Exhibit 10.6
EXECUTION COPY
SERIES E-1 CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
between
XXXX.XXX, INC.,
THOMSON INFORMATION SERVICES, INC.
and
AMERICA ONLINE, INC.
Dated as of December 23, 1999
Article I. THE PREFERRED SHARES 1
Section 1.01 Issuance and Delivery of the Preferred Shares................................................................ 1
Section 1.02 Closing...................................................................................................... 1
Article II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 1
Section 2.01 Organization, Qualifications and Corporate Power............................................................. 2
Section 2.02 Authorization of Agreements, Etc............................................................................. 2
Section 2.03 Validity..................................................................................................... 3
Section 2.04 Authorized Capital Stock..................................................................................... 3
Section 2.05 Financial Statements......................................................................................... 4
Section 2.06 Events Subsequent to the Date of the Balance Sheet........................................................... 5
Section 2.07 Litigation; Compliance with Law.............................................................................. 5
Section 2.08 Proprietary Information of Third Parties..................................................................... 6
Section 2.09 Patents, Trademarks, Etc..................................................................................... 6
Section 2.10 Title to Properties.......................................................................................... 7
Section 2.11 Leasehold Interests.......................................................................................... 7
Section 2.12 Insurance.................................................................................................... 7
Section 2.13 Taxes........................................................................................................ 7
Section 2.14 Other Agreements............................................................................................. 8
Section 2.15 Loans and Advances........................................................................................... 10
Section 2.16 Assumptions, Guaranties, Etc, of Indebtedness of Other Persons............................................... 10
Section 2.17 Significant Customers and Suppliers.......................................................................... 10
Section 2.18 Governmental Approvals....................................................................................... 10
Section 2.19 Disclosure................................................................................................... 10
Section 2.20 Offering of the Preferred Shares............................................................................. 11
Section 2.21 Brokers...................................................................................................... 11
Section 2.22 Officers..................................................................................................... 11
Section 2.23 Transactions With Affiliates................................................................................. 11
Section 2.24 Employees.................................................................................................... 11
Section 2.25 U.S. Real Property Holding Corporation....................................................................... 12
Section 2.26 ERISA........................................................................................................ 12
Section 2.27 Foreign Corrupt Practices Act................................................................................ 12
Section 2.28 Federal Reserve Regulations.................................................................................. 12
Section 2.29 Environmental Matters........................................................................................ 12
Section 2.30 Qualification as a Qualified Small Business.................................................................. 13
Article III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS 13
Section 3.01 Organization and Power....................................................................................... 13
Section 3.02 Authorization................................................................................................ 13
Section 3.03 Validity..................................................................................................... 14
Section 3.04 Additional Representation.................................................................................... 14
Article IV. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS 15
Section 4.01 Opinion of Company's Counsel................................................................................. 15
Article V. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY......................................................................... 19
Article VI. COVENANTS OF THE COMPANY............................................................................................. 20
Section 6.01 Financial Statements, Reports, Etc........................................................................... 20
Section 6.02 Right of Participation....................................................................................... 21
ii
Section 6.03 Reserve for Conversion Shares............................................................... 22
Section 6.04 Corporate Existence......................................................................... 22
Section 6.05 Properties, Business, Insurance............................................................. 23
Section 6.06 Inspection.................................................................................. 23
Section 6.07 Restrictive Agreements Prohibited........................................................... 23
Section 6.08 Transactions with Affiliates................................................................ 23
Section 6.09 Expenses of Directors....................................................................... 23
Section 6.10 Use of Proceeds............................................................................. 23
Section 6.11 Board of Directors Meetings................................................................. 24
Section 6.12 By-laws..................................................................................... 24
Section 6.13 Employee Non-Disclosure, Non-Competition and Developments Agreements........................ 24
Section 6.14 Subsidiaries................................................................................ 24
Section 6.15 Compliance with Laws........................................................................ 25
Section 6.16 Keeping of Records of Account............................................................... 25
Section 6.17 U.S. Real Property Interest................................................................. 25
Section 6.18 Rule 144A Information....................................................................... 25
Section 6.19 Compensation................................................................................ 25
Section 6.20 Confidentiality............................................................................. 26
Section 6.21 Qualification as a Qualified Small Business................................................. 26
Section 6.22 Right of First Refusal upon Sale of Company................................................. 27
Section 6.23 Right of First Offer........................................................................ 27
Section 6.24 Stock Option Plan........................................................................... 29
Section 6.25 Termination of Covenants.................................................................... 29
Article VII. MISCELLANEOUS 29
Section 7.01 Expenses.................................................................................... 29
Section 7.02 Survival.................................................................................... 29
Section 7.03 Brokerage................................................................................... 29
Section 7.04 Parties in Interest......................................................................... 29
Section 7.05 Notices..................................................................................... 30
Section 7.06 Governing Law............................................................................... 30
Section 7.07 Entire Agreement............................................................................ 30
Section 7.08 Counterparts................................................................................ 30
Section 7.09 Amendments.................................................................................. 30
Section 7.10 Severability................................................................................ 30
Section 7.11 Titles and Subtitle......................................................................... 30
Section 7.12 Certain Defined Terms....................................................................... 30
Article VIII.
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INDEX TO SCHEDULES
SCHEDULE I Purchasers
SCHEDULE II Disclosure Schedule
SCHEDULE III Purchaser Disclosure Schedule
SCHEDULE IV Security Holders
SCHEDULE V Agreements
INDEX TO EXHIBITS
EXHIBIT A Form of Registration Rights Agreement
EXHIBIT B Form of Stockholders Agreement
EXHIBIT C Second Amended and Restated Certificate of Incorporation
EXHIBIT D Form of Non-Disclosure, Non-Competition and Developments
Agreement
iv
SERIES E CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT dated as of December 23,
1999 between XXXX.XXX, Inc., a Delaware corporation (the "Company"), America
Online, Inc. ("AOL") and Thomson Information Services, Inc. ("Thomson" and,
collectively with AOL, the "Purchasers").
WHEREAS, the Company wishes to issue and sell to the Purchasers up to
207,980 shares (the "Preferred Shares") of the authorized but unissued Series X-
0 Convertible Preferred Stock, $.01 par value, of the Company (the "Series E-1
Preferred Stock"); and
WHEREAS, the Purchasers, severally, wish to purchase the Preferred Shares
on the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, the parties agree as follows:
Article I. THE PREFERRED SHARES
Section 1.01 Issuance and Delivery of the Preferred Shares. The Company
---------------------------------------------
agrees to issue and sell to each Purchaser, and each Purchaser hereby agrees to
purchase from the Company, the number of Preferred Shares set forth opposite the
name of such Purchaser under the heading "Number of Preferred Shares to be
Purchased" on Schedule I, at the aggregate purchase price set forth opposite the
name of such Purchaser under the heading "Aggregate Purchase Price for Preferred
Shares" on Schedule I.
Section 1.02 Closing. The closing shall take place at the offices of Xxxxx,
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Xxxx & Eliot LLP, Xxx Xxxx Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, at 10:00
a.m., Boston time, on December 29, or at such other location, date and time as
may be agreed upon between the Purchasers and the Company (such closing being
called the "Closing" and such date and time being called the "Closing Date"). At
the Closing, the Company shall issue and deliver to each Purchaser a stock
certificate or certificates in definitive form, registered in the name of such
Purchaser, representing the Preferred Shares being purchased by it at the
Closing. As payment in full for the Preferred Shares being purchased by it under
this Agreement, and against delivery of the stock certificate or certificates
therefor as aforesaid, on the Closing Date each Purchaser shall (i) deliver to
the Company a check payable to the order of the Company, in the amount set forth
opposite the name of such Purchaser under the heading "Aggregate Purchase Price
for Preferred Shares" on Schedule I, (ii) transfer such sum to the account of
the Company by wire transfer, or (iii) deliver or transfer such sum to the
Company by any combination of such methods of payments.
Article II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company (which term, for purposes of this Article II shall, except
where otherwise indicated or where the context requires otherwise, include the
Company and each of its subsidiaries) represents and warrants to the Purchasers
that, except as set forth in the Disclosure Schedule attached as Schedule II:
Section 2.01 Organization; Qualifications and Corporate Power.
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(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and is duly
qualified to transact business as a foreign corporation and is in good standing
in each jurisdiction in which the nature of the business transacted by it or the
character of the properties owned or leased by it requires such qualification
except where failure to so qualify could not reasonably be expected to result in
a material adverse effect on the Company or its business. The Company has the
corporate power and authority to own and hold its properties and to carry on its
business as now conducted, to execute, deliver and perform this Agreement, the
Amended and Restated Registration Rights Agreement with the Purchasers and the
other parties thereto in the form attached as Exhibit A (the "Registration
---------
Rights Agreement") and the Amended and Restated Stockholders Agreement with the
Purchasers and the other parties thereto in the form attached as Exhibit B (the
---------
"Stockholders Agreement"), to issue, sell and deliver the Preferred Shares and
to issue and deliver the shares of Series A Common Stock, $.00l par value, of
the Company issuable upon conversion of the Preferred Shares (the "Conversion
Shares").
(b) The Company has one subsidiary, Talkpoint Communications, Inc., a
Delaware corporation ("Talkpoint"). Except for Talkpoint, the Company does not
(i) own of record or beneficially, directly or indirectly, (A) any shares of
capital stock or securities convertible into capital stock of any other
corporation or (B) any participating interest in any partnership, joint venture
or other non-corporate business enterprise or (ii) control, directly or
indirectly, any other entity.
Section 2.02 Authorization of Agreements; Etc.
---------------------------------------------
(a) The execution and delivery by the Company of this Agreement, the
Registration Rights Agreement and the Stockholders Agreement, the performance by
the Company of its obligations hereunder and thereunder, the issuance, sale and
delivery of the Preferred Shares and the issuance and delivery of the Conversion
Shares have been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Second Amended and Restated Certificate of Incorporation of the
Company, as amended (the "Charter"), or the By-laws of the Company, as amended,
or any provision of any indenture, agreement or other instrument to which the
Company, any of its subsidiaries or any of their respective properties or assets
is bound, or conflict with, result in a breach of or constitute (with due notice
or lapse of time or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company or any of its subsidiaries.
(b) The Preferred Shares have been duly authorized and, when issued in
accordance with this Agreement, will be validly issued, fully paid and
nonassessable shares with no personal liability attaching to the ownership
thereof and will be free and clear of all liens, charges, restrictions, claims
and encumbrances imposed by or through the Company except as set forth in the
Registration Rights Agreement. The Conversion Shares have been duly reserved
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for issuance upon conversion of the Preferred Shares and, when so issued, will
be duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock with no personal liability attaching to the ownership thereof and
will be free and clear of all liens, charges, restrictions, claims and
encumbrances imposed by or through the Company except as set forth in the
Registration Rights Agreement. Neither the issuance, sale or delivery of the
Preferred Shares nor the issuance or delivery of the Conversion Shares is
subject to any preemptive right of stockholders of the Company or to any right
of first refusal or other right in favor of any person, other than the rights of
Thomson as set forth in that certain Amended and Restated Agreement Among
Thomson and Founders dated as of March 31, 1999, by and among Thomson, the
Company, the Xxxxxx Family Limited Partnership, Xxxxxxx X. Xxxxxx and Xxxxxx X.
Xxxxx (the "Xxxxxxx Agreement") and the rights of certain major holders of the
Company's Series D Preferred Stock (the "Major Purchasers") pursuant to the
Series D Convertible Preferred Stock Purchase Agreement dated June 9, 1999 by
and among the Company and the several purchasers named therein (the "Series D
Purchase Agreement"). Thomson's preemptive right with respect to the Preferred
Shares issued to AOL hereunder are reflected in the total number of Preferred
Shares Thomson is purchasing hereunder. Each Major Purchaser has waived its
preemptive rights with respect to the issuance and sale of the Preferred Shares.
In addition to the Preferred Shares being issued pursuant to this Agreement, the
Company has reserved 250,000 additional shares of its Series E-1 Preferred Stock
to be issued to AOL upon exercise of AOL's right to purchase such shares
pursuant to a Stock Subscription Warrant between the Company and AOL of even
date herewith (the "Warrant Agreement").
Section 2.03 Validity. This Agreement has been duly executed and delivered
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by the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms, and the Registration Rights
Agreement and the Stockholders Agreement, when executed and delivered in
accordance with this Agreement, will constitute the legal, valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, in each case, except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws
of general application affecting enforcement of creditors' rights and except as
to enforceability of the indemnification and contribution provisions of the
Registration Rights Agreement.
Section 2.04 Authorized Capital Stock. The authorized capital stock of the
------------------------
Company (which term, as used in this Section 2.04, excludes the Company's
subsidiary) immediately prior to the closing will consist of the following:
10,000,000 shares of Series A Common Stock, par value $0.001;
64,031 shares of Series B Common Stock, par value $0.001;
81,366 shares of Series C Common Stock, par value $0.001;
59,250 shares of Series D Common Stock, par value $0.001;
250,050 shares of Series E Common Stock, par value $0.001 (together the
foregoing classes of Common Stock are referred to herein as the "Common
Stock");
562,500 shares of Series A Convertible Preferred Stock, par value $.01 per
share;
344,043 shares of Series B Convertible Preferred Stock, par value $.01 per
share;
41,544 shares of Series C Convertible Preferred Stock par value $.01 per
share;
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891,314 shares of Series D Convertible Preferred Stock par value $.01 per
share;
457,980 shares of Series E-1 Convertible Preferred Stock, par value $.0l
per share; and
1,346,650 shares of Series E Convertible Preferred Stock, par value $.01
per share, of an undesignated subseries.
