Exhibit 10.15
INVESTMENT AGREEMENT
THIS AGREEMENT is made as of October 15, 1999 between XXXXXX INTERACTIVE
INC., a Delaware corporation with offices at 000 Xxxxxxxxx Xxxxx, Xxxxxxxxx, Xxx
Xxxx 00000 ("HI") and EXCITE, INC. with offices at 000 Xxxxxxxx, Xxxxxxx Xxxx,
Xxxxxxxxxx 00000 ("Investor").
WITNESSETH
WHEREAS, HI desires to sell to the investor and the Investor desires to
purchase from HI shares of the Class B Convertible Preferred Stock, par value
$.01 per share, of HI, all upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt an
sufficiency of which are hereby acknowledged, the parties agree as follows:
The parties agree as follows:
ARTICLE 1 -DEFINITIONS
1.1 Definitions. The following capitalized terms shall have the following
meanings:
"Affiliate" of any particular Person means any other Person controlling,
controlled by or under common control with such particular Person, where
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person whether
through the ownership of voting securities, by contract, or otherwise, partners
or former partners, and members or former members.
"Affiliated Group" means any affiliated group as defined in IRC ss.1504
that has filed a consolidated return for federal income tax purposes (or any
similar group under state, local, or foreign law) for a period during which any
of HI or any of its Subsidiaries was a member.
"Class A Preferred Stock" shall mean the Class A Convertible Preferred
Stock, par value $0.01 per share, of HI.
"Class B Preferred Stock" shall mean the Class B Convertible Preferred
Stock, par value $0.01 per share, of HI.
"Common Shares" shall mean the common stock, $0.001 par value per share,
of HI.
"Environmental and Safety Requirements" means all federal, state, local,
and foreign statutes, regulations, ordinances and other provisions having the
force and effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law, in each case
concerning public health and safety, worker health and safety, and pollution or
protection of the environment.
"Fully Diluted Basis" shall mean the number of common shares actually
outstanding, the number of Common Shares into which the then outstanding shares
of Class A Preferred Stock and Class B Preferred Stock could be fully converted
if fully converted on the given date, and the number of Common Shares which
could be obtained through the exercise, exchange, or conversion of all other
rights, warrants, options and convertible securities or other securities
convertible, exchangeable, or exercisable for Common Stock (or any of the
foregoing) outstanding or reserved for issuance on the given date.
"GAAP" means generally accepted accounting principles.
"Investment" means, with respect to any Person, (i) any capital
contribution by such Person to any other Person, (ii) any direct or indirect
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities, or ownership interest (including partnership,
membership, and joint venture interests) of any other Person, (iii) any loan,
advance or extension of credit by such Person to any other Person (other than
(a) extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale of goods or services in the ordinary course of
business, and (b) extensions of credit by HI to any of its wholly-owned
Subsidiaries or by any of its wholly-owned Subsidiaries to another of its
wholly-owned Subsidiaries), (iv) any guaranty of obligations of such Person, (v)
any transfer or sale of property of such Person to any other Person other than
upon full payment, in cash, of not less than the agreed sale price or the fair
value of such property, whichever is higher (other than transfers of property in
the ordinary course of business of the Person in exchange for fair value), (vi)
any acquisition by such Person of all or an integral part of the business of any
other Person or the assets comprising such business or such part thereof, and
(vii) any commitment or option to do any of the following. Any of the foregoing
under clauses (i) through (vi) shall be considered an Investment whether such
Investment is acquired by purchase, exchange, merger or any other method.
"IRC" means the Internal Revenue Code of 1986, as amended, and any
reference to any particular IRC section number shall be interpreted to include
any revision of or successor to that section regardless of how numbered or
classified.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment, deposit
arrangement, security interest, encumbrance, lien, preference in the nature of
security, or charge of any kind (including, without limitation, any conditional
sale or other title retention agreement or lease in the nature thereof), any
sale of receivables with recourse against the seller or any
Affiliate, any filing or agreement to file a financing statement as debtor under
the Uniform Commercial Code or any similar statute other than to reflect
ownership by a third Person of property leased to a party under a lease which is
not in the nature of a conditional sale or title retention agreement or any
subordination arrangement, and any agreement to give or make any of the
foregoing.
"Lockup Agreement" shall mean the Lockup Agreement in the form attached
hereto and made a part hereof as Exhibit B.
"Material Adverse Effect" means any event, matter, condition or
circumstance which (i) has a material adverse effect on the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise), employee relations, customer or supplier relations, or business
prospects of HI, (ii) has an adverse effect on the ability of HI to perform its
obligations under any material contract, the Share Purchase Agreements, the
Transaction Documents or any of the Shares to be issued by it or (iii)
materially or adversely affects the legality, validity, binding effect or
enforceability of the Share Purchase Agreements, the Transaction Documents or
the Shares.
"Offered Shares" shall have the meaning given in Section 6.3 of this
Agreement.
"Other Purchasers" shall have the meaning given in Section 2.1 of this
Agreement.
"Person" shall mean any individual, corporation, company, partnership,
limited liability company, joint venture, trust, government, governmental body,
agency, political subdivision, or other entity of any kind or nature.
