authorized
and validly issued, are fully paid and nonassessable, and were issued in
accordance with the registration or qualification provisions of the Securities
Act and any relevant state securities laws or pursuant to valid exemptions
therefrom.
(e) Except as contemplated herein and in the Ancillary Agreements and
for (i) the conversion privileges of the Series A, Series B and Series C
Convertible Preferred Stock, and (ii) currently outstanding options under the
Option Plan, there are no outstanding options, rights (including conversion or
preemptive rights and rights of first refusal), proxy or stockholder agreements
or agreements of any kind for the purchase or acquisition from the Company of
any of its securities. Other than the Ancillary Agreements, the Company is not a
party or subject to any agreement or understanding, and, to the best of
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the Company's knowledge, there is no agreement or understanding between any
persons that affects or relates to the Common Stock or the voting or giving of
written consents with respect to any security or the voting by a director of the
Company.
2.6 SUBSIDIARIES.
The Company does not own or control, directly or indirectly, any
interest in any other corporation, partnership, limited liability company,
association, or other business entity. The Company is not a participant in any
joint venture, partnership, or similar arrangement.
2.7 CONTRACTS AND OTHER COMMITMENTS.
The Company does not have and is not bound by any contract, agreement,
lease, commitment, or proposed transaction, judgment, order, writ or decree,
written or oral, absolute or contingent, other than (i) contracts for the
purchase of supplies and services that were entered into in the ordinary course
of business and that do not involve more than $50,000, and do not extend for
more than one (1) year beyond the date hereof, (ii) sales contracts entered into
in the ordinary course of business, and (iii) contracts terminable at will by
the Company on no more than thirty (30) days' notice without cost or liability
to the Company and that do not involve any employment or consulting arrangement
and are not material to the conduct of the Company's business. For the purpose
of this paragraph, employment and consulting contracts and contracts with labor
unions, and license agreements and any other agreements relating to the
Company's acquisition or disposition of patent, copyright, trade secret or other
proprietary rights or technology (other than standard end-user license
agreements) shall not be considered to be contracts entered into in the ordinary
course of business.
2.8 RELATED-PARTY TRANSACTIONS.
No employee, officer, stockholder or director of the Company or member
of his or her immediate family is indebted to the Company, nor is the Company
indebted (or committed to make loans or extend or guarantee credit) to any of
them, other than (i) for payment of salary for services rendered, (ii)
reimbursement for reasonable expenses incurred on behalf of the Company, and
(iii) for other standard employee benefits made generally available to all
employees (including stock option agreements outstanding under any stock option
plan approved by the Board of Directors of the Company). To the best of 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 has a business relationship, or any firm or corporation that
competes with the Company, except that employees, stockholders, officers, or
directors of the Company and members of their immediate families may own stock
in publicly traded companies that may compete or conduct business with the
Company. To the best of the Company's knowledge, no officer, director, or
stockholder or any member of their immediate families is, directly or
indirectly, interested in any material contract with the Company (other than
such contracts as relate to any such person's employment, ownership of capital
stock or other securities of the Company).
2.9 PERMITS.
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 presently planned to be conducted. The Company is not
in default in any material respect under any of such franchises, permits,
licenses or other similar authority.
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2.10 COMPLIANCE WITH OTHER INSTRUMENTS.
The Company is not in violation or default in any material respect of
any provision of its Second Charter or Bylaws and no such material violation or
default is anticipated following the Company's execution of the Restated Charter
or Bylaws or in any material respect of any provision of any mortgage,
indenture, agreement, instrument, or contract to which it is a party or by which
it is bound or, to the best of its knowledge, of any federal or state judgment,
order, writ, decree, statute, rule, regulation or restriction applicable to the
Company. The execution, delivery, and performance by the Company of this
Agreement, and any Ancillary Agreement, and the consummation of the transactions
contemplated hereby and thereby, will not result in any such violation or be in
material conflict with or constitute, with or without the passage of time or
giving of notice, either a material default under any such provision or an event
that results in the creation of any material lien, charge, or encumbrance upon
any assets of the Company or the suspension, revocation, impairment, forfeiture,
or non-renewal of any material permit, license, authorization, or approval
applicable to the Company, its business or operations, or any of its assets or
properties.
2.11 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 change in the assets, business,
properties, prospects, or financial condition of the Company, or in any material
change in the current equity ownership of the Company. The foregoing includes,
without limitation, any action, suit, proceeding, or investigation pending or
currently threatened 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, their obligations under any agreements with prior employers, or
negotiations by the Company with potential backers of, or investors in, the
Company or its proposed business. The Company is not a party to or, to the best
of its knowledge, named in or subject to any order, writ, injunction, judgment,
or decree of any court, government agency, or instrumentality. There is no
action, suit, proceeding or investigation by the Company currently pending or
that the Company currently intends to initiate.