Immediately prior to the Closing, the following stock of the Company will be
issued, outstanding, fully paid and nonassessable:
3,834,129 shares of Series A Common Stock, par value $0.001;
61,687 shares of Series B Common Stock, par value $0.001;
65,522 shares of Series C Common Stock, par value $0.001;
57,984 shares of Series D Common Stock, par value $0.001;
146,321 shares of Series E Common Stock, par value $0.001;
562,500 shares of Series A Convertible Preferred Stock, par value $.0l per
share;
344,043 shares of Series B Convertible Preferred Stock, par value $.01 per
share;
41,544 shares of Series C Convertible Preferred Stock par value $.01 per
share; and
709,970 shares of Series D Convertible Preferred Stock par value $.01 per
share.
The stockholders of record and holders of subscriptions, warrants, options,
convertible securities, and other rights (contingent or other) to purchase or
otherwise acquire equity securities of the Company, and the number of shares of
Common Stock or Preferred Stock and the number of such subscriptions, warrants,
options, convertible securities, and other such rights held by each, are as set
forth in the attached Schedule IV. The designations, powers, preferences,
rights, qualifications, limitations and restrictions in respect of each class
and series of authorized capital stock of the Company are as set forth in the
Charter, the relevant part of which is attached as Exhibit C, and all such
---------
designations, powers, preferences, rights, qualifications, limitations and
restrictions are valid, binding and enforceable and in accordance with all
applicable laws. Except as provided in this Agreement or as set forth in the
attached Schedule IV, (i) no person owns of record or is known to the Company to
own beneficially any share of Common Stock, (ii) no subscription, warrant,
option, convertible security, or other right (contingent or other) to purchase
or otherwise acquire equity securities of the Company is authorized or
outstanding and (iii) there is no commitment by the Company to issue shares,
subscriptions, warrants, options, convertible securities, or other such rights
or to distribute to holders of any of its equity securities any evidence of
indebtedness or asset. Except as provided for in the Charter or as set forth in
the attached Schedule IV, the Company has no obligation (contingent or other) to
purchase, redeem or otherwise acquire any of its equity securities or any
interest therein or to pay any dividend or make any other distribution in
respect thereof, and to the Company's knowledge, except for the Stockholders
Agreement and the Thomson Agreement, there are no voting trusts or agreements,
stockholders' agreements, pledge agreements, buy-sell agreements, rights of
first refusal, preemptive rights or proxies relating to any securities of the
Company. All of the outstanding securities of the Company were issued in
compliance with all applicable Federal and state securities laws.
Section 2.05 Financial Statements. The Company has furnished to the
--------------------
Purchasers the audited consolidated balance sheets of the Company as of December
31, 1998, and the related
4
audited consolidated statements of income, stockholders' deficit and cash flows
of the Company for the year ended December 31, 1998; and the unaudited
consolidated balance sheet of the Company as of September 30, 1999, and the
related unaudited consolidated statements of income, stockholders' equity and
cash flows of the Company for the period then ended (the "Balance Sheet"). Such
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied (except that such unaudited financial
statements do not contain all of the required footnotes or period end
adjustments not material in the aggregate) and fairly present the consolidated
financial position of the Company as of such dates. Since the date of the
Balance Sheet, (i) there has been no change in the assets, liabilities or
financial condition of the Company from that reflected in the Balance Sheet
except for changes in the ordinary course of business which in the aggregate
have not been materially adverse and (ii) none of the business, prospects,
financial condition, operations, property or affairs of the Company has been
materially adversely affected by any occurrence or development, individually or
in the aggregate, whether or not insured against.
Section 2.06 Events Subsequent to the Date of the Balance Sheet. Since the
-------------------------------- -----------------
date of the Balance Sheet, and other than as contemplated in this Agreement or
as set forth in Schedule II, the Company has not (i) issued any stock, bond or
other corporate security (ii) borrowed any amount or incurred or become subject
to any liability (absolute, accrued or contingent), except current liabilities
incurred and liabilities under contracts entered into in the ordinary course of
business, (iii) discharged or satisfied any lien or encumbrance or incurred or
paid any obligation or liability (absolute, accrued or contingent) other than
current liabilities shown on the Balance Sheet and current liabilities incurred
since the date of the Balance Sheet in the ordinary course of business, (iv)
declared or made any payment or distribution to stockholders or purchased or
redeemed any share of its capital stock or other security, (v) mortgaged,
pledged, encumbered or subjected to lien any of its assets, tangible or
intangible, other than liens for taxes not yet due and payable, (vi) sold,
assigned or transferred any of its tangible assets except in the ordinary course
of business, or canceled any debt or claim, (vii) sold, assigned, transferred or
granted any exclusive license with respect to any patent, trademark, trade name,
service xxxx, copyright, trade secret or other intangible asset, (viii) suffered
any loss of property or waived any right of substantial value whether or not in
the ordinary course of business, (ix) made any change in officer compensation
except in the ordinary course of business and consistent with past practice, (x)
made any material change in the manner of business or operations of the Company,
(xi) entered into any transaction except in the ordinary course of business or
as otherwise contemplated hereby or (xii) entered into any commitment
(contingent or otherwise) to do any of the foregoing.
Section 2.07 Litigation; Compliance with Law. There is no (i) action,
-------------------------------
suit, claim, proceeding or investigation pending or, to the Company's knowledge,
threatened against the Company, at law or in equity, or before or by any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, (ii) arbitration
proceeding relating to the Company pending under collective bargaining
agreements or otherwise or (iii) governmental inquiry pending or, to the
Company's knowledge, threatened against the Company (including without
limitation any inquiry as to the qualification of the Company to hold or receive
any license or permit), and to the Company's knowledge there is no basis for any
of the foregoing. The Company is not in default with respect to any order,
5
writ, injunction or decree known to or served upon the Company of any court or
of any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign. There is no
action or suit by the Company pending or threatened against others. The Company
has complied with all United States laws, rules, regulations and orders
applicable to its business, operations, properties, assets, products and
services except where such non-compliance could not reasonably be expected to
have a material adverse effect on the Company or its business. The Company has
all necessary United States permits, licenses and other authorizations required
to conduct its business as conducted, and the Company has been operating its
business pursuant to and in compliance with the terms of all such permits,
licenses and other authorizations except where the failure to obtain such
permit, license or other authorization or such non-compliance could not
reasonably be expected to have a material adverse effect on the Company or its
business. There is no existing United States law, rule, regulation or order,
whether Federal, state, county or local, which would prohibit or restrict the
Company from, or otherwise materially adversely affect the Company in conducting
its business in any jurisdiction in which it is now conducting business.
Section 2.08 Proprietary Information of Third Parties. To the Company's
----------------------------------------
knowledge, no third party has claimed that any person employed by or affiliated
with the Company has (a) violated or may be violating any of the terms or
conditions of his employment, non-competition or non-disclosure agreement with
such third party, (b) disclosed or may be disclosing or utilized or may be
utilizing any trade secret or proprietary information or documentation of such
third party or (c) interfered or may be interfering in the employment
relationship between such third party and any of its present or former
employees. No third party has requested information from the Company which
suggests that such a claim might be contemplated. To the Company's knowledge, no
person employed by or affiliated with the Company has employed or proposes to
employ any trade secret or any information or documentation proprietary to any
former employer, and to the Company's knowledge, no person employed by or
affiliated with the Company has violated any confidential relationship which
such person may have had with any third party, in connection with the
development or sale of any product or proposed product or the development or
sale of any service or proposed service of the Company, and the Company has no
reason to believe there will be any such employment or violation. To the
Company's knowledge, none of the execution or delivery of this Agreement, or the
carrying on of the business of the Company as officers, employees or agents by
any officer, director or key employee of the Company, or the conduct or proposed
conduct of the business of the Company, will conflict with or result in a breach
of the terms, conditions or provisions of or constitute a default under any
contract, covenant or instrument under which any such person is obligated.
Section 2.09 Patents; Trademarks; Etc. Set forth in Schedule II is a list
------------------------
and brief description of all domestic and foreign patents, patent rights, patent
applications, trademarks, trademark applications, service marks, service xxxx
applications, trade names and copyrights, and all applications for such which
are in the process of being prepared, owned by or registered in the name of the
Company, or of which the Company is a licensor or licensee or in which the
Company has any rights other than generally commercially available third-party
software. The Company owns or possesses adequate licenses or other rights to
use, or to its knowledge can develop or has developed, all patents, patent
applications, trademarks, trademark applications, service marks, service xxxx
applications, trade names, copyrights, manufacturing processes,
6
formulae, trade secrets, customer lists and know how (collectively,
"Intellectual Property") material to the conduct of its business as conducted,
and no claim is pending or, to the Company's knowledge, threatened to the effect
that the operations of the Company infringe upon or conflict with the asserted
rights of any other person under any Intellectual Property, and to the Company's
knowledge there is no basis for any such claim (whether or not pending or
threatened). No claim is pending or, to the Company's knowledge threatened, to
the effect that any such Intellectual Property owned or licensed by the Company,
or which the Company otherwise has the right to use, is invalid or unenforceable
by the Company, and, to the Company's knowledge, there is no basis for any such
claim (whether or not pending or threatened). To the Company's knowledge, all
technical information developed by and belonging to the Company which has not
been patented has been kept confidential.
Section 2.10 Title to Properties. The Company has good, clear and
-------------------
marketable title to its properties and assets reflected on the Balance Sheet or
acquired by them since the date of the Balance Sheet (other than properties and
assets disposed of in the ordinary course of business since the date of the
Balance Sheet), and all such properties and assets are free and clear of
mortgages, pledges, security interests, liens, charges, claims, restrictions and
other encumbrances (including without limitation, easements and licenses),
except for liens for or current taxes not yet due and payable and minor
imperfections of title, if any, not material in nature or amount and not
materially detracting from the value or impairing the use of the property
subject thereto or impairing the operations or proposed operations of the
Company and its subsidiaries. To the Company's knowledge after due inquiry,
there are no condemnation, environmental, zoning or other land use regulation
proceedings, either instituted or planned to be instituted, which would
adversely affect the use or operation of the Company's properties and assets for
their intended uses and purposes, or the value of such properties, and the
Company has not received notice of any special assessment proceedings which
would affect such properties and assets.
Section 2.11 Leasehold Interests. Each lease or agreement to which the
-------------------
Company is a party under which it is a lessee of any property, real or personal,
is a valid and subsisting agreement, duly authorized and entered into, without
any default of the Company thereunder and, to the Company's knowledge, without
any default thereunder of any other party thereto. No event has occurred and is
continuing which, with due notice or lapse of time or both, would constitute a
default or event of default by the Company under any such lease or agreement or,
to the Company's knowledge, by any other party thereto. The Company's possession
of such property has not been disturbed and, to the Company's knowledge after
due inquiry, no claim has been asserted against the Company adverse to its
rights in such leasehold interests.
Section 2.12 Insurance. The Company holds valid policies covering all of
---------
the insurance required to be maintained by it under Section 6.05.
Section 2.13 Taxes. The Company has filed all tax returns, Federal,
-----
state, county and local, required to be filed by it, and the Company has paid
all taxes shown to be due on such returns. The Company has established reserves
for all taxes accrued but not yet payable in accordance with generally accepted
accounting principles. The Federal income tax returns of the Company have never
been audited by the Internal Revenue Service. No deficiency assessment with
respect to or proposed adjustment of the Company's Federal state, county or
local taxes is
7
pending or, to the Company's knowledge, threatened. There is no tax lien,
whether imposed by any Federal, state, county or local taxing authority,
outstanding against the assets, properties or business of the Company. Neither
the Company nor any of its present or former stockholders has ever filed an
election pursuant to Section 1362 of the Internal Revenue Code of 1986, as
amended (the "Code"), that the Company be taxed as an S corporation.