"Proprietary Rights" shall mean all patents; all trademarks, service
marks, domain names, trade dress, trade names, and corporate names and all of
the goodwill associated therewith; all copyrights; all registrations,
applications and renewals for any of the foregoing; all inventions; all trade
secrets, confidential information, ideas, formulae, compositions, know-how,
manufacturing and production processes and techniques, research information,
drawings, specifications, designs, plans, improvements, technical and computer
data, documentation and software, and all other proprietary rights and processes
of similar nature ; and all computer programs (including source codes) and
related documentation.
"Public Offering" means any offering by HI (or any other holder) of HI
Common Stock to the public pursuant to an effective registration statement under
the Securities Act, as then in effect, or any comparable statement under any
similar federal statute then in force.
"Purchase Price" shall have the meaning given to it in Section 2.2 of this
Agreement.
"Registration Agreement" shall mean the Registration Agreement described
in Section
3.6 of this Agreement.
"Research Agreement" shall mean the Research Agreement described in
Section 3.11 of this Agreement.
"Restricted Securities" means (i) the Shares hereunder, (ii) the
Underlying Common Stock, and (iii) any securities issued with respect to the
Shares or Underlying Common Stock by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation, or other reorganization. As to any Restricted Securities, such
securities shall cease to be Restricted Securities when they have been (a)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, (b) distributed to the public
through a broker, dealer, or market maker pursuant to Rule 144 (or any similar
provision then in force) under the Securities Act or become eligible for sale
pursuant to Rule 144(k) (or any similar provision then in force) under the
Securities Act; provided that the Company has completed a Public Offering and is
subject to the provisions of the 1934 Act and as to any particular holder of
Restricted Securities, such holder (together with its Affiliates) holds less
than 1% of the Company's common stock on a Fully Diluted Basis, or (c) otherwise
transferred and new certificates for them not bearing the Securities Act legend
set forth in Section 6.5 hereof have been delivered by HI in accordance with
Section 6.2. Whenever any particular securities cease to be Restricted
Securities, the holder thereof shall be entitled to receive from HI, without
expense, new securities of like tenor not bearing a Securities Act legend of the
character set forth in Section 6.5.
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as in effect on
the date hereof and as hereafter amended.
"Securities Exchange Act" shall mean the Securities Exchange Act of 1934,
as in effect on the date hereof and as hereafter amended.
"Share Purchase Agreements" shall meaning given in Section 2.1 of this
Agreement.
"Shares" shall have the meaning given in Section 2.2 of this Agreement.
"Stockholders' Agreement" shall mean the Stockholders' Agreement described
in Section 3.10 of this Agreement.
"Subsidiary" means any Person of which, at the time of determination made
under this Agreement, at least a majority of capital stock having ordinary
voting power for the election of directors or other governing body of such
Person is owned by the applicable other Person, directly or through one or more
Subsidiaries.
"Tax" or "Taxes" means federal, state, county, local, foreign or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with respect
to Taxes, including any schedules attached thereto and including any amendment
thereof.
"Transaction Documents" shall mean the documents and agreements executed
and delivered in connection with this Agreement, including without limitation
the amendment to HI's Certificate of Incorporation, Registration Agreement, the
Lockup Agreement, the Research Agreement, the Shares, and the Stockholders
Agreement.
"Transfer" shall have the meaning given in Section 6.3 of this Agreement.
"Transfer Notice" shall have the meaning given in Section 6.3 of this
Agreement.
"Underlying Common Stock" shall mean (i) the Common Stock issued or
issuable upon conversion of the Class B Preferred Stock, and any (ii) Common
Stock issued or issuable with respect to the securities referred to in clause
(i) above by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. For purposes of this Agreement, any Person who holds Class B
Preferred Stock shall be deemed to be the holder of the Underlying Common Stock
obtainable upon conversion of such Class B Preferred Stock in connection with
the transfer thereof or otherwise regardless of any restriction or limitation on
the conversion of the Class B Preferred Stock, such Underlying Common Stock
shall be deemed to be in existence, and such Person shall be entitled to
exercise the rights of a holder of Underlying Common Stock hereunder. As to any
particular shares of Underlying Common Stock, such shares shall cease to be
Underlying Common Stock when they have been (a) effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them, (b) distributed to the public through a broker, dealer or market
maker pursuant to Rule 144 under the Securities Act (or any similar provision
then in force) or (c) repurchased by HI.
ARTICLE 2 - PURCHASE OF SHARES
2.1 Authorization of Class B Preferred Stock. HI has authorized the
issuance of 200,000 shares of Class B Preferred Stock having the rights and
preferences set forth in Exhibit A attached hereto (the "Class B Shares"). The
Class B Shares are being sold by HI to the
Investor and the other purchasers listed on Schedule 2.1 hereto (the "Other
Purchasers") pursuant to this Agreement and other substantially identical
agreements (this agreement together with such other agreements collectively, the
"Share Purchase Agreements"). Set forth opposite each Other Purchaser's name on
Schedule 2.1 is the number of Class B Shares being acquired by such Other
Purchasers and the purchase price paid, or to be paid, therefore.