2.12 OFFERING.
Subject in part to the truth and accuracy of each Investor's
representations set forth in this Agreement, the offer, sale and issuance of the
Series C Convertible Preferred Stock as contemplated by this Agreement are
exempt from the registration requirements of the Securities Act, 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.
2.13 FINANCIAL STATEMENTS.
The Company has delivered to each Investor its financial statements
(balance sheet and profit and loss statement, statement of stockholders' equity
and statement of cash flows including notes thereto) at June 30, 1999 and for
the term then ended (the "Financial Statements"). The Financial Statements have
been consistently prepared and derived from the books and records of the
Company. The Financial Statements fairly present in all material respects the
financial condition and operating results of the Company as of the dates, and
for the periods, indicated therein. Except as set forth in the Financial
Statements and to the best of the Company's knowledge, the Company has no
material liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to
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June 30, 1999 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.
2.14 CHANGES.
To the best of the Company's knowledge, since June 30, 1999, 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 business, properties,
prospects, or financial condition of the Company (as such business is presently
conducted and as it is presently proposed to be conducted);
(c) any waiver or compromise 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 business, properties, prospects, or
financial condition of the Company (as such business is presently conducted and
as it is presently proposed to be conducted);
(e) any material change to a material contract or arrangement by which
the Company or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or agreement
with any employee, officer, director or stockholder other than in the ordinary
course of business;
(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, 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 or contested by the
Company in good faith;
(k) any loans or guarantees made by the Company to or for the benefit
of its employees, stockholders, 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;
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(l) any declaration, setting aside, or payment of any dividend or other
distribution of the Company's assets 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) any other event or condition of any character that might materially
and adversely affect the business, properties, prospects, or financial condition
of the Company (as such business is presently conducted and as it is presently
proposed to be conducted); or
(n) any agreement or commitment by the Company to do any of the things
described in this paragraph 2.14.
2.15 INTELLECTUAL PROPERTY.
To the best of its knowledge (but without having conducted any special
investigation or patent search), the Company owns or possesses sufficient legal
rights to all patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information, and proprietary rights and processes necessary
for its business as now conducted without any conflict with, or infringement of
the rights of, others which would have a material adverse effect on the
business, properties, prospects or financial condition of the Company. The
Schedule of Exceptions contains a complete list of patents and pending patent
applications of the Company. Except for agreements with its own employees or
consultants, substantially in the form referenced in paragraph 2.16 below, and
standard end-user license agreements, there are no outstanding options,
licenses, or agreements of any kind relating to the foregoing, 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 proprietary rights and processes of
any other person or entity. 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, trade secrets, or other proprietary rights or processes of
any other person or entity. The Company is not 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 such
employee's best efforts to promote the interests of the Company or that would
conflict with the Company's business as proposed to be conducted. Neither the
execution nor delivery of this Agreement, 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, will, to the best of 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. The Company does not believe it is or
will be necessary to use any inventions of any of its employees (or persons it
currently intends to hire) made prior to their employment by the Company. The
Company has taken reasonable efforts to identify any possible liabilities,
losses, costs, expenses, or other adverse effects it may experience as a result
of the potential inability of computer systems to recognize the "Year 2000"and
has determined that it will have no material loss, cost, liability, or expense.
2.16 EMPLOYEES; EMPLOYEE COMPENSATION.
To the best of the Company's knowledge, there is no strike, labor
dispute or union organization activities pending or threatened between it and
its employees. None of the Company's employees belongs to any union or
collective bargaining unit. To the best of its knowledge, the Company has
complied in all material respects with all applicable state and federal equal
opportunity and other laws related to employment. The Company has a proprietary
information agreement with each of its employees protecting the Company's
confidential information. To the best of the Company's knowledge, no employee of
the Company is or will be in violation of any judgment, decree, or order, or any
term of any
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employment contract, patent disclosure agreement, or other contract or agreement
relating to the relationship of any such employee with the Company, or any other
party because of the nature of the business conducted or presently proposed to
be conducted by the Company or to the use by the employee of his or her best
efforts with respect to such business. Other than the Option Plan, the Company
is not 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. The
Company is not aware that any officer or key employee, or that any group of key
employees, intends to terminate their employment with the Company, nor does the
Company have a present intention to terminate the employment of any of the
foregoing. Subject to general principles related to wrongful termination of
employees, the employment of each officer and employee of the Company is
terminable at the will of the Company.
2.17 TAX RETURNS, PAYMENTS, AND ELECTIONS.
The Company has timely filed all tax returns and reports (federal,
state and local) as required by law. These returns and reports are true and
correct in all material respects. The Company has paid all taxes and other
assessments due and payable, except those contested by it in good faith. 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 ("Code"), to
be treated as a collapsible corporation pursuant to the Code, nor has it made
any other elections pursuant to the Code (other than its "S corporation"
election, which election has been revoked effective October 13, 1998, or that
relate solely to methods of accounting, depreciation, or amortization) that
would have a material effect on the business, properties, prospects, or
financial condition of the Company. 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 date of the Financial Statements, 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 depositaries.