Section 2.14 Other Agreements. Except as set forth in the attached
----------------
Schedule V, the Company is not a party to or otherwise bound by any written or
oral agreement, instrument, commitment or restriction which individually or in
the aggregate could materially adversely affect the business, prospects,
financial condition, operations, property or affairs of the Company, or any:
(a) distributor, dealer, manufacturer's representative or sales
agency agreement which is not terminable on less than ninety (90) days' notice
without cost or other liability to the Company (except for agreements which, in
the aggregate, are not material to the business of the Company);
(b) sales agreement which entitles any customer to a rebate or right
of set-off to return any product to the Company after acceptance thereof or to
delay the acceptance thereof, or which varies in any material respect from the
Company's standard form agreements;
(c) agreement with any labor union (and, to the knowledge of the
Company, no organizational effort is being made with respect to any of its
employees);
(d) agreement with any supplier with a value in excess of $50,000
containing any provision permitting any party other than the Company to
renegotiate the price or other terms, or containing any pay-back or other
similar provision, upon the occurrence of a failure by the Company to meet its
obligations under the agreement when due or the occurrence of any other event;
(e) agreement for the future purchase of fixed assets or for the
future purchase of materials, supplies or equipment in excess of its normal
operating requirements;
(f) agreement for the employment of any officer, employee or other
person (whether of a legally binding nature or in the nature of informal
understandings), on a full-time or consulting basis which in the United States
is not terminable on notice without cost or other liability to the Company,
except normal severance arrangements and accrued vacation pay;
(g) bonus, pension, profit-sharing, retirement, hospitalization,
insurance, stock purchase, stock option or other plan, agreement or
understanding pursuant to which benefits are provided to any employee of the
Company (other than group insurance plans applicable to employees generally)
other than the Company's 1999 Incentive and Nonqualified Stock Option Plan;
(h) agreement relating to the borrowing of money or to the mortgaging
or pledging of, or otherwise placing a lien or security interest on, any asset
of the Company;
8
(i) guaranty of any obligation for borrowed money or otherwise;
(j) voting trust or agreement, stockholders' agreement, pledge
agreement, buy-sell agreement or first refusal or preemptive rights agreement
relating to any securities of the Company;
(k) agreement, or group of related agreements with the same party or
any group of affiliated parties, under which the Company has advanced or agreed
to advance money or has agreed to lease any property as lessee or lessor;
(1) agreement or obligation (contingent or otherwise) to issue, sell
or otherwise distribute or to repurchase or otherwise acquire or retire any
share of its capital stock or any of its other equity securities, other than
rights to repurchase shares from former employees and consultants;
(m) assignment, license or other agreement with respect to any form of
intangible property (other than license agreements for generally commercially
available third party software and agreements involving payment or receipt by
the Company of less than $25,000);
(n) agreement under which it has granted any person any registration
rights, other than the Registration Rights Agreement;
(o) agreement under which it has limited or restricted its right to
compete with any person in any respect; or
(p) other agreement or group of related agreements with the same party
involving more than $50,000 or continuing over a period of more than six months
from the date or dates thereof (including renewals or extensions optional with
another party), which agreement or group of agreements is not terminable by the
Company without penalty upon notice of thirty (30) days or less, but excluding
any agreement or group of agreements with a customer of the Company for the
sale, lease or rental of the Company's products or services if such agreement or
group of agreements was entered into by the Company in the ordinary course of
business.
The Company, and to the Company's knowledge after due inquiry, each other
party thereto, have in all material respects performed all the obligations
required to be performed by them to date (or each non-performing party has
received a valid, enforceable and irrevocable written waiver with respect to its
non-performance), have received no notice of default and are not in default
(with due notice or lapse of time or both) under any agreement instrument,
commitment, plan or arrangement to which the Company is a party or by which it
or its property may be bound except where such default could not reasonably be
expected to have a material adverse effect on the Company or its business. The
Company has no present expectation or intention of not fully performing all its
obligations under each such agreement instrument, commitment, plan or
arrangement, and the Company has no knowledge of any breach or anticipated
breach by the other party to any agreement, instrument, commitment, plan or
9
arrangement to which the Company is a party. The Company is in compliance with
all of the terms and provisions of its Charter and By-laws, as amended.
Section 2.15 Loans and Advances. The Company does not have any outstanding
------------------
loans or advances to any person and is not obligated to make any such loans or
advances, except, in each case, for advances to employees of the Company in
respect of reimbursable business expenses anticipated to be incurred by them in
connection with their performance of services for the Company.
Section 2.16 Assumptions, Guaranties, Etc. of Indebtedness of Other
------------------------------------------------------
Persons. The Company has not assumed, guaranteed, endorsed or otherwise become
-------
directly or contingently liable on any indebtedness of any other person
(including, without limitation, liability by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment to supply funds to or
otherwise invest in the debtor, or otherwise to assure the creditor against
loss), except for guaranties by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business.
Section 2.17 Significant Customers and Suppliers. No customer or supplier
-----------------------------------
which was material to the Company's financial performance during the period
covered by the financial statements referred to in Section 2.5 or which has been
material to the Company's financial performance thereafter, has terminated,
materially reduced or threatened to terminate or materially reduce its purchases
from or provision of products or services to the Company, as the case may be.
Section 2.18 Governmental Approvals. Subject to the accuracy of the
----------------------
representations and warranties of the Purchasers set forth in Article III, no
registration or filing with, or consent or approval of or other action by, any
Federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by the Company of
this Agreement, the Registration Rights Agreement or the Stockholders Agreement,
the issuance, sale and delivery of the Preferred Shares or, upon conversion
thereof, the issuance and delivery of the Conversion Shares, other than (i)
filings pursuant to state securities laws (all of which filings have been made
by the Company, other than those which are required to be made after the Closing
and which will be duly made on a timely basis) in connection with the sale of
the Preferred Shares and (ii) with respect to the Registration Rights Agreement,
the registration of the shares covered thereby with the Commission and filings
pursuant to state securities laws.
Section 2.19 Disclosure. Neither this Agreement nor any Schedule or Exhibit
----------
to this Agreement contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained herein or therein not
misleading. The financial projections and other estimates contained in the draft
1999 Budget of the Company were prepared by the Company based on the Company's
experience in the industry and on assumptions of fact and opinion as to future
events which the Company, at the date of the issuance of the draft 1999 Budget,
believed to be reasonable, but which the Company cannot and does not assure or
guarantee the attainment of in any manner. As of the date hereof no facts have
come to the attention of the Company which would, in its opinion, require the
Company to revise or amplify
10
the assumptions underlying such projections and other estimates or the
conclusions derived therefrom.
Section 2.20 Offering of the Preferred Shares. Neither the Company nor any
--------------------------------
person authorized or employed by the Company as agent, broker, dealer or
otherwise in connection with the offering or sale of the Preferred Shares or any
security of the Company similar to the Preferred Shares has offered the
Preferred Shares or any such similar security for sale to, or solicited any
offer to buy the Preferred Shares or any such similar security from, or
otherwise approached or negotiated with respect thereto with, any person or
persons, and neither the Company nor any person acting on its behalf has taken
or will take any other action (including, without limitation, any offer,
issuance or sale of any security of the Company under circumstances which might
require the integration of such security with Preferred Shares under the
Securities Act or the rules and regulations of the Commission thereunder), in
either case so as to subject the offering, issuance or sale of the Preferred
Shares to the registration provisions of the Securities Act.
Section 2.21 Brokers. The Company has no contract, arrangement or
-------
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
Section 2.22 Officers. Set forth in Schedule II is a list of the names of
--------
the officers of the Company, together with the title or job classification of
each such person and the total compensation anticipated to be paid to each such
person by the Company in 1999. None of such persons has an employment agreement
or understanding, whether oral or written, with the Company or any of its
subsidiaries, which is not terminable on notice by the Company or such
subsidiary without cost or other liability to the Company or such subsidiary.
Section 2.23 Transactions With Affiliates. Except as indicated in Schedule
----------------------------
2.23, no director, officer, employee or stockholder of the Company, or member of
the family of any such person, or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any such person, or any
member of the family of any such person, has a substantial interest in or is an
officer, director, trustee, partner or holder of more than 50% of the
outstanding capital stock thereof, is a party to any transaction with the
Company, including any contract, agreement or other arrangement providing for
the employment of furnishing of services by, rental of real or personal property
from or otherwise requiring payments to any such person or firm, other than
employment-at-will arrangements in the ordinary course of business.
Section 2.24 Employees. Each of the officers of the Company, each key
---------
employee and each other employee now employed by the Company who has access to
confidential information of the Company has executed a Non-Disclosure,
Noncompetition and Developments Agreement substantially in the form of Exhibit D
---------
(the "Employee Agreement"), and such agreements are in full force and effect. No
officer or key employee of the Company has advised the Company (orally or in
writing) that he intends to terminate employment with the Company. The Company
has complied in all material respects with all applicable United States laws
relating to the employment of labor, including provisions relating to wages,
hours, equal opportunity, collective
11
bargaining and the payment of Social Security and other taxes, and with the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Section 2.25 U.S. Real Property Holding Corporation. The Company is not now
--------------------------------------
and has never been a "United States real property holding corporation", as
defined in Section 897(c)(2) of the Code and Section 1.897-2(b) of the
Regulations promulgated by the Internal Revenue Service, and the Company has
filed with the Internal Revenue Service all statements, if any, with its United
States income tax returns which are required under Section 1.897-2(h) of such
Regulations.
Section 2.26 ERISA.
-----
(a) No Employee Plan is an "employee pension benefit plan" as defined
in Section 3(2) of ERISA. The Company and its ERISA Affiliates have not incurred
nor expect to incur any liability under Title IV of ERISA.
(b) None of the Employee Plans or other arrangements listed on
Schedule V covers any non-United States employee or former employee of the
Company, except as required by Section 4980 of the Code.
(c) Each Employee Plan and each Benefit Arrangement has been
maintained in substantial compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations which are
applicable to such Employee Plan and Benefit Arrangement, including ERISA.
(d) No taxes under Section 4980B or Section 4975 of the Code have been
incurred in respect of any Employee Plan.
Section 2.27 Foreign Corrupt Practices Act. The Company has not taken any
-----------------------------
action which would cause it to be in violation of the Foreign Corrupt practices
Act of 1977, as amended, or any rules and regulations thereunder. To the
Company's knowledge after due inquiry, there is not now, and there has never
been any employment by the Company of, or beneficial ownership in the Company
by, any governmental or political official in any country in the world.
Section 2.28 Federal Reserve Regulations. The Company is not engaged in the
---------------------------
business of extending credit for the purpose of purchasing or carrying margin
securities (within the meaning of Regulation G of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of the Preferred Shares
will be used to purchase or carry any margin security or to extend credit to
others for the purpose of purchasing or carrying any margin security or in any
other manner which would involve a violation of any of the regulations of the
Board of Governors of the Federal Reserve System.
Section 2.29 Environmental Matters. For the purposes of this Section 2.29,
---------------------
the following terms shall have the following meanings;
12
"Environmental Law" means any federal, state or local statute, law,
ordinance, rule or regulation of the United States and any other jurisdiction
within the United States now effective and any order, to which the Company is a
party or is otherwise directly bound, of the United States or other jurisdiction
within the United States now effective relating to: (i) pollution or protection
of the environment, including natural resources; (ii) manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances; or (ii) exposure of persons, including employees, to
Hazardous Substances;
"Hazardous Substances" means any substance, whether liquid, solid or gas
(i) listed, identified or designated as hazardous or toxic under any
Environmental Law, (ii) which, applying criteria specified in any Environmental
Law, is hazardous or toxic, or (iii) the use or disposal of which is regulated
under Environmental Law.
As of the Closing Date the Company has not been required to obtain any permits,
licenses or any other authorizations which are required under any Environmental
Law. To the best of the Company's knowledge, no Hazardous Substances have been,
or have been threatened to be, discharged, released or emitted into the air,
water, surface water, ground water, land surface or subsurface strata or
transported to or from the property of the Company by the Company except in
compliance in all material respects with Environmental Law and except for
incidental release of Hazardous Substances in amounts or concentrations which
would not reasonably be expected to give rise to any claims or liabilities
against the Company under any Environmental Law. The Company has not received
any written notification from a governmental agency that there is any violation
of any Environmental Law with respect to the business and properties of the
Company, nor has the Company received any written notification from a
governmental agency pursuant to Section 104, 106 or 107 of the Comprehensive
Environmental Response Compensation and Liability Act, as amended.
Section 2.30 Qualification as a Qualified Small Business. The Company is a
-------------------------------------------
"qualified small business," as defined in Section 1202(d) of the Code and the
Preferred Shares constitute "qualified small business stock" as defined in
Section 1202(c) of the Code.
Article III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Except as otherwise noted on Schedule III hereto, each Purchaser severally
and not jointly represents and warrants to the Company that:
Section 3.01 Organization and Power. Such purchaser, if a corporation or
----------------------
partnership, is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its formation. Such purchaser has all necessary
power and authority to own and hold its properties and to carry on its business
as currently conducted and to execute, deliver and perform this Agreement, the
Registration Rights Agreement and the Stockholders Agreement.
Section 3.02 Authorization. The execution and delivery by such Purchaser of
-------------
this Agreement, the Registration Rights Agreement, and the Stockholders
Agreement and the performance by Purchaser of its obligations hereunder and
thereunder, have been duly authorized by all requisite corporate or other action
and will not violate any provision of law, any order of
13
any court or other agency of government, or if a corporation, Purchaser's
Certificate of Incorporation or by-laws, or any provision of any indenture,
agreement, or other instrument to which such Purchaser or its properties or
assets is bound.
Section 3.03 Validity. This Agreement has been duly executed and delivered
--------
by such Purchaser and constitutes the legal, valid and binding obligation of
Purchaser, enforceable in accordance with its terms. The Registration Rights
Agreement and the Stockholders Agreement, when executed and delivered in
accordance with this agreement, will constitute legal, valid and binding
obligations of such Purchaser, enforceable in accordance with their respective
terms.