2.2 Share Purchase. On the date of the Closing, HI shall sell to Investor,
and Investor, subject to the terms and conditions hereof and in reliance upon
the representations and warranties of HI contained herein or made pursuant
hereto, shall purchase from HI, 30,000 Class B Shares (together with the
Underlying Common Stock, the "Shares"), being 1.381% of the Common Shares on a
Fully Diluted Basis after the purchases under the Share Purchase Agreements. The
aggregate purchase price for the Shares to be acquired by the Investor pursuant
to this Agreement shall be Three Million Dollars ($3,000,000) (the "Purchase
Price").
2.3 The Closing.
(a) The closing of the purchase and sale of the Shares (the "Closing")
shall take place at the offices of Xxxxxx Beach & Xxxxxx LLP located at 000 X.
Xxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx at 10:00 a.m. , eastern daylight time, on
October 15, 1999 or such other time and place as are mutually agreeable to the
parties.
(b) On the date of the Closing and upon receipt of the items set forth in
Section 2.3(c) hereof, Investor shall pay the Purchase Price by wire transfer or
in other immediately available funds to HI addressed as follows:
Manufacturers and Traders Trust Company
Xxxxxxxxx, XX 00000
Account #015215148
ABA#02200004-6
For: Xxxxxx Interactive Inc.
Re: Mezzanine Investment
(c) At the Closing (i) Investor and HI shall execute and deliver this
Agreement, the Registration Agreement, the Stockholders Agreement, and the
Research Agreement, (ii) Investor shall execute and deliver the Lockup Agreement
and the Consent of Shareholders in the form attached as Exhibit D, and (iii) HI
shall deliver a certificate registered in the Investor's name evidencing the
Shares to Investor.
ARTICLE 3 - CONDITIONS OF INVESTOR'S OBLIGATION AT CLOSING
The obligation of the Investor to purchase and pay for the Shares at the
Closing is subject to the satisfaction as of the Closing of the following
conditions (any of which may be waived by the Investor):
3.1 Representations, Warranties, and Covenants. The representations and
warranties contained in Article 5 hereof or in any certificate or document
delivered pursuant hereto, shall be true and correct at and as of the Closing as
though then made and HI shall have performed and complied with all of the
covenants and agreements required to be performed or complied with by it
hereunder on or prior to the Closing.
3.2 Amendment of Certificate of Incorporation. HI's Certificate of
Incorporation shall have been amended and shall be in the form set forth in
Exhibit A hereto, shall be in full force and effect under the laws of the State
of Delaware as of the Closing as so amended, and shall not have been further
amended or modified; provided, however, that Investor acknowledges that certain
modifications to the Certificate of Incorporation have been or will be approved
by the directors and shareholders (including the Investor after its investment)
of HI contingent upon completion of a Public Offering, a copy of which
shareholder approval (which describes and approves such modifications) is
attached as Exhibit D hereto.
3.3 Securities Law Compliance. HI shall have made all filings under all
applicable federal and state securities laws necessary to consummate the
issuance of the Shares pursuant to this Agreement in compliance with such laws
and HI shall be in compliance with all such laws.
3.4 Compliance with Applicable Laws/Authorizations. The purchase of the
Shares by the Investor hereunder shall not be prohibited by any applicable law
or governmental order, rule or regulation and shall not subject the Investor to
any penalty, tax, liability, or, in the Investor's reasonable judgment, other
onerous condition, and the purchase of the Shares by the Investor hereunder
shall be permitted by laws, rules, and regulations of the jurisdictions and
governmental authorities and agencies to which the Investor is subject. Any
necessary consents, waivers, approvals, licenses, permits, orders and
authorizations of, and any filings, registrations or qualifications with, any
governmental authority of other Person (including any consents or waivers by the
holders of the Class A Preferred Stock), with respect to the transactions
contemplated by this Agreement, the Share Purchase Agreements and the
Transaction Documents shall have been obtained or made and shall be in full
force and effect.
3.5 No Change in Law etc.. No legislation, order, rule, ruling or
regulation shall have been proposed, enacted, or made by or on behalf of any
governmental authority, and no legislation shall have been introduced, and no
investigation by an governmental authority shall have been commenced or
threatened, and no action, suit or proceeding shall have been commenced before,
and no decision shall have been rendered by, any court, other governmental
authority or arbitrator, which, in any such case, in the Investor's reasonable
judgment could adversely affect, restrain, prevent, or change the transactions
contemplated by the Share Purchase Agreements or the Transaction Documents
(including without limitation, the issuance of the Shares) or have a Material
Adverse Effect.
3.6 Registration Agreement. HI and Xxxxxxx MAP Venture Capital Fund III as
successor to Xxxxxxx MAP Venture Capital Fund III Trust, BVCF III, L.P. as
successor to Xxxxxxx Venture Capital Fund III, L.P., and Virginia Retirement
System (the "Xxxxxxx Holders") shall have entered into a Registration Agreement
Amendment Number 1 (the "Amendment") to the Registration Agreement made among HI
and the Xxxxxxx Holders, in substantially the form attached to this Agreement as
Exhibit C , and HI and Investor shall have entered into a Registration Agreement
in substantially the form attached to the Amendment as Exhibit A thereto (the
"Registration Agreement").