2.18 ENVIRONMENTAL AND SAFETY LAWS.
To the best of its knowledge, the Company is not in violation of any
applicable statute, law, or regulation relating to the environment or
occupational health and safety which would have a material adverse effect on the
business, properties, prospects or financial condition of the Company, and to
the best of its knowledge, no material expenditures are or will be required in
order to comply with any such existing statute, law, or regulation.
2.19 MINUTE BOOKS.
The minute books of the Company contain minutes of all meetings of
directors and stockholders and all actions by written consent without a meeting
by the directors and stockholders since the date of incorporation and accurately
reflects all actions by the directors (and any committee of directors) and
stockholders with respect to all transactions referred to in such minutes in all
material respects.
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2.20 REAL PROPERTY HOLDING CORPORATION.
The Company is not a real property holding corporation within the
meaning of Internal Revenue Code Section 897(c)(2) and any regulations
promulgated thereunder.
2.21 QUALIFIED SMALL BUSINESS.
The Company represents that the shares of Series C Convertible
Preferred Stock are eligible to qualify as "qualified small business stock" as
defined in Section 1202(c) of the Code.
3. ACKNOWLEDGMENTS OF REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
The Investors hereby represent and warrant to the Company that as of
the date of this Agreement:
3.1 AUTHORIZATION.
Such Investor has full power and authority to enter into this
Agreement, and that this Agreement, when executed and delivered, will constitute
a valid and legally binding obligation of such Investor enforceable in
accordance with its terms.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT.
This Agreement is made with each Investor in reliance upon such
Investor's representation to the Company, which by such Investor's execution of
his Agreement such Investor hereby confirms, that the Series C Convertible
Preferred Stock to be purchased by such Investor and the Common Stock issuable
upon conversion thereof (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 resale or 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, each 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 RELIANCE UPON INVESTORS' REPRESENTATIONS.
Each Investor understands that the Series C Convertible Preferred Stock
is not, and any Common Stock acquired on conversion thereof at the time of
issuance may not be, registered under the Securities Act on the ground that the
sale provided for in this Agreement and the issuance of securities hereunder is
exempt from registration under the Securities Act pursuant to Section 4(2)
thereof, and that the Company's reliance on such exemption is predicated on the
Investors' representations set forth herein.
3.4 RECEIPT OF INFORMATION.
Each Investor believes such Investor has received all the information
such Investor considers necessary or appropriate for deciding whether to
purchase the Series C Convertible Preferred Stock. Each Investor further
represents that such Investor has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the
offering of the Series C Convertible Preferred Stock and the business,
properties, prospects, and financial condition of the Company and to obtain
additional information (to the extent the Company possessed such information or
could acquire it
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without unreasonable effort or expense) necessary to verify the accuracy of any
information furnished to such Investor or to which such Investor had access. 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.
3.5 INVESTMENT EXPERIENCE.
Each Investor represents that such Investor is experienced in
evaluating and investing in private placement transactions of securities of
companies in a similar stage of development and acknowledges that such Investor
is able to fend for himself, herself or itself, can bear the economic risk of
such Investor's investment, and has such knowledge and experience in financial
and business matters that such Investor is capable of evaluating the merits and
risks of the investment in the Series C Convertible Preferred Stock. If other
than an individual, Investor also represents that each record or beneficial
owner of any equity interest in Investor (each an "Investor Owner") meets the
requirements of the preceding sentence.
3.6 ACCREDITED INVESTOR.
(a) The term "Accredited Investor" as used herein refers to:
(i) A person or entity who is a director or executive officer of
the Company;
(ii) Any bank as defined in Section 3(a)(2) of the Securities Act,
or any savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934; any insurance company as defined in Section
2(13) of the Securities Act; any investment company registered under the
Investment Company Act of 1940 or a business development company as defined in
Section 2(a)(48) of that Act; any Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958; any plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; any employee benefit plan within the meaning of
Title I of the Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in Section 3(21) of
such Act, which is either a bank, savings and loan association, insurance
company, or registered investment adviser, or if the employee benefit plan has
total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited investors;
(iii) Any private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
(iv) Any organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
(v) Any natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of the purchase exceeds $1,000,000;
(vi) Any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year;
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(vii) Any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a person who has such knowledge and experience in
financial and business matters that he or she is capable of evaluating the
merits and risks of the prospective investment; or
(viii) Any entity in which all of the equity owners are accredited
investors.