Section 3.04 Additional Representation. Each Purchaser severally represents
-------------------------
and warrants to the Company that:
(a) it is an "accredited investor" within the meaning of Rule 501
under the Securities Act and was not organized for the specific purpose of
acquiring the Preferred Shares;
(b) it has sufficient knowledge and experience in investing in
companies similar to the Company in terms of the Company's stage of development
so as to be able to evaluate the risks and merits of its investment in the
Company and it is able financially to bear the risks thereof;
(c) such Purchaser believes it has received all information reasonably
necessary for deciding whether to purchase the Preferred Shares. It has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the Preferred Shares and to discuss the Company's
business, management and financial affairs with the Company's management;
(d) the Preferred Shares being purchased by it are being acquired for
its own account for the purpose of investment and not with a view to or for sale
in connection with any distribution thereof,
(e) it understands that (i) the Preferred Shares and the Conversion
Shares have not been registered under the Securities Act by reason of their
issuance in action exempt from the registration requirements of the Securities
Act pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated under the
Securities Act, (ii) the Preferred Shares and, upon conversion thereof, the
Conversion Shares must be held indefinitely unless a subsequent disposition
thereof is registered under the Securities Act or is exempt from such
registration, (iii) the Preferred Shares and the Conversion Shares will bear a
legend to such effect and (iv) the Company will make a notation on its transfer
books to such effect, and
(f) if it sells any Conversion Shares pursuant to Rule 144A
promulgated under the Securities Act, it will take all necessary steps in order
to perfect the exemption from registration provided thereby, including (i)
obtaining on behalf of the Company information to enable the Company to
establish a reasonable belief that the purchaser is a qualified institutional
buyer and (ii) advising such purchaser that Rule 144A is being relied upon with
respect to such resale.
14
Article IV. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS
The obligation of each Purchaser to purchase and pay for the Preferred
Shares being purchased by it on the Closing Date is, at its option, subject to
the satisfaction, on or before the Closing Date, of the following conditions:
(a) Opinion of Company's Counsel. The Purchasers shall have received
---------- -----------------
from Xxxxx, Xxxx & Xxxxx LLP, counsel for the Company, an opinion dated the
Closing Date, in form and scope satisfactory to the Purchasers and their
counsel, substantially to the effect that:
(i) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. The
Company is duly qualified to transact business as a foreign corporation and is
in good standing in Massachusetts and California. The Company has the corporate
power and authority to own and hold its properties and to carry on its business
as currently conducted. The Company has the corporate power and authority to
execute, deliver and perform this Agreement, the Registration Rights Agreement
and the Stockholders Agreement, to issue, sell and deliver the Preferred Shares
and, upon conversion thereof, to issue and deliver the Conversion Shares.
(ii) This Agreement, the Registration Rights Agreement, the
Stockholders Agreement and the Warrant Agreement have been duly authorized,
executed and delivered by the Company and constitute the legal, valid and
binding obligations of the Company, enforceable in accordance with their
respective terms (subject, as to enforcement of remedies, to the discretion of
courts in awarding equitable relief and to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting the rights of
creditors generally), except that such counsel need not express any opinion as
to the validity or enforceability of the indemnification and contribution
provisions of the Registration Rights Agreement.
(iii) The execution and delivery by the Company of this
Agreement, the Registration Rights Agreement and the Stockholders Agreement, the
performance by the Company of its obligations hereunder and thereunder, the
issuance, sale and delivery of the Preferred Shares and, upon conversion
thereof, the issuance and delivery of the Conversion Shares, will not violate
any provision of law, the Charter or By-laws, as amended, of the Company, any
order of any court or other agency of government or any indenture, agreement or
other instrument known to such counsel to which the Company, or any of its
properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge, restriction, claim or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company. In rendering the
foregoing opinion, such counsel may assume full disclosure to the Purchasers of
all material facts and, with respect to performance by the Company of its
obligations under the Registration Rights Agreement may assume compliance by the
Company at such time with the registration requirements of the Securities Act
and with applicable state securities laws and may disclaim any opinion as to the
15
validity or enforceability of the indemnification and contribution provisions of
the Registration Rights Agreement.
(iv) The authorized capital stock of the Company consists of:
10,000,000 shares of Series A Common Stock, par value $0.001;
64,031 shares of Series B Common Stock, par value $0.001;
81,366 shares of Series C Common Stock, par value $0.001;
59,250 shares of Series D Common Stock, par value $0.001;
250,050 shares of Series E Common Stock, par value $0.001 (together the
foregoing classes of Common Stock are referred to herein as the "Common
Stock");
562,500 shares of Series A Convertible Preferred Stock, par value $.01 per
share;
344,043 shares of Series B Convertible Preferred Stock, par value $.01 per
share;
41,544 shares of Series C Convertible Preferred Stock par value $.01 per
share;
891,314 shares of Series D Convertible Preferred Stock par value $.01 per
share;
457,980 shares of Series E-1 Convertible Preferred Stock, par value $.01
per share; and
1,346,650 shares of Series E Convertible Preferred Stock, par value $.01
per share of an undesignated subseries.
Immediately prior to the Closing, the following stock of the Company will be
issued, outstanding, fully paid and nonassessable:
3,834,129 shares of Series A Common Stock, par value $0.001;
61,687 shares of Series B Common Stock, par value $0.001;
65,522 shares of Series C Common Stock, par value $0.001,
57,984 shares of Series D Common Stock, par value $0.001;
146,321 shares of Series E Common Stock, par value $0.001;
562,500 shares of Series A Convertible Preferred Stock, par value $.01 per
share;
344,043 shares of Series B Convertible Preferred Stock, par value $.01 per
share;
41,544 shares of Series C Convertible Preferred Stock par value $.01 per
share; and
709,970 shares of Series D Convertible Preferred Stock par value $.01 per
share.
Immediately prior to the Closing, the stockholders of record and holders of
record of subscriptions, warrants, options, convertible securities, and other
rights (contingent or other) to purchase or otherwise acquire equity securities
of the Company, and the number of shares of Common Stock or Preferred Stock and
the number of such subscriptions, warrants, options, convertible securities, and
other such rights held by each, will be as set forth in Schedule IV. For
purposes of the foregoing opinion, counsel may rely on the records in its
possession. The designations, powers, preferences, rights, qualifications,
limitations and restrictions in respect of each class or series of authorized
capital stock of the Company are as set forth in the Charter and all such
designations, powers, preferences, rights, qualifications, limitations and
restrictions are valid, binding and enforceable and in accordance with all
applicable laws (subject, as to enforcement, to the discretion of courts in
awarding equitable relief and to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting the rights of
16
creditors generally). Except as set forth in Schedule IV, to the knowledge of
such counsel, immediately prior to the Closing no subscription, warrant, option,
convertible security, or other right (contingent or other) to purchase or
acquire equity securities of the Company shall be authorized or outstanding and
there will be no commitment by the Company to issue shares, subscriptions,
warrants, options, convertible securities, or other such rights or to distribute
to holders of any of its equity securities any evidence of indebtedness or
asset. Except as set forth in Schedule IV or as provided for in the Charter, to
the knowledge of such counsel the Company has no obligation (contingent or
other) to purchase, redeem or otherwise acquire any of its equity securities or
any interest therein or to pay any dividend or make any other distribution in
respect thereof.
(v) The Preferred Shares and the Conversion Shares have been duly
authorized. The issuance, sale and delivery of the Preferred Shares and the
issuance and delivery of the Conversion Shares upon conversion of the Preferred
Shares have been duly authorized by all required corporate action; the Preferred
Shares have been validly issued, are fully paid and nonassessable and, to the
knowledge of such counsel, are free and clear of all liens, charges,
restrictions, claims and encumbrances imposed by or through the Company except
as set forth in the Registration Rights Agreement; and the Conversion Shares
have been duly reserved for issuance upon conversion of the Preferred Shares
and, when so issued, will be validly issued, fully paid and nonassessable and,
to the knowledge of such counsel, will be free and clear of all liens, charges,
restrictions, claims and encumbrances imposed by or through the Company except
as set forth in the Registration Rights Agreement. Neither the issuance, sale or
delivery of the Preferred Shares nor the issuance or delivery of the Conversion
Shares is subject to any preemptive right of stockholders of the Company arising
under law or the Charter or By-laws of the Company, each as amended, which has
not been waived, or, to the knowledge of such counsel, to any contractual right
of first refusal or other right in favor of any person, other than the rights
set forth in the Thomson Agreement.
(vi) Assuming that the Company's Board of Directors has duly
authorized the Company to file a Certificate of Designation setting the price of
the Warrant Shares each time such shares are to be issued, and that such a
Certificate of Designation has been filed, if issued against payment therefor in
accordance with the Warrant Agreement, such Warrant Shares will be validly
issued, fully paid and nonassessable, and, to the knowledge of such counsel,
will be free and clear of all liens, charges, restrictions, claims and
encumbrances imposed by or through the Company except as set forth in the
Registration Rights Agreement. The issuance, sale or delivery of the such shares
is not subject to any preemptive right of stockholders of the Company arising
under law or the Charter or By-laws of the Company, each as amended, which has
not been waived, or, to the knowledge of such counsel, to any contractual right
of first refusal or other right in favor of any person, other than the rights
set forth in the Thomson Agreement.
(vii) To the knowledge of such counsel there is no (A) action, suit
proceeding or investigation pending or threatened against the Company, at law or
in equity, or before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (B) arbitration proceeding relating to the Company pending under
collective bargaining agreements or (C) governmental inquiry pending
17
or threatened against the Company (including, without limitation, any inquiry as
to the clarification of the Company to hold or receive any license or permit).
To the knowledge of such counsel, the Company is not in default with respect to
any order, writ, injunction or decree known to such counsel of any court or of
any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign.
(viii) Assuming the accuracy of the representations and
warranties of the Purchasers set forth in Article III, no registration or filing
with, and no consent or approval of, or other action by any Federal, state or
other governmental agency or instrumentality is or will be necessary under
current law for the valid execution, delivery and performance by the Company of
this Agreement, the issuance, sale and delivery of the Preferred Shares or, upon
conversion thereof, the issuance and delivery of the Conversion Shares, other
than filings pursuant to state securities laws (all of which filings, other than
those which are required to be made after the Closing, have been made by the
Company). In rendering the foregoing opinion with respect to performance by the
Company of its obligations under the Registration Rights Agreement, such counsel
may assume compliance by the Company at such time with the registration
requirements of the Securities Act and with applicable state securities laws and
may disclaim any opinion as to the validity of enforceability of the
indemnification and contribution provision of the Registration Rights Agreement.
(ix) All of the outstanding shares of capital stock have been
issued in compliance with the registration requirements of the Securities Act
and all applicable state securities laws.
(b) Representations and Warranties to be True and Correct. The
-----------------------------------------------------
representations and warranties contained in Article II shall be true, complete
and correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and the
President and Treasurer of the Company shall have certified to such effect to
the Purchasers in writing.
(c) Performance. The Company shall have performed and complied with
-----------
all agreements contained herein required to be performed or complied with by it
prior to or at the Closing Date, and the President and Treasurer of the Company
shall have certified to the Purchasers in writing to such effect and to the
further effect that all of the conditions set forth in this Article IV have been
satisfied.
(d) All Proceedings to be Satisfactory. All corporate and other
----------------------------------
proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be satisfactory in
form and substance to the Purchasers and their counsel, and the Purchasers and
their counsel shall have received all such counterpart originals or certified or
other copies of such documents as they reasonably may request.
(e) Documents. The Purchasers and their counsel shall have received
---------
copies of the following documents:
18
(i) the Charter, certified as of a recent date by the Secretary of
State of the State of Delaware, and (B) a certificate of said Secretary dated as
of a recent date as to the due incorporation and good standing of the Company,
the payment of all excise taxes by the Company and listing all documents of the
Company on file with said Secretary;
(ii) a certificate of the Secretary or an Assistant Secretary of the
Company dated the Closing Date and certifying: (A) that attached thereto is a
true and complete copy of the By-laws of the Company as in effect on the date of
such certification; (B) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors or the stockholders of the Company
authorizing the execution, delivery and performance of this Agreement, the
Registration Rights Agreement and the Stockholders Agreement, the issuance, sale
and delivery of the Preferred Shares and the reservation, issuance and delivery
of the Conversion Shares, and that all such resolutions are in full force and
effect and are all the resolutions adopted in connection with the transactions
contemplated by this Agreement, the Registration Rights Agreement and the
Stockholders Agreement; (C) that the Charter has not been amended since the date
of the last amendment referred to in the certificate delivered pursuant to
clause (i)(B) above; and (D) to the incumbency and specimen signature of each
officer of the Company executing this Agreement, the Registration Rights
Agreement or the Stockholders Agreement, the stock certificates representing the
Preferred Shares and any certificate, or instrument furnished pursuant hereto,
and a certification by another officer of the Company as to the incumbency and
signature of the officer signing the certificate referred to in this clause
(ii); and
(iii) such additional supporting documents and other information with
respect to the operations and affairs of the Company as the Purchasers or their
counsel reasonably may request
(f) Registration Rights Agreement. The Company shall have executed and
-----------------------------
delivered the Registration Rights Agreement.
(g) Stockholders Agreement. The Stockholders Agreement shall have been
----------------------
executed and delivered by the Company and the parties thereto as indicated in
the form of agreement attached hereto as Exhibit B.
(h) Charter. The Charter shall read in its entirety as set forth in
-------
Exhibit C.
All such documents shall be satisfactory in form and substance to the Purchasers
and their counsel.
Article V. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
The obligation of the Company to sell the Preferred Shares to each
Purchaser on the Closing Date is, at its option, subject to the satisfaction, on
or before the Closing Date, of the following conditions:
19
(a) Representations and Warranties to be True and Correct. The
-----------------------------------------------------
representations and warranties of such Purchaser contained in Article III shall
be true, complete and correct on and as of the Closing Date with the same effect
as though such representations and warranties had been made on and as of such
date.