3.7 Opinion of HI's Counsel. Investor shall have received from Xxxxxx
Beach & Xxxxxx, LLP, counsel for HI, an opinion addressed to Investor dated the
date of Closing in substantially the form attached to this Agreement as Exhibit
G.
3.8 Compliance Certificate of Officer. HI shall have delivered to Investor
an officer's certificate dated the date of closing stating that the conditions
specified in Section 2 to be performed by HI, and the conditions specified in
Sections 3.1-3.12, inclusive, of this Agreement, have been fully satisfied.
3.9 Corporate Proceedings. HI shall have delivered to Investor copies
certified by the Secretary of HI, of (a) resolutions adopted by the Board of
Directors of HI authorizing the execution, delivery, and performance of this
Agreement, the Share Purchase Agreements, and the Transaction Documents, the
amendment to the Certificate of Incorporation attached hereto as Exhibit A, the
issuance and sale of the Shares, the reservation for issuance of the Underlying
Common Stock, and the consummation of all of the transactions contemplated by
this Agreement and the Share Purchase Agreements, and (b) resolutions duly
adopted by HI's stockholders adopting the amendment to the Certificate of
Incorporation attached hereto as Exhibit A.
3.10 Stockholders Agreement. HI and the Investor shall have entered into a
Stockholders' Agreement in substantially the form attached hereto as Exhibit E
(the "Stockholders' Agreement").
3.11 Research Agreement. HI and the Investor shall have entered into a
Research Agreement in substantially the form attached to this Agreement as
Exhibit F (the "Research Agreement").
3.12 Other Documents and Opinions. The Investor shall have received such
other documents and opinions, in form and substance satisfactory to the Investor
and its counsel, relating to matters incident to the transactions contemplated
hereby as the Investor may reasonably request.
ARTICLE 4 - REPRESENTATIONS OF INVESTOR
As a material inducement to HI to enter into this Agreement and sell the
Shares hereunder, Investor represents and warrants to HI as follows:
4.1 Formation. Investor is validly formed or organized, and existing,
under the laws of the jurisdiction of its formation, and has all requisite power
and authority to carry out the transactions contemplated by this Agreement.
4.2 Authorization. The execution and delivery of this Agreement and the
Transaction Documents, and performance of the transactions contemplated hereby,
by Investor have been duly authorized by Investor. This Agreement and the
Transaction Documents constitute valid and binding obligations of Investor,
enforceable in accordance with their terms, subject to limitations imposed by
bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization, or
other laws or judicial decisions or principles of equity relating to or
affecting the enforcement of creditors' rights generally. Except to the extent
that any of the following would not reasonably be expected to have a material
adverse effect on the ability of Investor to consummate the transactions
contemplated by this Agreement, the execution and delivery by Investor of this
Agreement and the Transaction Documents, and the compliance with their terms by
Investor, do not (a) conflict with or result in a violation of, (b) constitute a
default under, or (c) require any authorization, consent, approval, exemption,
or other action by or notice to, or filing with, any court or administrative or
governmental body or agency pursuant to, (i) the charter documents or bylaws of
Investor, (ii) any law, statute, rule, or regulation to which Investor is
subject, or (iii) any material agreement, instrument, order, judgment, or decree
to which Investor is subject.
4.3 Investment Intent. The Shares are being acquired for the Investor's
own account, for investment and not with a view to, or for resale in connection
with, any distribution thereof within the meaning of the Securities Act or the
securities laws of any other state applicable to Investor. Investor understands
that the Shares have not been registered under the Securities Act by reason of
their issuance in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act pursuant to Section 4 (2) thereof,
which exemption depends upon, among other things, the bona fide nature of
Investor's investment intent expressed herein, that HI has no present intention
of registering the Shares, and that the Shares must be held by the Investor
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from registration.
4.4 Access to Information. During the negotiation of the transactions
contemplated by this Agreement, the Investor and its representatives have been
afforded access to corporate books, documents, and other information concerning
HI and to its offices and facilities, have been afforded an opportunity to ask
such questions of HI and its officers, employees, agents,
accountants, and representatives concerning HI's business, operations, financial
condition, assets, liabilities, and other relevant matters as they have deemed
necessary or desirable, and have been given all such information as has been
requested, in order to evaluate the merits and risks of the prospective
investments contemplated herein.
4.5 Due Diligence. The Investor and its representatives have been solely
responsible for Investor's own "due diligence" investigation of HI and its
management and business, for Investor's own analysis of the merits and risks of
this investment, and for its own analysis of the fairness and desirability of
the terms of the investment. In taking any action or performing any role
relative to the arranging of the proposed investment, the Investor has acted
solely in its own interest, and neither Investor nor any of Investor's agents or
employees has acted as an agent of HI. The Investor has such knowledge and
experience in financial and business matters that Investor is capable of
evaluating the merits and risks of the purchase of the Shares pursuant to the
terms of this Agreement and of protecting Investor's interests in connection
therewith. Nothing in this Section 4.5, however, shall affect HI's obligations
to the Investor under the representations and warranties contained in Article 4
hereof.