As used in this Paragraph 3.6(a), the term "net worth" means the excess
of total assets over total liabilities. For the purpose of determining a
person's net worth, the principal residence owned by an individual should be
valued at fair market value, including the cost of improvements, net of current
encumbrances. As used in this Paragraph 3.6(a), "income" means actual economic
income, which may differ from adjusted gross income for income tax purposes.
Accordingly, each Investor should consider whether such Investor should add any
or all of the following items to such Investor's adjusted gross income for
income tax purposes in order to reflect more accurately such Investor's actual
economic income: any amounts attributable to tax-exempt income received, losses
claimed as a limited partner in any limited partnership, deductions claimed for
depletion, contributions to an XXX or Xxxxx retirement plan, and alimony
payments.
(b) Each Investor as to such Investor severally and not jointly further
represents to the Company that except as otherwise disclosed to the Company, in
writing, prior to such Investor's execution hereof, such Investor (and each
Investor Owner) is an Accredited Investor.
3.7 RESTRICTED SECURITIES.
Each Investor understands that the Series C Convertible Preferred Stock
(and any Common Stock issued on conversion thereof) may not be sold,
transferred, or otherwise disposed of without registration under the Securities
Act or an exemption therefrom, and that in the absence of an effective
registration statement covering the Series C Convertible Preferred Stock (or the
Common Stock issued on conversion thereof) or an available exemption from
registration under the Securities Act, the Series C Convertible Preferred Stock
(and any Common Stock issued on conversion thereof) must be held indefinitely.
In particular, each Investor is aware that the Series C Convertible Preferred
Stock (and any Common Stock issued on conversion thereof) may not be sold
pursuant to Rule 144 promulgated under the Securities Act unless all of the
conditions of that Rule are met. Among the conditions for use of Rule 144 may be
the availability of current information to the public about the Company. Such
information is not now available and the Company has no present plans to make
such information available.
3.8 LEGENDS.
To the extent applicable, each certificate or other document evidencing
any of the Series C Convertible Preferred Stock or any Common Stock issued upon
conversion thereof shall be endorsed with the legends substantially in the form
set forth below: (a) The following legend under the Securities Act:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND
ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."
(b) Any legend imposed or required by applicable state securities laws.
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4. CONDITIONS OF INVESTORS' OBLIGATIONS AT CLOSINGS.
The obligations of each Schedule A Investor under subparagraph 1.1(c)
of this Agreement are subject to the fulfillment on or before the First Closing
of each of the following conditions, the waiver of which shall not be effective
against any Schedule A Investor who does not consent in writing thereto:
4.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company contained in Section
2 shall be true on and as of each of the Closings with the same effect as though
such representations and warranties had been made on and as of the date of each
of the Closings.
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 each of the Closings.
4.3 COMPLIANCE CERTIFICATE.
The President of the Company shall deliver to each Investor at each of
the Closings in which such Investor shall participate a certificate certifying
that the conditions specified in paragraphs 4.1, 4.2, 4.4 and 4.5 have been
fulfilled.
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 Series C
Convertible Preferred Stock pursuant to this Agreement shall be duly obtained
and effective as of each of the Closings.
4.5 PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the transactions
contemplated at the Closings and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Investors and their
counsel, which shall have received all such counterpart original and certified
or other copies of such documents as it may reasonably request.
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4.6 STOCKHOLDER AGREEMENT.
The Company, the Investors and the other Company shareholders
shall have executed the Amended and Restated Stockholders' Agreement in
substantially the form attached hereto as Exhibit C.
4.7 FILING OF RESTATED CHARTER.
The Restated Charter in the form attached hereto as Exhibit A shall
have been filed with the Secretary of State of Tennessee.
4.8 RESERVATION OF CONVERSION SHARES.
The Conversion Shares issuable upon conversion of the shares of Series
C Convertible Preferred Stock shall have been duly authorized and reserved for
issuance upon such conversion.
4.9 INVESTORS' RIGHTS AGREEMENT.
The Investors' Rights Agreement as amended by the Amendment to
Investors' Rights Agreement in substantially the form attached hereto as Exhibit
D shall have been executed and delivered by the parties thereto.
4.10 CO-SALE AGREEMENT.
The Co-Sale Agreement as amended by the Amendment to Co-Sale Agreement
in substantially the form attached hereto as Exhibit E shall have been executed
and delivered by the parties thereto. The stock certificates representing the
shares subject to the Co-Sale Agreement shall have been delivered to the
Secretary of the Company and shall have had appropriate legends placed upon them
to reflect the restrictions on transfer set forth on the Co-Sale Agreement.
4.11 VOTING AGREEMENT.
The Voting Agreement as amended by the Amendment to Voting Agreement in
substantially the form attached hereto as Exhibit F shall have been executed and
delivered by the parties thereto.