(b) Payment of Purchase Price. The Purchaser shall have delivered the
-------------------------
Aggregate Price for the Preferred Shares in accordance with Section 1.2.
(c) Charter Amendment. The Charter in the form attached as Exhibit C
----------------- ---------
shall have been adopted by the Company and approved by its Directors and
shareholders, and the Charter shall have been duly filed with the Secretary of
State of the State of Delaware and have become legally effective.
(d) Qualification. All authorizations, approvals, 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 of the Preferred
Shares pursuant to this Agreement shall have been duly obtained and effective as
of the Closing Date.
(e) With respect only to the Company's obligation to issue and sell
any Preferred Shares to AOL and 12,845 Preferred Shares to Thomson, the Company
and AOL shall have entered into an Interactive Services Agreement relating to
the carriage or promotion of Company-provided content by AOL (the "Interactive
Services Agreement").
(f) With respect only to the obligation of the Company to sell 12,845
of the Preferred Shares to Thomson on the Closing Date, AOL shall have purchased
and paid for 93,168 Preferred Shares on the Closing Date.
Article VI. COVENANTS OF THE COMPANY
The Company covenants and agrees with each of the Purchasers that:
Section 6.01 Financial Statements. Reports. Etc. The Company shall furnish
----------------------------------
to each Purchaser under this Agreement:
(a) within one hundred twenty (120) days after the end of each fiscal
year of the Company a consolidated balance sheet of the Company and its
subsidiaries as of the end of such fiscal year and the related consolidated
statements of income, stockholders' equity and cash flows for the fiscal year
then ended, prepared in accordance with generally accepted accounting principles
and certified by a firm of independent public accountants of recognized national
standing selected by the Board of Directors of the Company;
(b) within thirty (30) days after the end of each month in each
fiscal year a consolidated balance sheet of the Company and its subsidiaries and
the related consolidated statements of income, stockholders' equity and cash
flows, unaudited but prepared in accordance with generally accepted accounting
principles and certified by the Chief Financial Officer of the Company, such
consolidated balance sheet to be as of the end of such month and such
20
consolidated statements of income, stockholders' equity and cash flows to be for
such month and for the period from the beginning of the fiscal year to the end
of such month, in each case with comparative statements for the prior fiscal
year;
(c) at the time of delivery of each annual financial statement
pursuant to 6.01(a), a certificate executed by the Chief Financial Officer on
behalf of the Company stating that such officer has caused this Agreement and
the Preferred Stock to be reviewed and has no knowledge of any default by the
Company in the performance or observance of any of the provisions of this
Agreement or the Preferred Stock or, if such officer has such knowledge,
specifying such default and the nature thereof,
(d) thirty (30) days prior to the start of each fiscal year, or such
later date approved by the Board of Directors, consolidated capital and
operating expense budgets, cash flow projections and income and loss projections
for the Company and its subsidiaries in respect of such fiscal year, itemized in
reasonable detail and prepared on a monthly basis, and, promptly after
preparation, any revisions to any of the foregoing;
(e) promptly following receipt by the Company, each audit response
letter, accountant's management letter and other written report submitted to the
Company by its independent public accountants in connection with an annual or
interim audit of the books of the Company or any of its subsidiaries; and
(f) promptly after the commencement thereof, notice of all actions,
suits, claims, proceedings, investigations and inquiries of the type described
in Section 2.7 that could materially adversely affect the Company or any of its
subsidiaries.
Section 6.02 Right of Participation. The Company shall, prior to any
----------------------
proposed issuance by the Company of any of its securities (other than debt
securities with no equity feature), offer to AOL under this Agreement by written
notice the right, for a period of twenty (20) days, to purchase for cash at an
amount equal to the price or other consideration for which such securities are
to be issued, a number of such securities so that, after giving effect to such
issuance (and the conversion, exercise and exchange into or for (whether
directly or indirectly) shares of Common Stock of all such securities that are
so convertible, exercisable or exchangeable), AOL will continue to maintain its
same proportionate equity ownership in the Company as of the date of such notice
(treating AOL, for the purpose of such computation, as the holder of the number
of shares of Common Stock which would be issuable to AOL upon conversion,
exercise and exchange of all securities (including but not limited to the
Preferred Shares) held by AOL on the date such offer is made, that are
convertible, exercisable or exchangeable into or for (whether directly or
indirectly) shares of Common Stock and assuming the like conversion, exercise
and exchange of all such other securities held by other persons), but excluding
shares of Common Stock issuable to AOL upon its exercise of any right to
purchase Common Stock pursuant to the Warrant issued to AOL by the Company in
connection with the Interactive Services Agreement; provided, however, that the
participation rights of AOL pursuant to this Section 6.2 shall not apply to
securities issued (A) upon conversion of any of the Preferred Shares or Common
Shares, (B) as a stock dividend or upon any subdivision of shares of Common
Stock, provided that the securities issued pursuant to such stock dividend or
subdivision are limited to additional shares
21
of Common Stock, (C) pursuant to subscriptions, warrants, options, convertible
securities, or other rights which are listed in Schedule IV as being outstanding
on the date of this Agreement, (D) solely in consideration for the acquisition
(whether by merger or otherwise) by the Company or any of its subsidiaries of
all or substantially all of the stock or assets of any other entity, (E)
pursuant to a firm commitment public offering, (F) pursuant to the exercise of
options to purchase Common Stock, or as direct stock grants, not to exceed
twenty-five percent (25%) of the Company's outstanding shares of capital stock
on a fully diluted basis, that were granted by the Board of Directors and
approved by the Compensation Committee (as defined in Section 6.19) under any
Company stock option plan to directors, officers, employees or consultants of
the Company in connection with their service to the Company (the shares exempted
by this clause (F) being hereinafter referred to as the "Reserved Employee
Shares"), and (G) pursuant to the exercise by Thomson of its preemptive rights
to purchase securities described in Subsections (D) or (F) above under the
Thomson Agreement. The Company's written notice to AOL shall describe the
securities proposed to be issued by the Company and specify the number, price
and payment terms. AOL may accept the Company's offer as to the full number of
securities offered to it or any lesser number, by written notice thereof given
by it to the Company prior to the expiration of the aforesaid twenty (20) day
period, in which event the Company shall promptly sell and AOL shall buy, upon
the terms specified, the number of securities agreed to be purchased by AOL. The
Company shall be free at any time prior to one hundred twenty (120) days after
the date of its notice of offer to AOL, to offer and sell to any third party or
parties the remainder of such securities proposed to be issued by the Company
(including but not limited to the securities not agreed by AOL to be purchased
by it), at a price and on payment terms no less favorable to the Company than
those specified in such notice of offer to AOL. However, if such third party
sale or sales are not consummated within such one hundred twenty (120) day
period, the Company shall not sell such securities as shall not have been
purchased within such period without again complying with this Section 6.2.
Section 6.03 Reserve for Conversion Shares. The Company shall at all times
-----------------------------
reserve and keep available out of its authorized but unissued shares of Common
Stock, for the purpose of effecting the conversion of the Preferred Shares and
otherwise complying with the terms of this Agreement, such number of its duly
authorized shares of Common Stock as shall be sufficient to effect the
conversion of the Preferred Shares from time to time outstanding or otherwise to
comply with the terms of this Agreement. If at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of the Preferred Shares or otherwise to comply with the terms of this
Agreement, the Company will forthwith use its best efforts to take such
corporate action as may be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes. The Company will obtain any authorization, consent, approval or other
action by or make any filing with any court or administrative body that may be
required under applicable state securities laws in connection with the issuance
of shares of Common Stock upon conversion of the Preferred Shares.
Section 6.04 Corporate Existence. The Company shall maintain and, except as
-------------------
otherwise permitted by Section 6.14 cause each of its subsidiaries to maintain,
their respective corporate existence, rights and franchises in full force and
effect.
22
Section 6.05 Properties, Business, Insurance. The Company shall maintain
-------------------------------
and cause each of its subsidiaries to maintain as to their respective properties
and business, with financially sound and reputable insurers, insurance against
such casualties and contingencies and of such types and in such amounts as is
customary for companies similarly situated, which insurance shall be deemed by
the Company to be sufficient. The Company shall not cause or permit any
assignment or change in beneficiary and shall not borrow against such policy.
Section 6.06 Inspection. The Company shall permit and cause each of its
----------
subsidiaries to permit each Purchaser and such persons as it may designate, such
persons to be reasonably acceptable to the Company, at such Purchaser's expense,
at reasonable times and upon reasonable notice, to visit and inspect any of the
properties of the Company and its subsidiaries, examine their books and take
copies and extracts therefrom, discuss the affairs, finances and accounts of the
Company and its subsidiaries with their officers, employees and public
accountants (and the Company hereby authorizes said accountants to discuss with
such Purchaser and such designees such affairs, finances and accounts).
Section 6.07 Restrictive Agreements Prohibited. Neither the Company nor any
---------------------------------
of its subsidiaries shall become a party to any agreement which by its terms
restricts the Company's performance of this Agreement, the Registration Rights
Agreement, the Stockholders Agreement or the Charter.
Section 6.08 Transactions with Affiliates. Except for transactions
----------------------------
contemplated by this Agreement (including entering into the Interactive Services
Agreement and a Warrant Agreement in connection therewith) or as otherwise
approved by the Compensation Committee (as defined below), neither the Company
nor any of its subsidiaries shall enter into any transaction with any director,
officer, employee or holder of more than 5% of the outstanding capital stock of
any class or series of capital stock of the Company or any of its subsidiaries,
member of the family of any such person, or any corporation, partnership, trust
or other entity in which any such person, or member of the family of any such
person, is a director, officer, trustee, partner or holder of more than 5% of
the outstanding capital stock thereof (an "Affiliate"), except for transactions
on customary terms related to such Affiliate's employment (which transactions
are subject to Section 6.19 hereof). Notwithstanding the foregoing, nothing
herein shall be deemed to restrict the Company from providing to an Affiliate
the services the Company regularly provides to its customers on the same terms
regularly made available to such customers.
Section 6.09 Expenses of Directors. The Company shall promptly reimburse in
---------------------
full each director of the Company who is not an employee of the Company for all
of his reasonable out-of-pocket expenses incurred in attending each meeting of
the Board of Directors of the Company or any Committee thereof.
Section 6.10 Use of Proceeds. The Company shall use the proceeds from the
---------------
sale of the Preferred Shares for general business purposes and for payments
under the Interactive Services Agreement.
23
Section 6.11 Board of Directors Meetings. The Company shall use its best
---------------------------
efforts to ensure that meetings of its Board of Directors are held at least four
times each year and at least once each quarter. The Company shall permit AOL, so
long as AOL is not represented on the Board of Directors of the Company, to
attend meetings of the Board of Directors, except where such attendance could
jeopardize rights of the Company, such as the attorney client privilege. The
Company shall cause each of its subsidiaries to permit AOL, so long as AOL is
not represented on the Board of Directors of such subsidiary, to attend meetings
of the Board of Directors of such subsidiary, except where such attendance could
jeopardize rights of the Company, such as the attorney client privilege.
Section 6.12 By-laws. The Company shall at all times cause its By-laws to
-------
provide that, (a) unless otherwise required by the laws of the State of
Delaware, (i) any two directors or (ii) any holder or holders of at least 25% of
the outstanding shares of Series D Convertible Preferred Stock, shall have the
right to call a meeting of the Board of Directors or stockholders and (b) the
number of directors fixed in accordance therewith shall in no event conflict
with any of the terms or provisions of the Preferred Stock as set forth in the
Charter. The Company shall at all times maintain provisions in its By-laws
and/or Charter indemnifying all directors against liability and absolving all
directors from liability to the Company and its stockholders to the maximum
extent permitted under the laws of the State of Delaware.
Section 6.13 Employee Non-Disclosure, Non-Competition and Developments
---------------------------------------------------------
Agreements. The Company shall use its reasonable best efforts to cause each of
----------
the future officers of the Company, each key employee and each other employee
who has or will have access to confidential information of the Company and to
cause or to use its best efforts to cause its subsidiaries to cause each of the
future officers of the Company or its subsidiaries, each key employee and each
other employee employed by the Company or its subsidiaries who will have access
to confidential information of the Company to execute a Non-Disclosure, Non-
Competition and Developments Agreement in the form of Exhibit D, upon each such
---------
person's employment by the Company or any of its subsidiaries.
Section 6.14 Subsidiaries. The Company shall not permit any subsidiary to
------------
consolidate or merge into or with or sell or transfer all or substantially all
its assets, except that any subsidiary may (i) consolidate or merge into or with
or sell or transfer assets to any other subsidiary, (ii) merge into or sell or
transfer assets to the Company or (iii) merge into or with another company
provided that the Company owns more than 50% of the voting stock of the
subsidiary or the surviving corporation, as the case may be, following such
merger. The Company shall not sell or otherwise transfer any shares of capital
stock of any subsidiary, except to the Company or another subsidiary, or permit
any subsidiary to issue, sell or otherwise transfer any shares of its capital
stock or the capital stock of any subsidiary, except to the Company or another
subsidiary. The Company shall not permit any subsidiary to purchase or set aside
any sums for the purchase of, or pay any dividend or make any distribution on,
any shares of its stock, except for dividends or other distributions payable to
the Company or another subsidiary.