4.6 Economic Risk; Accredited Investor. The Investor is able to bear the
economic risk of the purchase of the Shares pursuant to the terms of this
Agreement, including a complete loss of Investor's investment in the Shares. The
Investor is an Accredited Investor as such term is defined in Rule 501 of
Regulation D promulgated under the Securities Act.
4.7 Brokers. The Investor has not involved any brokers or finders in
connection with this Agreement or the transactions contemplated hereby, and
agrees to indemnify HI for any breach of this Section 4.7 by it.
ARTICLE 5 - REPRESENTATIONS OF HI
As a material inducement to the Investor to enter into this Agreement and
purchase the Shares hereunder, HI represents and warrants to the Investor as
follows:
5.1 Organization, Corporate Power. HI is a corporation duly organized,
validly existing, and in good standing under the laws of Delaware, and is
qualified (and in good standing) to do business in every jurisdiction in which
its ownership of property or conduct of business requires it to qualify. HI
possesses all requisite corporate power and authority and legal right to own and
operate its assets, to carry out its business as now conducted and presently
proposed to be conducted, to execute, deliver, and carry out the transactions
contemplated by this Agreement, the Share Purchase Agreements, and each of the
Transaction Documents. The copies of HI's charter documents and bylaws which
have been previously furnished to Investor reflect all amendments made thereto
at any time prior to the date of this Agreement and are correct and complete.
Each Subsidiary of HI is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, possesses all requisite
corporate
power and authority and the legal right to own and operate its assets, to carry
out its business as now conducted and presently proposed to be conducted and is
qualified (and in good standing) to do business in every jurisdiction in which
its ownership of property or conduct of its business requires it to qualify. All
the outstanding shares of capital stock of each Subsidiary are validly issued,
fully paid and nonassessable and all such shares are owned by HI or another one
of its Subsidiaries free and clear of any Lien and not subject to any right or
option to purchase such shares. Neither HI nor any Subsidiary is in violation in
any respect of its certificate or articles of incorporation or by-laws.
5.2 Authorization; No Breach. The execution and delivery of this
Agreement, the Share Purchase Agreements, and the Transaction Documents, and
performance of the transactions contemplated hereby (including the amendment to
HI's Certificate of Incorporation) and thereby, by HI has been duly authorized
by HI. This Agreement, the Share Purchase Agreements, and the Transaction
Documents constitute legal, valid and binding obligations of HI, enforceable in
accordance with their terms, subject to limitations imposed by bankruptcy,
insolvency, reorganization, or other laws or judicial decisions or principles of
equity relating to or affecting the enforcement of creditors' rights generally.
The Shares, when issued at Closing, will constitute the legal, valid, and
binding obligations of HI enforceable in accordance with their respective terms.
The execution and delivery by HI of this Agreement, the Share Purchase
Agreements, and the Transaction Documents, the fulfillment and compliance with
their terms by HI (including the amendment to HI's Certificate of
Incorporation), the sale and issuance of the Shares, and the issuance of the
Underlying Common Shares, do not and will not (a) conflict with or result in a
breach or violation of (with or without the giving of notice or the passage of
time or both), (b) constitute a default under, (c) result in the creation of any
Lien, security interest charge or encumbrance upon any of the capital stock,
properties or assets of HI or its Subsidiaries, or (d) require any
authorization, consent, waiver, approval, order, exemption, or other action by
or notice to, or filing with, any court or administrative or governmental body
or agency or any other Person pursuant to, or give any third party the right to
modify, terminate, or accelerate any obligation under, (i) the certificate of
incorporation or bylaws of HI or any of its Subsidiaries, (ii) any law, statute,
rule, or regulation to which HI or any of its Subsidiaries is subject, or (iii)
any agreement, instrument, order, judgment, writ, injunction, or decree to which
HI or any of its Subsidiaries is subject. The execution and delivery by HI of
this Agreement, the Share Purchase Agreements, and the Transaction Documents and
the performance of the transactions contemplated hereby and thereby (including
the issuance of Shares and the Underlying Common Shares) will not cause
anti-dilution clauses of any outstanding securities to become operative or give
rise to any preemptive rights.