4.12 LEGAL OPINION.
The Investors shall have received from legal counsel to the Company (which may
be in house counsel) an opinion addressed to each of them, dated the date of
each Closing, in substantially the form attached hereto as Exhibit G.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSINGS.
The obligations of the Company to each Investor, such obligations being
several and not joint with respect to each Investor, under this Agreement are
subject to the fulfillment on or before each of the Closings of each of the
following conditions with respect to such Investor.
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5.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of such Investor contained in
Section 3 shall be true on and as of each of the Closings with the same effect
as though such representations and warranties had been made on and as of the
date of the Closings.
5.2 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 Stock pursuant
to this Agreement shall be duly obtained and effective as of each of the
Closings.
5.3 STOCKHOLDER AGREEMENT.
Such Investor shall have executed the Amended and Restated
Stockholders' Agreement in substantially the form attached hereto as Exhibit C.
5.4 CO-SALE AGREEMENT.
A Co-Sale Agreement as amended by the Amendment to Co-Sale Agreement
substantially in the form attached hereto as Exhibit E shall have been executed
and delivered by the parties thereto other than the Company.
5.5 VOTING AGREEMENT.
A Voting Agreement as amended by the Amendment to Voting Agreement
substantially in the form attached hereto as Exhibit F shall have been executed
and delivered by the parties thereto other than the Company.
6. GENERAL PROVISIONS.
6.1 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.
6.2 SURVIVAL OF WARRANTIES.
The warranties, representations, and covenants of the Company and the
Investors contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and each of the Closings.
6.3 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 permitted transferees of any
shares of Series C Convertible Preferred Stock sold hereunder or any Common
Stock issued upon conversion thereof). 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,
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remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
6.4 GOVERNING LAW.
This Agreement shall be governed by and construed under the laws of the
State of Tennessee as applied to agreements among Tennessee residents entered
into and to be performed entirely within Tennessee.
6.5 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.
6.6 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.
6.7 NOTICES.
Unless otherwise provided, all notices and other communications
required or permitted under this Agreement shall be in writing and shall be
mailed by United States first class mail, postage prepaid, sent by facsimile or
delivered personally by hand or by a nationally recognized courier addressed to
the party to be notified at the address or facsimile number indicated for such
person on the signature page hereof, or at such other address or facsimile
number as such party may designate by ten (10) days' advance written notice to
the other parties hereto. All such notices and other written communications
shall be effective on the date of mailing, confirmed facsimile transfer or
delivery.
6.8 FINDER'S FEES.
Each party represents that it neither is nor will be obligated for any
finder's fee or commission in connection with the purchase by the Investors of
the Series C Convertible Preferred Stock.
Each Investor agrees to indemnify and to hold harmless the Company from
any liability for any commission or compensation in the nature of a finder's fee
(and the cost and expenses of defending against such liability or asserted
liability) for which the 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 finder's 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.
6.9 ATTORNEYS' FEES.
If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement, any Ancillary Agreement or the Restated Charter,
the prevailing party shall be entitled to reasonable attorneys' fees, costs, and
disbursements in addition to any other relief to which such party may be
entitled.
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6.10 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 Investors (or their transferees) holding more
than 66 2/3% of the Common Stock not previously sold to the public that is
issued or issuable upon conversion of the Series C Convertible Preferred Stock.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any securities purchased under this Agreement at the
time outstanding (including securities into which such securities have been
converted), each future holder of all such securities, and the Company.
6.11 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.
6.12 TENNESSEE SECURITIES LAW.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS
NOT BEEN QUALIFIED WITH THE SECURITIES DIVISION OF THE TENNESSEE DEPARTMENT OF
COMMERCE AND INSURANCE OF THE STATE OF TENNESSEE AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH
SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES
IS EXEMPT FROM QUALIFICATION BY TENNESSEE LAW. THE RIGHTS OF ALL PARTIES TO THIS
AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED,
UNLESS THE SALE IS SO EXEMPT.
6.13 EFFECT OF AMENDMENT OR WAIVER.
Each Investor acknowledges that by the operation of paragraph 6.10
hereof the Investors (or their transferees) holding more than sixty six and two
thirds percent (66 2/3%) of the Common Stock not previously sold to the public
that is issued or issuable upon conversion of the Series C Convertible Preferred
Stock will have the right and power to diminish or eliminate all rights of such
Investor under this Agreement.
6.14 RIGHTS OF INVESTORS.
Each holder of Series C Convertible Preferred Stock (and Common Stock
issued upon conversion thereof) shall have the absolute right to exercise or
refrain from exercising any right or rights that such holder may have by reason
of this Agreement or any Series C Convertible Preferred Stock, including without
limitation the right to consent to the waiver of any obligation of the Company
under this Agreement and to enter into an agreement with the Company for the
purpose of modifying this Agreement or any agreement effecting any such
modification, and such holder shall not incur any liability to any other holder
or holders of Series C Convertible Preferred Stock (or Common Stock issued upon
exercise thereof) with respect to exercising or refraining from exercising any
such right or rights.