24
Section 6.15 Compliance with Laws. The Company shall comply, and cause each
--------------------
subsidiary to comply, with all applicable laws, rules, regulations and orders,
noncompliance with which could materially adversely affect its business or
condition, financial or otherwise.
Section 6.16 Keeping of Records of Account. The Company shall keep, and
-----------------------------
cause each subsidiary to keep, adequate records and books of account, in which
complete entries will be made in accordance with generally accepted accounting
principles consistently applied, reflecting all financial transactions of the
Company and such subsidiary, and in which, for each fiscal year, all proper
reserves for depreciation, depletion, obsolescence, amortization, taxes, bad
debts and other purposes in connection with its business shall be made.
Section 6.17 U.S. Real Property Interest. The Company shall provide prompt
---------------------------
written notice to each Purchaser following any "determination date" (as defined
in Treasury Regulation Section 1.897-2(c)(i)) on which the Company becomes a
United States real property holding corporation. In addition, upon a written
request by any Purchaser, the Company shall provide such Purchaser with a
written statement informing the Purchaser whether such Purchaser's interest in
the Company constitutes a U.S. real property interest. The Company's
determination shall comply with the requirements of Treasury Regulation Section
1.897-2(h)(1) or any successor regulation, and the Company shall provide timely
notice to the Internal Revenue Service, in accordance with and to the extent
required by Treasury Regulation Section 1.897-2(h)(2) or any successor
regulation, that such statement has been made. The Company's written statement
to any Purchaser shall be delivered to such Purchaser within ten (10) days of
such Purchases written request therefor. The Company's obligation to furnish a
written statement pursuant to this Section 6.17 shall continue notwithstanding
the fact that a class of the Company's stock may be regularly traded on an
established securities market.
Section 6.18 Rule 144A Information. The Company shall, at all times during
---------------------
which it is neither subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), nor
exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act,
provide in writing, upon the written request of any Purchaser and a prospective
buyer who is a "qualified institutional buyer" within the meaning of Rule
144A(a)(1) of Preferred Shares or Conversion Shares from any Purchaser, all
information required by Rule 144A(d)(4)(i) of the General Regulations
promulgated by the Commission under the Securities Act ("Rule 144A
Information"). The Company also shall, upon the written request of any
Purchaser, cooperate with and assist such Purchaser or any member of the
National Association of Securities Dealers, Inc. PORTAL system in applying to
designate and thereafter maintain the eligibility of the Preferred Shares or
Conversion Shares, as the case may be, for trading through PORTAL. The Company's
obligations under this Section 6.18 shall at all times be contingent upon the
relevant Purchasers obtaining from the prospective buyer of Preferred Shares or
Conversion Shares a written agreement to take all reasonable precautions to
safeguard the Rule 144A Information from disclosure to anyone other than a
person who will assist such buyer in evaluating the purchase of any Preferred
Shares or Conversion Shares.
Section 6.19 Compensation. No change in compensation shall be paid to any
------------
officer or key employee of the Company nor shall any stock option or share of
the Company's capital stock
25
be issued to any employee of the Company without the approval of a majority
of the members of the Company's Compensation Committee.
Section 6.20 Confidentiality. The Company's obligations under Sections 6.1,
---------------
6.6, 6.11 and 6.18 shall at all times be contingent upon each Purchaser's
agreement, and each Purchaser hereby agrees, to take all reasonable precautions
to safeguard the confidentiality of the information received by or disclosed to
such Purchaser by the Company in the fulfillment of the Company's obligations
under such Sections and to refrain from disclosure of such information to anyone
other than a person who will assist such Purchaser in evaluating the Company or
to such Purchaser's accountants, attorneys and other professional advisors and,
in the case of Section 6.1, to its equity investors (but only to the extent
reasonably necessary to meet such Purchaser's reporting obligations).
Notwithstanding the foregoing, a Purchaser shall be authorized to disclose
confidential information of the Company pursuant to the requirement or request
of a governmental body with jurisdiction, to the extent such disclosure is
required by a valid and applicable statute, rule, regulation, order, decree,
judgment or similar act, and notice is given by such Purchaser to the Company of
any such requirement or request, which notice is adequate to enable the Company
to seasonably seek an appropriate protective order or exemption from such
requirement or request.
Section 6.21 Qualification as a Qualified Small Business. The Company
-------------------------------------------
covenants and agrees to comply with the reporting and recordkeeping
requirements, if any, of Section 1202 of the Code and any regulations
promulgated thereunder and to execute and deliver to the Purchasers and the
Internal Revenue Service, from time to time, such forms, documents, schedules
and other instruments as may be reasonably requested thereby to demonstrate,
where possible, that the Preferred Shares and the Conversion Shares qualify as a
"qualified small business stock," as defined in Section 1202(c) of the Code.
26
Section 6.22 Right of First Refusal upon Sale of Company.
-------------------------------------------
(a) Before the Company accepts a bona fide offer from a third party
(the "Proposed Acquirer") to acquire greater than forty percent (40%) of the
fully diluted capital stock of the Company (the "Offered Shares"), whether by
sale of stock, merger, sale of substantially all of its assets or otherwise, the
Company shall transmit such bona fide offer (the "Offer Notice") to AOL who
shall have the right, as described herein, to acquire the Offered Shares on
terms and conditions, including price, not less favorable to AOL than those
applying to the Proposed Acquirer. The Offer Notice shall disclose the identity
of the Proposed Acquirer, the Offered Shares proposed to be sold, the terms and
conditions, including price, of the proposed sale, and any other material facts
relating to the proposed sale. If the consideration is readily marketable, the
fair market value thereof shall be determined on the date of the Offer,
otherwise, the value shall be determined by mutual agreement of the Company and
AOL, and, if no agreement is reached, then the value shall be determined by a
third party mutually agreeable to the Company and AOL. Notwithstanding the
foregoing, the rights described in this Section 7.22 shall not apply to any
transaction in which the Company will acquire another business entity, by merger
or otherwise, and in which the stockholders of the Company immediately prior to
the acquisition will hold a majority of the voting securities of the resulting
entity immediately after the acquisition.
(b) If AOL elects to purchase the Offered Shares, AOL shall
communicate such election in writing ("Written Election") to the Company within
thirty (30) days of the date of the Offer Notice. The Written Election shall,
when taken in conjunction with the Offer Notice, be deemed to constitute a
valid, legally binding and enforceable agreement for the sale and purchase of
such Offered Shares. The closing of the sale of the Offered Shares to AOL
pursuant to this Section 6.23 shall be made at the offices of the Company on the
thirtieth (30th) day following receipt by the Company of the Written Election
(or if such 30th day is not a business day, then on the next succeeding business
day).
(c) If the Company has not received a Written Election from AOL
within thirty (30) days of the date of the Offer Notice, or if at any time
during that period AOL indicates in writing its decision not to purchase the
Offered Shares, the Company may accept the offer of the Proposed Acquirer. Any
such sale shall be to the Proposed Acquirer at not less than the price, and upon
other terms and conditions, if any, not more favorable to the Proposed Acquirer
than those specified in the Offer Notice.
(d) The rights granted to AOL hereunder are subject to the rights, if
any, of the other Major Purchasers under Section 6.2 hereof, and of Thomson
under Section 3.01 of the Thomson Agreement.
Section 6.23 Right of First Offer.
--------------------
(a) Notification of Offer. Except as otherwise provided in the
---------------------
following sentence, if the Company wishes to sell, exchange, convey, convert,
transfer or otherwise dispose of ("Transfer") greater than forty percent (40%)
of the fully diluted capital stock of the Company, whether by sale of stock,
merger, sale of substantially all of its assets or otherwise, the
27
Company agrees that it will advise AOL by written notice (the "Notification") of
------------
such offer, specifying (i) the number of shares of capital stock proposed to be
Transferred (the "Offered Shares"), (ii) a price per share which shall be the
------- ------
minimum price at which the Company proposes to effect the Transfer (the "Minimum
-------
Price"), and (iii) all other material terms of the proposed Transfer.
-----
Notwithstanding the foregoing, the rights described in this Section 6.23 shall
not apply to any transaction in which the Company will acquire another business
entity, by merger or otherwise, and in which the stockholders of the Company
immediately prior to the acquisition will hold a majority of the voting
securities of the resulting entity immediately after the acquisition.
(b) Terms of Offer. The Notification shall be deemed to be an offer
--------------
(the "Offer") to Transfer all (but not less than all) of the Offered Shares to
AOL at the Minimum Price and on the other terms and conditions of the proposed
Transfer. In the event that all or any part of the consideration is
consideration other than cash or cash equivalents, the Minimum Price shall mean
the Fair Market Value of such consideration (as hereinafter defined). AOL shall
accept or reject the Offer as soon as practicable after receipt of the
Notification, and in any case by written notice within thirty (30) days after
receipt of the Notification, or within ten (10) days after the determination of
Fair Market Value if later. Failure by AOL to give written notice of rejection
or acceptance within such time shall be deemed a rejection in accordance with
the terms of Subsection (d) below.
(c) Acceptance of Offer. In the event AOL elects to accept the Offer,
-------------------
it shall communicate such election to the Company by written notice.
Communication of such election (the "Acceptance") shall, when taken in
conjunction with the Notification, constitute a valid and legally binding
purchase and sale agreement. Payment in cash (or on such other terms and
conditions as shall have been specified in the Notification) shall be made at a
closing (the "Closing") within thirty (30) days after the delivery of such
Acceptance. If such Closing does not occur within thirty (30) days after the
delivery of such Acceptance, the Acceptance shall be treated as a rejection in
accordance with the terms of Subsection (d) below.
(d) Rejection of Offer. In the event AOL rejects the Offer, it shall
------------------
communicate such election to the Company by written notice. Immediately
following such rejection (including a rejection for failure to accept the offer
as specified in (b) and (c) above), and for a period of one-hundred eighty (180)
days thereafter, the Company shall be free to offer and Transfer all of the
Offered Shares, at a price equal to or greater than the Minimum Price and on
other terms and conditions no less favorable than those contained in the Offer.
(e) Fair Market Value. "Fair Market Value," as used in this Section
-----------------
6.23 means, with respect to consideration other than cash or cash equivalents,
if the consideration is readily marketable, the fair market value thereof as
determined on the date of the Offer, otherwise, the value as determined by
mutual agreement of the Company and AOL, and, if no agreement is reached, then
the value as determined by a third party mutually agreeable to the Company and
AOL.
28
(f) The rights granted to AOL hereunder are subject to the rights, if
any, of the Major Purchasers pursuant to the Series D Purchase Agreement, and of
Thomson under Section 3.01 of the Thomson Agreement.
Section 6.24 Stock Option Plan. The Company shall not increase the number
-----------------
of shares of Common Stock under all of its stock option plans covering its
employees, Directors and consultants, in excess of fifteen percent (15%) of the
outstanding capital stock of the Company on a fully diluted basis without the
written approval of the holders of a majority of the outstanding shares of
Preferred Stock voting as a single class.
Section 6.25 Termination of Covenants. All of the covenants set forth in
------------------------
this Agreement shall survive the termination of this Agreement, provided,
however, that all of the covenants set forth in this Article VI, except for
Sections 6.18 and 6.21, shall terminate and be of no further force or effect
upon the completion of a firm commitment underwritten public offering of the
Company's securities causing a mandatory conversion of all the Preferred Shares
into Common Stock pursuant to the terms of the Company's Charter.
Article VII. MISCELLANEOUS
Section 7.01 Expenses. Each party hereto will pay its own expenses in
--------
connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated.
Section 7.02 Survival. All representations and warranties made herein or in
--------
the Registration Rights Agreement or any certificate or instrument delivered to
the Purchasers pursuant to or in connection with this Agreement, the
Registration Rights Agreement or the Stockholders Agreement, shall survive for a
period of one year the execution and delivery of this Agreement, the
Registration Rights Agreement and the Stockholders Agreement and the issuance,
sale and delivery of the Preferred Shares.
Section 7.03 Brokerage. Each party hereto will indemnify and hold harmless
---------
the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
Section 7.04 Parties in Interest. All representations, covenants and
-------------------
agreements contained in this Agreement by or between behalf of any of the
parties hereto shall bind and inure to the benefit of the respective successors
and assigns of the parties hereto whether so expressed or not. Without limiting
the generality of the foregoing, all covenants and agreements benefitting the
Purchasers shall inure to the benefit of any and all subsequent holders from
time to time of at least 25% of a Purchaser's (or its affiliate's) Preferred
Shares or Conversion Shares. Notwithstanding the foregoing, AOL may assign all
of its rights under this Agreement to a subsidiary in which it owns a majority
of the voting securities after its purchase of Preferred Shares.
29
Section 7.05 Notices. All notices, requests, consents and other
-------
communications hereunder shall be in writing and shall be delivered in person,
mailed by certified or registered mail, return receipt requested, or sent by
telecopier or telex, addressed as follows:
(a) if to the Company, at 000 Xxxxxxxx Xxxxxx, Xxxxxx, XX 00000,
Attention: President, with a copy to Xxxx X. Xxxxxxxxx, Xx., Esq., Xxxxx, Xxxx &
Xxxxx LLP, Xxx Xxxx Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000; and
(b) if to any Purchaser, at the address of such Purchaser set forth
in Schedule I or, in any such case, at such other address or addresses as shall
have been furnished in writing by such party to the others.