5.3 Capital Stock and Related Matters. As of the date of this Agreement
and immediately thereafter, the authorized capital stock of HI shall consist of
(a) 147,000 shares of Class A Preferred Stock, all of which is duly authorized
and validly issued and outstanding, (b) 200,000 shares of Class B Preferred
Stock of which none will be outstanding, and (b) 100,000,000 shares of Common
Stock, of which 10,990,924 shall be duly authorized and validly
issued and outstanding (before giving effect to the purchase of the Shares and
the remainder of the Class B Preferred Stock), 11,790,324 of which shall be
reserved for issuance upon conversion of the Class A Preferred Stock, 2,833,565
of which shall be reserved for issuance upon conversion of all of the Class B
Preferred Stock, and 5,154,408 of which shall be reserved for issuance upon
exercise of outstanding options and warrants. Except as aforesaid, as of the
date of this Agreement, HI shall not have outstanding any stock, investment
rights, options, or securities convertible, exercisable, or exchangeable for (or
any agreements under which HI is or may become obligated to issue, sell, or
transfer) any shares of its capital stock or containing any profit participation
features, nor shall it have outstanding any rights or options to subscribe for
or to purchase its capital stock or any stock or securities convertible into or
exchangeable for its capital stock. As of the date of this Agreement, all of the
outstanding shares of HI's capital stock shall be validly issued, fully paid,
and nonassessable and were issued in compliance with all applicable state and
federal securities laws. There are no statutory or contractual stockholder's
preemptive rights or rights of first refusal, with respect to the Shares or
Underlying Common Stock which have not been effectively waived in writing. HI
has not violated any applicable federal or state securities laws in connection
with the offer, sale, or issuance of the Shares, and assuming the accuracy of
the representations and warranties of the Investor set forth in Article 4
hereof, the offer, sale, and issuance of the Shares hereunder do not require
registration under the Securities Act or any applicable state securities laws.
All the rights, preferences, privileges and restrictions of the Shares are set
forth in the Transaction Documents. No equity securities or rights to purchase
equity securities provides for acceleration or other changes in vesting
provisions or other terms governing such securities as a result of a Public
Offering, merger, consolidation, change of control or sale of assets except as
described on Schedule 5.3.
5.4 Validity of Shares. The Shares issued to Investor pursuant to Section
2.1 of this Agreement, when issued in accordance with this Agreement, shall be
duly authorized, validly issued, fully paid, and nonassessable and will be free
of any Liens.
5.5 Financial Statements. HI has delivered to Investor true and correct
copies of the audited consolidated balance sheet of HI and its Subsidiaries as
of June 30, 1997, June 30, 1998, and June 30, 1999, and the related statements
of income and cash flows for the twelve-month periods then ended (with such
balance sheet for the fiscal year ending June 30, 1999 called the "Latest
Balance Sheet", and collectively, the "Financial Statements").
Each of such Financial Statements (including in all cases the notes
thereto, if any) has been prepared in accordance with GAAP, is accurate and
complete in all material respects, is consistent with the books and records of
HI (which are accurate and complete in all material respects), and presents
fairly the consolidated financial condition, results or operations, and cash
flows of HI and its Subsidiaries in accordance with GAAP, applied on a
consistent basis as of the dates and for the periods set forth therein.
5.6 Absence of Undisclosed Liabilities. Except as set forth on the
attached Schedule
5.6, HI and its Subsidiaries do not have any obligation or liability (whether
accrued, absolute, contingent, unliquidated, or otherwise, whether or not known
to HI or any Subsidiary, whether due or to become due and regardless of when
asserted) arising out of transactions entered into at or prior to the date of
the Closing, or any action or inaction at or prior to the date of the Closing,
or any state of facts or any circumstances existing at or prior to the date of
the Closing other than: (i) liabilities set forth on the Latest Balance Sheet
(including any notes thereto), and (ii) liabilities and obligations which have
arisen after the date of the Latest Balance Sheet in the ordinary course of
business, none of which is a liability resulting from breach of contract, breach
of warranty, tort, infringement, claim or lawsuit and none of which, either
individually or collectively, is likely to have a Material Adverse Effect.
5.7 Absence of Certain Developments. Except as expressly contemplated by
this Agreement or as set forth on the attached Schedule 5.7, since June 30,
1999, neither HI nor any Subsidiary has:
(a) issued any notes, bonds or other debt securities or any capital stock
or other equity securities or any securities convertible, exchangeable or
exercisable into any capital stock or other equity securities, except as
reflected in Section 5.3 of this Agreement;
(b) borrowed any amount or incurred or become subject to any liabilities,
except current liabilities incurred in the ordinary course of business and
liabilities under contracts entered into in the ordinary course of business;
(c) discharged or satisfied any Lien or paid any obligation or liability,
other than current liabilities paid in the ordinary course of business;
(d) declared or made any payment or distribution of cash or other property
to its stockholders with respect to its capital stock or other equity securities
or purchased or redeemed any shares of its capital stock or other equity
securities (including, without limitation, any warrants, options or other rights
to acquire its capital stock or other equity securities);
(e) mortgaged or pledged any of its properties or assets or subjected them
to any Lien, except Liens for current property taxes not yet due and payable;
(f) sold, assigned or transferred any of its tangible assets, except in
the ordinary course of business, or canceled any debts or claims;
(g) sold, assigned or transferred any patents or patent applications,
trademarks, service marks, trade names, corporate names, copyrights or copyright
registrations, trade secrets, or other intangible assets, except in each case
for non-exclusive license agreements made in the ordinary course of business;
(h) suffered any Material Adverse Effect, or suffered any extraordinary
losses (other than operating losses incurred in the ordinary course of business)
or suffered any damage, destruction or casualty loss exceeding in the aggregate
$10,000, whether or not covered by insurance;
(i) made any Investment in or taken steps to incorporate any Subsidiary,
or made any Investment in any other Person; or
(j) entered into any other material transaction other than in the ordinary
course of business.