6.15 QUALIFIED SMALL BUSINESS STOCK.
The Company shall submit to its stockholders (including the Investors)
and to the Internal Revenue Service any reports that may be required in Section
1202(d)(1)(C) of the Code and any related
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Treasury Regulations. In addition, within ten (10) days after any Investor has
delivered to the Company a written request therefor, the Company shall deliver
to such Investor a written statement informing the Investor whether such
Investor's interest in the Company constitutes "qualified small business stock"
as defined in Section 1202(c) of the Code. The Company's obligation to furnish a
written statement pursuant to this paragraph 6.16 shall continue notwithstanding
the fact that a class of the Company's stock may be traded on an established
securities market.
6.16 EXCULPATION AMONG INVESTORS.
Each Investor acknowledges that such Investor 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 for any action heretofore or hereafter taken or omitted to be taken by
any of them in connection with the Series C Convertible Preferred Stock (and
Common Stock issued upon conversion thereof).
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
HEALTHSTREAM, INC.
By
----------------------------------
President
000 00xx Xxx. Xxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
INVESTORS:
HEALTHSTREAM PARTNERS
By
----------------------------------
General Partner
900-A, 0000 Xxxx Xxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
VANDERBILT UNIVERSITY
By
----------------------------------
17
18
XXXXXX INVESTMENT PARTNERSHIP III
By: THE XXXXXX COMPANIES, INC.
Managing Partner
By
----------------------------------
Xxxxxxx X. Xxxxxx, President
00 Xxxxxx Xxxxx Xxxx.
Xxxxx 000
Xxxxxxxxx, XX 00000
XXXXXXX XXXXXXX XXXXXXX XXXXX IV L.P.
By Its General Partner
CSHB Ventures IV L.P.
By Its General Partner
-----------------------------------
Xxx Xxxxxxx
000 Xxxxxx Xxx. Xxxxx
Xxxxxxxx, XX 00000-0000
DAUPHIN CAPITAL PARTNERS I, L.P.
By
----------------------------------
Xxxxx Xxxxxx, Principal
000 Xxxxxx Xxx.
Xxxxxx Xxxxxx, XX 00000
JCB HEALTHSTREAM INVESTORS, L.L.C
By
----------------------------------
Xxxxx Xxxxxx, Chief Manager
000 Xxxxxxxx Xx.
Xxxxxxxxx, XX 00000
XXXXXX CAPITAL PARTNERS III, L.P.
By
----------------------------------
Xxxx X. Xxxxxxxxxx
0000 Xxxx Xxx Xxx.
Xxxxx 000
Xxxxxxxxx, XX 00000
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19
JCB CF HEALTHSTREAM PARTNERS, L.L.C
By
----------------------------------
Xxxxxx Xxxxxxxxx
000 Xxxxxxxx Xx.
Xxxxxxxxx, XX 00000
FCA VENTURE PARTNERS II, L.P.
By
----------------------------------
Xxxxxx XxXxxxxxx
000 00xx Xxx. Xxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
THE XXXX COMPANY
By
----------------------------------
Xxxxxx Xxxxxx
0000 Xxxxxxxxxx Xx.
Xxxxxxxxx, XX 00000
CUMBERLAND EQUITY PARTNERS
By
----------------------------------
Xxxxxxx Xxxx
000 Xxxxxx Xxx. XxxxxXxxxx 0000
Xxxxxxxxx, XX 00000
SAVVY INVESTMENT PARTNERS
By
----------------------------------
Xxxxxxxx X. Xxxxxxxxx, Xx.
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
19
00
XXXXXXXX XXXX INVESTMENTS, L.P.
By
----------------------------------
H. Xxx Xxxxxxxx, General Partner
0000 Xxxxx Xxxxxxxx Xxx.
Xxxxxxxxx, XX 00000-0000
By
----------------------------------
Xxxx X. Xxxxxxxx, General Partner
c/o H. Xxx Xxxxxxxx
0000 Xxxxx Xxxxxxxx Xxx.
Xxxxxxxxx, XX 00000-0000
JCB VENTURE PARTNERSHIP IV
By
----------------------------------
Xxxxxx Xxxxxxxxx, Chief Manager
000 Xxxxxxxx Xx.
Xxxxxxxxx, XX 00000
XXXXXX PARTNERS, LTD.
By
----------------------------------
Xxx Xxxxxx
000 Xxxxxxxx Xxxx.
Xxxxx 000
Xxxxxxxxx, XX 00000
-------------------------------------
Xxxxxx X Xxxxx, Xx.