Section 7.06 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of The Commonwealth of Massachusetts,
without regard to principles of conflict of laws or choice of laws.
Section 7.07 Entire Agreement. This Agreement, including the Schedules and
----------------
Exhibits hereto, constitutes the sole and entire agreement of the parties with
respect to the subject matter hereof other than the Thomson Agreement the
Registration Rights Agreement and the Stockholders Agreement. All Schedules and
Exhibits hereto are hereby incorporated herein by reference.
Section 7.08 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.
Section 7.09 Amendments. This Agreement may not be amended or modified, and
----------
no provisions hereof may be waived, without the written consent of the Company
and the holders of at least two-thirds of the outstanding shares of Common Stock
issued or issuable upon conversion of the Preferred Shares.
Section 7.10 Severability. If any provision of this Agreement shall be
------------
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
Section 7.11 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are for convenience only and are not to be Considered in construing or
interpreting any term or provision of this Agreement.
Section 7.12 Certain Defined Terms. As used in this Agreement, the
---------------------
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "Benefit Arrangement" means each employment, severance or other
-------------------
similar contract, arrangement or policy (written or oral) and each plan or
arrangement (written or oral) providing for severance benefits, insurance
coverage (including any self-insured
30
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits or for deferred
compensation, profit-sharing, bonuses, stock options, stock appreciation rights
or other forms of incentive compensation or post-retirement insurance,
compensation or benefits which (i) is not an Employee Plan and (ii) covers any
employee or former employee of the Company.
(b) "Employee Plan" means each "employee benefit plan," as such term
-------------
is defined in Section 3(3) of ERISA, that (A)(i) is subject to any provision of
ERISA and (ii) is maintained or contributed to by the Company, or (B)(i) is
subject to any provision of Title IV of ERISA and (ii) is maintained or
contributed to by any of the Company's ERISA Affiliates.
(c) "ERISA" means the Employment Retirement Income Security Act of
-----
1974, as amended.
(d) "ERISA Affiliate" of any entity means any other entity that,
---------------
together with such entity, would be treated as a single employer under Section
414 of the Code.
(e) "Person" shall mean an individual, corporation, trust,
------
partnership, joint venture, unincorporated organization, government agency or
any agency or political subdivision thereof, or other entity.
(f) "Subsidiary" shall mean, as to the Company, any corporation of
----------
which more than 50% of the outstanding stock having ordinary voting power to
elect a majority of the Board of Directors of such corporation (irrespective of
whether or not at the time stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned by the Company, or
by one or more of its subsidiaries, or by the Company and one or more of its
subsidiaries.
[The remainder of this page is left blank intentionally.]
31
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Series E-l Convertible Preferred Stock Purchase Agreement of the day and year
first above written.
COMPANY:
-------
XXXX.XXX, Inc.
By: /s/ [ILLEGIBLE]
----------------------------
Its: CEO
----------------------------
Date: 12/22/99
----------------------------
PURCHASERS:
----------
Thomson Information Services, Inc.
By: ____________________________
Its: ____________________________
Date: ____________________________
America Online, Inc.
By: ____________________________
Its: _____________________________
Date: _____________________________
32
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Series E-1 Convertible Preferred Stock Purchase Agreement of the day and year
first above written.
COMPANY:
-------
XXXX.XXX, Inc.
By: _____________________________
Its: _____________________________
Date: _____________________________
PURCHASERS:
----------
Thomson Information Services, Inc.
By: /s/ [ILLEGIBLE]
------------------------------
Its: Vice President
-----------------------------
Date: _____________________________
America Online, Inc.
By: _____________________________
Its: _____________________________
Date: _____________________________
33
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Series E-1 Convertible Preferred Stock Purchase Agreement of the day and year
first above written.
COMPANY:
-------
XXXX.XXX, INC.
By: ____________________________
Its: ____________________________
Date: ____________________________
PURCHASERS:
----------
Thomson Information Services, Inc.
By: _____________________________
Its: _____________________________
Date: _____________________________
America Online In
By: /s/ [ILLEGIBLE]
-----------------------------
Its: VP- Business Affairs
-----------------------------
Date: 12/23/99
-----------------------------
34
SCHEDULE I
----------
Purchasers
----------
--------------------------------------------------------------------------------
Number of Preferred Purchase Price of
Name and Address of Purchaser Shares to be Preferred Shares
Purchased
--------------------------------------------------------------------------------
America Online, Inc. 93,168 $1,500,004.80
00000 XXX Xxx
Xxxxxx, XX 00000
Thomson Information Services, Inc. 114,812 $1,848,473.20
c/o Xxxx Xxxx
00 Xxxxxxx Xxxxx
Xxxxxx, XX 00000
--------------------------------------------------------------------------------
35
SCHEDULE II
-----------
Disclosure Schedule
-------------------
General Note: Facts disclosed for one Section in these schedules shall be deemed
to be disclosed for all Sections to which such facts might apply.
SECTION 2.04
See the Capitalization Table at Schedule IV.
Simultaneously with the Closing, the Company is issuing to AOL a warrant to
purchase up to 1,596,650 shares of its preferred stock. Contingent upon vesting
of the shares according to certain performance criteria established in the
Warrant Agreement, AOL will have the right to purchase up to 250,000 shares of
the Series E-1 Preferred Stock and up to 1,346,650 shares of preferred stock of
series to be established at the time of AOL's exercise of such warrant.
SECTION 2.06
Since September 30, 1999, the Company has set the annual salaries for its
officers as indicated in Section 2.22 of this Disclosure Schedule, and the
Company's Board of Directors has voted to issue to each such officer an option
to purchase 207,096 shares of the Company's Series A Common Stock.
Simultaneously with the Closing, the Company is entering into an Interactive
Services Agreement with AOL, a copy of which has been reviewed by the
Purchasers.
SECTION 2.07
The Company has filed suit in the U.S. District Court for the District of
Massachusetts against c-Call, Inc., seeking to protect its "Streetevents"
trademark. A motion for a preliminary injunction against c-Call's use of the
name "Streetfusion" was denied.
SECTION 2.09
See attached "Trademark List" indicating list of trademarks owned by the Company
and their registration status. The design xxxx referenced therein is for the
Company's "IR EYE" logo. Talkpoint Communications Inc. also owns a federal
registration for "TALKPOINT."
SECTION 2.15
CCBN has prepaid Ecerv for services totaling $15,000 as of 11/30/99.
SECTION 2.19
The Company is in continuous discussions with potential suitors and targets
regarding the possibility of conducting strategic transactions including, but
not limited to, mergers, sales, acquisitions and joint ventures. Although the
Company is not currently in negotiations to effect any such transaction, there
is no assurance that any current discussions or future discussions will not
result in the consummation of a transaction.
36
SECTION 2.22
Name Office Salary
---- ------ ------
Xxxxxxx X. Xxxxxx Chairman, Chief Executive
Officer and Treasurer $200,000
Xxxxxx X. Xxxxx President and Secretary $187,500
SECTION 2.23
Letter Agreement, dated April 26, 1999, between the Company and Thomson
Financial Investor Relations, relating to First Call data feed and other
matters.
SECTION 2.24
Certain employees of the Company have not yet returned signed copies of the
agreement in the form of Exhibit D. However, each of these employees signed a
similar agreement with the Company's predecessor, XXXX.XXX, LLC, and, by the
terms of the transaction transforming XXXX.XXX, LLC into XXXX.XXX, Inc., those
agreements remain in full force. The Company is nonetheless seeking the
signatures of these employees on the new form of agreement and expects to
receive them shortly.
37
====================================================================================================================================
Thursday, December 02, 1999 Trademark List Page: 1
Client CCBN XXXX.XXX, Inc.
Application Registration Renewal First Use
Trademark Name Attorney(s) Case Number Number/Filing Date Number/Date Date Date
====================================================================================================================================
(DESIGN) TML LAG 007332 75/802978 01-Aug-1997
Country: United States of America Owner: XXXX.XXX, Inc. 16-Sep-1999
Status: Pending
Classes: 35 Remarks:
Goods: Providing management and consulting services in the field of
investor relations; providing investor relations services through a
global computer network.
------------------------------------------------------------------------------------------------------------------------------------
CCBN TML LAC JDP 006829 75/614953 01-Jun-1997
Country: United States of America Owner: XXXX.XXX, Inc. 04-Jan-1999
Agent: FOL Xxxxx, Xxxx & Xxxxx LLP Status: Pending
Classes: 35 Remarks: Recordation of merger document recorded
5/13/99, reel/frame: 001913/0241.
Goods: Providing business management and consulting services in the
field of investor relations; providing investor relation services
through a global computer network.
38
====================================================================================================================================
Thursday, December 02, 1999 Trademark List Page: 2
Client CCBN XXXX.XXX, Inc.
Application Registration Renewal First Use
Trademark Name Attorney(s) Case Number Number/Filing Date Number/Date Date Date
====================================================================================================================================
IR EYE TML LAC JDP 006828 75/614921 01-Jul-1997
Country: United States of America Owner: XXXX.XXX, Inc. 04-Jan-1999
Agent: FOL Xxxxx, Xxxx & Xxxxx LLP Status: Pending
Classes: 35 Remarks: Recordation of merger document recorded
5/13/99, reel/frame: 001913/0241.
Goods: Providing business management and consulting services in the
field of investor relations; providing investor relation services
through a global computer network.
------------------------------------------------------------------------------------------------------------------------------------
JOINMAIL TML LAC JDP 007058 75/674450 01-Apr-1998
Country: United States of America Owner: XXXX.XXX, Inc. 05-Apr-1999
Agent: FOL Xxxxx, Xxxx & Xxxxx LLP Status: Pending
Classes: 38 Remarks:
Goods: Electronic mail list hosting services in the field of investor
relations via a global computer network.
39
====================================================================================================================================
Thursday, December 02, 1999 Trademark List Page: 3
Client CCBN XXXX.XXX, Inc
Application Registration Renewal First Use
Trademark Name Attorney(s) Case Number Number/Filing Date Number/Date Date Date
====================================================================================================================================
STREETEVENTS TML LAC 007178 75/734153 28-Oct-1998
Country: United States of America Owner: XXXX.XXX, Inc. 22-Jun-1999
Agent: FOL Xxxxx, Xxxx & Xxxxx LLP Status: Pending
Classes: 42 Remarks:
Goods: Providing access to a database via a global computer network
in the field of public company information.
40
SCHEDULE V
----------
The Company has entered into the following agreements that might be deemed
material, individually or in the aggregate:
SECTION 2.14 (g)
The Company provides a standard benefit package of medical insurance and pays
80% of the premium, a 401K plan with no matching of contributions, paid
vacation, tuition reimbursement, group life insurance, AD&D, short term
disability and long term disability insurance.
SECTION 2.14 (h)
In connection with the capital lease agreement with US Trust referenced in
Section 2.14(k) of this Disclosure Schedule, the Company has pledged to US Trust
a $75,000 certificate of deposit as collateral for such lease.
SECTION 2.14 (j)
The Thomson Agreement
The Series D Purchase Agreement
Stockholders Agreement by and among the Company and certain holders of its
Series D Preferred Stock (being amended and restated in connection with this
transaction).
SECTION 2.14 (k)
The Company has a capital lease agreement with US Trust Leasing Corporation to
lease furniture for its San Francisco and Boston offices through 8/3/03.
Lease agreement with 116 New Xxxxxxxxxx Associates, LLC for 3,196 square feet of
space located at 000 Xxx Xxxxxxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxxxxxxx with a term
to 4/30/04.
Lease agreement with Millwood Partners, L.P. VII, dated 6/3/98, for 8,843 square
feet of space located at 000 Xxxxxxxx Xxxxxx, Xxxxxx with a term to 12/31/01.
Sublease with One and Two Northwinds Center, L.P., dated 9/15/99 for 2,890
square feet located at Xxx XxxxxXxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxx with a term to
11/15/00.
The Company currently has taken assignment, as of August 13, 1999, of a lease
from Invention Machines Corporation to lease the 5/th/ and 6/th/ floors of 000
Xxxxxxxx Xxxxxx (23,167 square feet) with a term to 1/31/03 and has assigned the
Company's Lease of 000 Xxxxxxxx Xxxxxx to Invention Machines.
SECTION 2.14 (I)
Warrant Agreement with AOL being executed simultaneously with the Closing, as
described on Schedule II, Section 2.04.
41
SECTION 2.14 (m)
The Company currently pays a maintenance agreement to Onyx Software Corporation
for an enterprise-wide system for client and sales tracking.
Content License Agreement with Yahoo! Inc., dated _____________.
SECTION 2.14 (p)
The Interactive Services Agreement.
Sales Agreements with customers in the standard form used by the Company.
Agreement with Digex, dated 8/17/98, to provide Website Hosting on servers for
all of the Company's clients. The Company intends to terminate this agreement
due to Digex's failure to adequately perform its duties under the agreement.
Agreement with E-cerv, Inc., dated 12/3/98, to provide interactive voice
response and mail fulfillment services.
Agreement with One World Software Solutions, Inc, dated October 19, 1998, to
provide software development resources for CCBN's Street Events division.
Agreement with Intervu Incorporated, dated 4/12/99, to provide streaming
audio/video services.