(k) knowledge of any change in the assets, liabilities, financial
condition or operations of HI from that reflected in the Financial Statements,
other than changes in the ordinary course of business, none of which
individually or in the aggregate has had or is expected to have a material
adverse effect on such assets, liabilities, financial condition, operations or
prospects of HI or its Subsidiaries;
(l) knowledge of any resignation or termination of any officer or key
employee of HI or its Subsidiaries; and HI or its Subsidiaries, to the best of
its knowledge, does not know of the impending resignation or termination of
employment of any such officer or key employee;
(m) knowledge of any material change, except in the ordinary course of
business, in the contingent obligations of HI or its Subsidiaries by way of
guaranty, endorsement, indemnity, warranty or otherwise;
(n) knowledge of any waiver by HI or its Subsidiaries of a valuable right
or of a material debt owed to it;
(o) knowledge of any direct or indirect loans made by HI or its
Subsidiaries to any shareholder, employee, officer or director of HI or its
Subsidiaries, other than immaterial advances made in the ordinary course of
business;
(p) knowledge of any material change in any compensation arrangement or
agreement with any employee, officer, director or shareholder other than entry
into the non-compete and confidentiality agreements with the Chief Executive
Officer, President, and Executive Vice President and Chief Technology Officer in
the form delivered to Investor;
(q) knowledge of any labor organization activity;
(r) knowledge of any change in material agreement to which HI or its
Subsidiaries is a party or by which it is bound which materially and adversely
affects the business, assets, liabilities, financial condition, operations or
prospects of HI or its Subsidiaries; or
(s) knowledge of any other event or condition of any character that,
either individually or cumulatively, has materially and adversely affected the
business, assets, liabilities, financial condition, operations or prospects of
HI or its Subsidiaries.
(t) made any arrangement or commitment by HI or its Subsidiaries to do any
of the acts described in subsection (a) through (s) above.
5.8 Absence of Illegal Payments. Neither HI nor any Subsidiary has at any
time made any illegal payments for political contributions or made any bribes,
kickback payments or other illegal payments.
5.9 Assets. Except as set forth on the attached Schedule 5.9, HI and each
Subsidiary have good and marketable title to, or a valid leasehold interest in,
the properties and assets used by them, located on their premises or shown on
the Latest Balance Sheet or acquired thereafter, free and clear of all Liens,
except for properties and assets disposed of in the ordinary course of business
since the date of the Latest Balance Sheet and except for Liens disclosed on the
Latest Balance Sheet (including any notes thereto) and Liens for current
property taxes not yet due and payable. Except as described on Schedule 5.9,
HI's and each Subsidiary's equipment and other tangible assets are in good
operating condition in all material respects and are fit for use in the ordinary
course of business. HI and each Subsidiary own, or have a valid leasehold
interest in, all assets necessary for the conduct of their respective businesses
as presently conducted and as presently proposed to be conducted.
5.10 Tax Matters.
(a) Except as set forth on the attached Schedule 5.10, HI, each
Subsidiary, and each Affiliated Group have filed all Tax Returns which they are
required to file under applicable laws and regulations; all such Tax Returns are
complete and correct in all material respects and have been prepared in
compliance with all applicable laws and regulations in all material respects;
HI, each Subsidiary and each Affiliated Group in all material respects have paid
all Taxes due and owing by them (whether or not such Taxes are required to be
shown on a Tax Return) and have withheld and paid over to the appropriate taxing
authority all Taxes which they are required to withhold from amounts paid or
owing to any employee, stockholder, creditor or other third party; neither HI,
any Subsidiary nor any Affiliated Group has waived any statute of limitations
with respect to any material Taxes or agreed to any extension of time with
respect to any material Tax assessment or deficiency; the accrual for Taxes on
the Latest Balance Sheet would be adequate to pay all Tax liabilities of HI and
its Subsidiaries if their current tax year were treated as ending on the date of
the Latest Balance Sheet (excluding any amount recorded which is attributable
solely to timing differences between book and Tax income); since the date of the
Latest Balance Sheet, HI and its Subsidiaries have not incurred any material
liability for Taxes other than in the ordinary course of business; the
assessment of any additional Taxes for periods for which Tax Returns have been
filed by HI, each Subsidiary and each Affiliated Group shall not exceed the
recorded liability therefor on the Latest Balance Sheet (excluding any amount
recorded which is attributable solely to timing differences between book and Tax
income); the federal income Tax Returns of HI and its Subsidiaries have been
audited and closed for all tax years through June 30, 1995; no foreign, federal,
state or local tax audits or administrative or judicial proceedings are
pending or being conducted with respect to HI, any Subsidiary or any Affiliated
Group, no information related to Tax matters has been requested by any foreign,
federal, state or local taxing authority and no written notice indicating an
intent to open an audit or other review has been received by HI from any
foreign, federal, state or local taxing authority; and there are no material
unresolved questions of, claims concerning HI's, any Subsidiary's or any
Affiliated Group Tax liability.