000 Xxxxxx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
-------------------------------------
Xxxxxxx Xxxxx
0000 Xxxxxxxx Xxx.
Xxxxxxxxx, XX 00000
-------------------------------------
Xxxxxx Xxxx
000 00xx Xxx. Xxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
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21
-------------------------------------
Xxxxx and Xxxxx Xxx Xxxxxx
0000 Xxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
-------------------------------------
Xxxxx Xxxxx
000 Xxxxxxxxx Xxx.
Xxx. 000
Xxxxxxxxx, XX 00000
-------------------------------------
Xxxxxx X. Xxxxxxxxx
X.X. Xxxxxxxx & Co.
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
-------------------------------------
Xxxxx Xxxxx
000 Xxxxxxxxxxxx-Xxxxxxxxx Xx. Xxxxx
Xxxxxxxxxxxx, XX 00000
-------------------------------------
Xxxx Xxxxxx
0000 Xxxxxxxx Xxx
Xxxxx 000
Xxxxxxxxx, XX 00000
-------------------------------------
S. Xxxxxxx Xxxxx
000 Xxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
-------------------------------------
Xx. Xxxxx Xxxxxx
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
-------------------------------------
Xxxxxxx Xxxxxxx
000 Xxxxx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
21
22
XXXXXX XXXXXXX VENTURE
PARTNERS III, L.P.
by: Xxxxxx Xxxxxxx Venture
Partners III, L.L.C
its General Partner
by: Xxxxxx Xxxxxxx Venture
Capital III, Inc.
its Institutional Managing Member
By
----------------------------------
XXXXXX XXXXXXX VENTURE
INVESTORS III, L.P.
by: Xxxxxx Xxxxxxx Venture
Partners III, L.L.C
its General Partner
by: Xxxxxx Xxxxxxx Venture
Capital III, Inc.
its Institutional Managing Member
By
----------------------------------
THE XXXXXX XXXXXXX VENTURE PARTNERS
ENTREPRENUER FUND, L.P.
by: Xxxxxx Xxxxxxx Venture
Partners, L.L.C
its General Partner
by: Xxxxxx Xxxxxxx Venture Capital
Fund III, Inc.
its Institutional Managing Member
By
----------------------------------
GE CAPITAL PARTNERS
By
----------------------------------
Xxxx Xxxxxx
000 Xxxx Xxxxx Xx.
Xxxxxxx, XX 00000
-------------------------------------
Xxxxx & Xxxxxxxxx Xxxxxxx
0000 Xxxx Xxxx
Xxxxxxxxx, XX 00000
-------------------------------------
Xxxxx Xxxxx
0000 Xxxx Xxxx
Xxxxxxxxx, XX 00000
22
23
XXXXX FAMILY INTERNET PARTNERS
By
----------------------------------
Xxxxxx X Xxxxx, Xx.
0000 Xxxx Xxxx
Xxxxxxxxx, XX 00000
XXXXXX/XXXX ASSOCIATES LLC
By
----------------------------------
Xxxxxxx X. Xxxxxx
Welsh, Carson, Xxxxxxxx & Xxxxx
000 Xxxx Xxx.
00xx Xxxxx
Xxx Xxxx, XX 00000
BORNEO PARTNERS
By
----------------------------------
Xxxxxxx Xxxx, Administrator
0000 Xxxxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
-------------------------------------
Xxxxxxxx Xxxxxxxx
000 Xxxxxxx Xxx.
Xxxxxx, XX 00000
-------------------------------------
Xxxxxxx and Xxxxx Xxxxxx
000 Xxxxxxxxxx Xx. X.
Xxxxxxxxx, XX 00000
-------------------------------------
Xxx XxXxxxx
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
-------------------------------------
Xxxxxxx and Xxxxxx XxXxxxx
000 Xxxxxx Xxx.
Xxxxxxxxx, XX 00000
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24
-------------------------------------
Xxxxxx X. Xxxxxxxx
# 14 Nottingham
Amarillo, TX 79124
SC FUND I, L.P.