Agreement with Digitrade to provide delayed quote services.
Agreement with Media General Financial Services, Inc., dated 3/22/99, to provide
pricing and fundamental data for client web sites.
Agreement with Partes Corporation, dated 12/7/97, to provide SEC filings though
its Xxxxx Data services.
Agreement with FaxNet dated 9/30/99 to provide blast faxing services.
Agreement with GTE, dated 10/7/99, to provide website hosting on servers for all
of the Company's clients.
Agreement with Revnet Systems, dated 4/29/99, to provide Email list management
and client blast email communications.
Agreement with BigCharts Inc., dated September 30, 1999 to provide financial and
textual information pertinent to public companies.
42
SCHEDULE III
------------
Purchaser Disclosure Schedule
-----------------------------
[No schedule provided by Purchasers]
43
SCHEDULE IV
-----------
Security Holders
----------------
See attached capitalization table.
Simultaneously with the Closing, the Company is issuing to AOL a warrant to
purchase up to 1,596,650 shares of its preferred stock. Contingent upon vesting
of the shares according to certain performance criteria established in the
Warrant Agreement, AOL will have the right to purchase up to 250,000 shares of
the Series E-1 Preferred Stock and up to 1,346,650 shares of preferred stock of
series to be established at the time of AOL's exercise of such warrant.
44
Series A Series A Series B Series B Series C Series C Series D Series Series E
Common Pfd Common Pfd Common Pfd Common Pfd Common
-------- -------- -------- -------- -------- -------- -------- ------- --------
Preferred Shares
----------------
Thomson Financial 562,500 44,043 41.544 86,358
Xxxxxx Xxxxx 7,500 892
Xxxxxxxx Farms 15,000 1,784
Xxxxxx X'Xxxxxx 30,000 3,568
Xxxxxxx Xxxxxxx 15,000 1,784
Xxxx Xxxxxxxxx 7,500 892
Xxxxxx Xxxx 15,000
Xxx Xxxx for NSI 37,500 4,460
Xxxxxx Xxxxxxxx 15,000 1,784
Xxxx Xxxxxxx 30,000 3,568
Xx Xxxxxx 30,000
Xxxxx Xxxxxx 3,568
Xxxxxx X. XxXxxxxxx 30,000 3,568
Xxx Xxxxxx 7,500 892
Xxxx Xxxxxxxxx 10,500 1,249
Xxxxx Xxxxxx 12,000
Xxxxxxx Xxxxx 7,500 892
Sanddrift, LTD (Xxxxx) 30,000 3,568
Xxxxxxx Xxxxxx 53,095
Xxxx Xxxxxx 10,619
Xxxx Xxxxxxxx 10,619
Trident 212,382
Psilos 212,382
Common Shares
-------------
Xxxxxxx Xxxxxx 2,580,000 92,046
Xxxxxx Xxxxx 791,250 15,750 18,000
Xxxxx Xxxx 90,000 15,000 9,000
Xxxxx Xxxxxxx 93,750 5,625 4,500
Xxxxxx Xxxxxxx 72,000
Xxx Xxxxxxx 18,000
Xxxx Xxxxx 15,000
Xxxx Xxxxxxxxx 750 2,250
Xxxxxx Xxxx 3,000 1,500
Xxxxx Xxxxxxxx 22,500 3,000
Xxx Xxxxxx 93.75 140.625
Xxxxx Xxxxxxxx 6,750
Xxxxxxx Xxxxxx 6,750
Xxxxx Xxxxx 1,406
Xxxx Xxxxxx 6,750
Xxxxx Xxxxxx 5,250
Xxx Xxxxxxx 6,750
Xxxxx Xxxxxx 187.5
Xxxxx Xxxxxx 187.5
Xxxxx Xxxxxxxx 6,750
Xxxxx Xxxxxxx 281
Xxxxxxx Xxxxxxxxx 750 2,250
Xxxx Xxxxxxxxx 22,500 7,500
Xxxxxxxxx Xxxxxx 9,000
Xxxxxx Xxxxx 187.5
Fully
Options Diluted Shs
(Forfeitures) a/o 10/31/99 Percent
------------ ------------ -------
Preferred Shares
----------------
Thomson Financial 734,445 10.80%
Xxxxxx Xxxxx 8,392 0.12%
Xxxxxxxx Farms 16,784 0.25%
Xxxxxx X'Xxxxxx 33,568 0.49%
Xxxxxxx Xxxxxxx 16,784 0.25%
Xxxx Xxxxxxxxx 8,392 0.12%
Xxxxxx Xxxx 15,000 0.22%
Xxx Xxxx for NSI 41,960 0.62%
Xxxxxx Xxxxxxxx 16,784 0.25%
Xxxx Xxxxxxx 33,568 0.49%
Xx Xxxxxx 30,000 0.44%
Xxxxx Xxxxxx 3,568 0.05%
Xxxxxx X. XxXxxxxxx 33,568 0.49%
Xxx Xxxxxx 8,392 0.12%
Xxxx Xxxxxxxxx 11,749 0.17%
Xxxxx Xxxxxx 12,000 0.18%
Xxxxxxx Xxxxx 8,392 0.12%
Sanddrift, LTD (Xxxxx) 33,568 0.49%
Xxxxxxx Xxxxxx 53,095 0.78%
Xxxx Xxxxxx 10,619 0.16%
Xxxx Xxxxxxxx 10,619 0.16%
Trident 212,382 3.12%
Psilos 212,382 3.12%
Common Shares
-------------
Xxxxxxx Xxxxxx 207,096 2,879,142 42.33%
Xxxxxx Xxxxx 207,096 1,032,096 15.18%
Xxxxx Xxxx 114,000 1.68%
Xxxxx Xxxxxxx 0 103,875 1.53%
Xxxxxx Xxxxxxx 1,650 73,650 1.08%
Xxx Xxxxxxx 18,000 0.26%
Xxxx Xxxxx 15,000 0.22%
Xxxx Xxxxxxxxx 3,000 0.04%
Xxxxxx Xxxx 750.00 5,250 0.08%
Xxxxx Xxxxxxxx 25,500 0.37%
Xxx Xxxxxx 234 0.00%
Xxxxx Xxxxxxxx 3,000 9,750 0.14%
Xxxxxxx Xxxxxx 750 7,500 0.11%
Xxxxx Xxxxx 1,406 0.02%
Xxxx Xxxxxx 3,000 9,750 0.14%
Xxxxx Xxxxxx 5,250 0.08%
Xxx Xxxxxxx 3,000 9,750 0.14%
Xxxxx Xxxxxx 188 0.00%
Xxxxx Xxxxxx 188 0.00%
Xxxxx Xxxxxxxx 6,750 0.10%
Xxxxx Xxxxxxx 281 0.00%
Xxxxxxx Xxxxxxxxx 3,000 0.04%
Xxxx Xxxxxxxxx 45,000 75,000 1.10%
Xxxxxxxxx Xxxxxx 1,000 10,000 0.15%
Xxxxxx Xxxxx 188 0.00%
45
Xxxxxxxx Xxxxxxx 750 750 750 2,250 0.03%
Xxxxxx Xxxxxx 300 300 0.00%
Xxxxxx Xxxxx 300 450 750 0.01%
Xxxxx Xxxxxxxxx 234 234 0.00%
Xxxxxx Xxxxxxxxx 6,750 6,750 0.10%
Xxxxx Xxxxxx 750 750 1,500 0.02%
XxxxXxxx Xxxxxxx 6,750 6,750 0.10%
Xxxxx X. Xxxxxx 750 750 0.01%
Xxxxx X. Xxxxxxxx 750 750 0.01%
Xxxxxxx Xxx 90,000 (56,667) 33,333 0.49%
Xxxxx Xxxxxx 60,000 60,000 0.88%
Xxxxx Xxxxx 125 0 125 0.00%
Xxxx XxXxxxxx 6,750 6,750 0.10%
Xxxx Xxxxxxxx 6,750 6,750 0.10%
Xxxxxx Xxxxxxx 63 63 0.00%
Xxxx Xxxxxxxxxx 4,500 1,500 6,000 0.09%
Xxxxxx X'Xxxxx 750 750 0.01%
Xxxxxxx Xxxx 750 750 0.01%
Xxxxxx Xxxxxxx 300 450 750 0.01%
Xxxxxx Xxxxxx 300 450 750 0.01%
Poppy Keras 300 300 0.00%
Xxxx Xxxxxxxx 300 300 0.00%
Xxx Xxxxxxx 300 300 0.00%
Hui Ye 300 700 1,000 0.01%
Xxxx Xxxxxx 49,800 49,800 0.73%
Xxxx Xxxxxxxx 41,550 41,550 0.61%
Xxx Xxxx 2,250 2,250 0.03%
Xxx Xxxxx 8,145 8,145 0.12%
Xxxxx Xxxxx 3,300 3,300 0.05%
Xxxxx Xxxxx 4,980 4,980 0.07%
Xxx Xxxxx 1,500 1,500 0.02%
Xxx Xxxxxxx 750 750 0.01%
Xxxxxx Xxxxx 300 300 0.00%
Xxx X'Xxxxxx 300 300 0.00%
Xxxxxx Xxxxx 300 300 0.00%
Xxxxxx Xxxxxxx 500 500 0.01%
Xxxxx Xxxxxx 300 300 0.00%
Xxx Xxxxxxx 750 750 0.01%
Xxxxx Xxxxxxx 3,000 3,000 0.04%
Xxxxx Xxxxxx 625 625 0.01%
Xxxxxxxx Xxxxxx 300 300 0.00%
Xxxxx Xxxxxxx 300 300 0.00%
Xxx Xxxxx 750 750 0.01%
Xxxxxxx Beezeley 300 300 0.00%
Xxxxxx Xxxxxxxxxx 300 300 0.00%
Xxxx Xxxxxx 300 300 0.00%
Xxxxxx Xxxxxx 300 300 0.00%
Xxxxx Xxxxxx 500 500 0.01%
Xxxxxx Xxxxxx 750 750 0.01%
Xxxxx Xxxxxxxx 750 750 0.01%
Xxxx Xxxxx 500 500 0.01%
Xxxxx Xxxxxxx 300 300 0.00%
Xxx Xxxxx 750 750 0.01%
Xxxxxx Xxxxxxxxx 300 300 0.00%
46
Xxxxxxxx Xxxxxx 750 750 0.01%
Xxxxx Xxxxxx 300 300 0.00%
Xxxx Xxxxxxxx 60,000 60,000 0.88%
Xxxxxxxxx Xxxxxxxxx 300 300 0.00%
Xxxxx Xxxxx 250 250 0.00%
Xxx Xxxxxxxx 300 300 0.00%
Xxxx Xxxxx 250 250 0.00%
Xxxxxxx Xxxxxxxx 1,000 1,000 0.01%
Xxxxxxx Kill 100 100 0.00%
Xxxxx Xxxxxxxxx 300 300 0.00%
Xxxx Xxxxx 1,200 1,200 0.02%
Xxxxx Xxxxxxx 500 500 0.01%
Xxxxxxx Xxxxxx 1,000 1,000 0.01%
Xxxxx Xxxxxxxx 300 300 0.00%
Xxxx Xxxxx 500 500 0.01%
Xxxxx Xxxxxxxxx 500 500 0.01%
Xxxxxx Xxxxxx 100 100 0.00%
Xxxxx Xxxx 150 150 0.00%
Xxxxx Xxxxxx 750 750 0.01%
Xxxxxxx, Xxxxx 300 300 0.00%
Xxxxxxxxx Xxxxx 300 300 0.00%
Xxxx XxXxxxxx 300 300 0.00%
Xxxx Xxxxxxxx 250 250 0.00%
Xxx Xxxxx 500 500 0.01%
Xxxxxxxxx Xxxxx 3,000 3,000 0.04%
Xxxxxxx Xxxxx 300 300 0.00%
Xxxxx Xxxxx 15,000 15,000 0.22%
Xxx Xxxxx 67,500 67,500 0.99%
XxXxxx, Xxxxxx 1,000 1,000 0.01%
Xxxxxx, Xxxxxx 150 150 0.00%
Xxxxxxx, Xxxxxxx 500 500 0.01%
Xxxxxxx, Xxxxxxx 300 300 0.00%
Xxxxx, Xxxxxxx 300 300 0.00%
Xxxxxxxx, Xxxxx 300 300 0.00%
Xxxxxxxxxxx, Xxxxxx 750 750 0.01%
New employees 8/99 - 10/15 21,275 21,275 0.31%
Talkpoint shareholders 173,379 0 173,379 2.55%
Talkpoint employees 78,500 78,500 1.15%
Options unissued 114,320 114,320 1.68%
Xxxx XxXxxxx 3,000 3,000 0.04%
Xxxxxxx Xxxxxxxxxx 3,000 3,000 0.04%
Xxxxx Xxxxxxx 3,000 3,000 0.04%
Xxxxx Xxxxxxx 3,000 3,000 0.04%
Xxx Xxxxxxxx 3,000 3,000 0.04%
Xxx Xxxxxxxx 1,000 1,000 0.01%
Xxxxx XxXxxxxx 1,000 1,000 0.01%
Total Shares
Outstanding 3,834,129 562,500 61,687 344,043 65,522 41,544 57,984 709,970 202,988 920,870 6,801,236 100.00%
47