By
----------------------------------
General Partner
00000 Xxxxx Xxxxxx Xxxxx Xx.
Xx Xxxxx, XX 00000
24
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PART TWO
SCHEDULE A
INVESTORS
NUMBER OF
NAME SHARES
---- ------
Vanderbilt University 40,000
HealthStream Partners 300,000
TOTAL 340,000
26
SCHEDULE B
INVESTORS
NUMBER OF
NAME SHARES
---- ------
Xxxxx & Xxxxx Xxx Xxxxxx 4,519
Xxxxx Xxxxx 2,259
Xxxxxx Investment Partnership III 33,891
Xxxxxxx Xxxxxxx Xxxxxxx Booth IV, L.P. 11,297
Dauphin Capital Partners I, L.P. 11,297
Xxxxxxx and Xxxxxxxx Xxxxx 11,297
JCB HealthStream Investors, L.L.C 6,213
Xxxxxx X. Xxxxx, Xx 11,297
Xxxxxx Capital Partners III, L.P. 11,297
Xxxxxx Partners, Ltd. 5,648
Xxxxxx Xxxx 5,648
FCA Venture Partners II, L.P. 5,648
The Xxxx Company 5,648
Xxxxx Xxxxx 4,520
Cumberland Equity Partners 4,520
JCB CF HealthStream Partners, L.L.C 3,389
Savvy Investment Partners 3,163
Xxxxxx Xxxxxxxx 2,259
JCB Venture Partnership IV 2,259
Chancery Lane Investments, L.P. 2,259
Xx. Xxxx X. Xxxxxx 3,389
S. Xxxxxxx Xxxxx 1,130
Xx. Xxxxx Xxxxxx 1,130
Xxxxxx Xxxxxxx Venture Partners III, L.P. 39,647
Xxxxxx Xxxxxxx Venture Investors III, L.P. 3,807
Xxxxxx Xxxxxxx Venture Partners Entrepenuer Fund, L.P. 1,734
GE Capital Equity Investments, Inc. 22,594
Xxxxxx/Xxxx Associates LLC 10,167
Xxxxx Xxxxx 5,648
Xxxxx & Xxxxxx Xxxxxxx 1,130
Xxxxx Family Internet Partners 5,648
-------
TOTAL 244,352
27
SCHEDULE C
INVESTORS
NUMBER OF
NAME SHARES
---- ------
Borneo Partners 24,648
SC Fund I, L.P. 20,000
Xxx XxXxxxx 7,000
Xxxxxxxx Xxxxxxxx 5,000
Xxxxxxx and Xxxxx Xxxxxx 3,500
Xxxxxxx and Xxxxxx XxXxxxx 3,000
Xxxxxx Xxxxxxxx 2,500
TOTAL 65,648
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SCHEDULE OF EXCEPTIONS
2.5 CAPITALIZATION AND VOTING RIGHTS.
The Company entered a distribution agreement with GE Medical Systems ("GE") on
June 14, 1999. In connection with this distribution agreement, the Company
granted GE a warrant to purchase 132,450 shares of the Company's Common Stock at
a purchase price of $7.55 per share. The Company also granted GE registration
rights associated with these shares.
2.7 CONTRACTS AND OTHER COMMITMENTS.
The Company has obligations under a lease executed with Cummins Station, LLC
totaling $551,315.00. This lease expires on April 30, 2005. The Company has
options under this lease until April 30, 2015.
On July 23, 1999, the Company acquired substantially all of the assets of
SilverPlatter Education, Inc. for $1,000,000. Twenty percent of the transaction
was paid for with the Company's Common Stock while the remaining eighty percent
was paid with cash.
The Company entered a distribution agreement with GE Medical Systems ("GE") on
June 14, 1999. In connection with this distribution agreement, the Company
granted GE a warrant to purchase 132,450 shares of the Company's Common Stock at
a purchase price of $7.55 per share. The Company also granted GE registration
rights associated with these shares.
The Company and Xxxxxx X Xxxxx, Xx. have executed an Executive Employment
Agreement dated April 21, 1999.
29
2.8 RELATED-PARTY TRANSACTIONS.
Indebtedness to Company by Shareholders
MacDonald Xxxxxxxxxx owes the Company $1,248.03 due to an outstanding balance of
a loan from the Company to purchase shares.
Indebtedness to Shareholders by Company
The Company owes Xxxxxx Xxxxx, Xx. $1,293,000 for loans made to the Company
under a Promissory Note dated August 23rd, 1999 ("Note"). This Note replaces and
supercedes the previous notes executed between Xxxxxx Xxxxx, Xx. and the Company
dated January 18, 1994, February 23, 1994, March 30, 1994, July 11, 1997,
December 31, 1997 and April 21, 1999. Xxxxxx Xxxxx, Xx. converted $1,000,000
worth of the above indebtedness under the previous notes to shares of the
Company's Common Stock. He converted $500,000 worth of the above indebtedness
under the previous notes to shares of the Company's Series B Convertible
Preferred Stock on April 21, 1999 and an additional $250,000 worth of the above
indebtedness under the previous notes to shares of the Company's Series B
Convertible Preferred Stock on August 23, 1999.
The Company owes Xxxxx Xxxxxx $60,000.00 for loans made to the Company.
Xxxxxx Xxxxx, Xx. serves on the Board of Directors of Passport Health
Communications. This firm does not directly compete with the Company, but it
does do business in the Internet healthcare information industry.
2.16 EMPLOYEES; EMPLOYEE COMPENSATION.
The Company and Xxxxxx X Xxxxx, Xx. have executed an Executive Employment
Agreement dated April 21, 1999.