(b) Neither HI nor any of its Subsidiaries has made an election under
ss.341(f) of the Internal Revenue Code of 1986, as amended. Neither HI nor any
Subsidiary is liable for the Taxes of another Person that is not a Subsidiary in
a material amount under (a) Treas. Reg. ss. 1.1 502-6 (or comparable provisions
of state, local or foreign law), (b) as a transferee or successor, (c) by
contract or indemnity or (d) otherwise. Neither HI nor any Subsidiary is a party
to any tax sharing agreement. HI, each Subsidiary and each Affiliated Group have
disclosed on their federal income Tax Returns any position taken for which
substantial authority (within the meaning of IRC ss.6662(d)(2)(B)(i)) did not
exist at the time the return was filed. Neither HI nor any Subsidiary has made
any payments, is obligated to make payments or is a party to an agreement that
could obligate it to make any payments that would not be deductible under IRC
ss.280G.
5.11 Contracts and Commitments.
(a) Except as specifically contemplated by this Agreement and except as
set forth on the attached Schedule 5.11, HI is not a party to or bound by,
whether written or oral, any: (i) collective bargaining agreement or contract
with any labor union, whether formal or informal; (ii) contract for the
employment of any officer, individual employee or group of employees or other
person on a full-time, part-time or consulting basis or any severance
agreements; (iii) agreement or indenture relating to the borrowing of money or
to placing a Lien on any of the assets of HI; (iv) agreements with respects to
the lending or investing of funds; (v) guaranty of any obligation for borrowed
money or otherwise, other than endorsements made for collection; (vi) license or
royalty agreements except those entered into in the ordinary course of business;
(vii) lease or agreement under which HI is lessee of, or holds or operates, any
personal property owned by any other party for which annual rental exceeds
$50,000; (viii) lease or agreement under which HI is lessor of or permits any
third party to hold or operate any property, real or personal, owned or
controlled by it for which annual rental exceeds $50,000; (ix) contract or group
of related contracts with the same party for the purchase or sale of raw
materials, commodities, supplies, products or other personal property or for the
furnishing or receipt of services which either calls for performance over a
period of more than one year and involves a sum in excess of $50,000 per year;
(x) contract relating to the distribution, marketing or sales of
its products or services (including contracts to provide advertising allowances
or promotional services) involving more than $50,000 per year; (xi) franchise
agreements, (xii) contract which prohibits it from freely engaging in business
anywhere in the world; or (xiii) any other agreement material to HI not entered
into in the ordinary course of business.
(b) Except as specifically contemplated by this Agreement, or disclosed on
Schedule 5.11, (i) no contract or commitment required to be disclosed on
Schedule 5.11 has been breached or canceled by the other party since June 30,
1999, (ii) HI has performed in all material respects all of the obligations
required to be performed by HI in connection with the contracts or commitments
required to be disclosed on the Schedule 5.11, and is not in receipt of any
claim of default under any contract or commitment required to be disclosed on
the Schedule 5.11, (iii) HI has no present expectation or intention of not fully
performing any obligation pursuant to any contract set forth on Schedule 5.11,
and (iv) HI has no knowledge of any material breach or anticipated material
breach by any party to any contract specific on Schedule 5.11.
(c) HI has provided the Investor with a true and correct copy of all
written contracts which are referred to on Schedule 5.11 which have been
requested by Investors, together with all amendments, waivers or other changes
thereto.
5.12 Proprietary Rights.
(a) Schedule 5.12 attached hereto contains a complete and accurate list of
all patented and registered Proprietary Rights owned by HI, all pending patent
applications and applications for the registration of other Proprietary Rights
owned by HI and all licenses, options or agreements with respect to the
Proprietary Rights of HI or any of its Subsidiaries and all licenses, options or
agreements to which HI or any of its Subsidiaries is bound with respect to the
Proprietary Rights of any other person other than in the ordinary course of
business. Except as set forth on Schedule 5.12, HI owns and possesses all right,
title and interest in and to, or has a valid and enforceable written license to
use, all of the Proprietary Rights necessary for the operation of its business
as presently conducted and as currently proposed to be conducted; no claim by
any third party contesting the validity, enforceability, use or ownership of any
Proprietary Rights owned or used by HI has been made or is currently
outstanding; HI has not received any information as to any infringement or
misappropriation by, or conflict with, any third party with respect to the
Proprietary Rights of HI, nor has HI received any claims alleging infringement
or misappropriation, or other conflict with, any Proprietary Rights of any third
party; and HI has not infringed, misappropriated or otherwise conflicted with
any Proprietary Rights of any third party.
(b) To the knowledge of HI or its Subsidiaries, no employee of HI or its
Subsidiaries, nor any consultant with whom HI or its Subsidiaries has
contracted, is in violation of any term of any employment contract, proprietary
information agreement, or any other agreement relating to the right of any such
individual to be employed by, or to contract with, HI or its Subsidiaries
because of the nature of the business to be conducted by HI or its Subsidiaries
or presently proposed to be conducted; and to the knowledge of HI or its
Subsidiaries, the continued employment by HI or its Subsidiaries of its present
employees, and the performance of contracts with their independent contractors,
will not result in any such violation. HI or its Subsidiaries has not received
any notice alleging that any such violation has occurred.
(c) The Chief Executive Officer, President, and Executive Vice President
and Chief Technology Officer of HI have executed confidentiality and non-compete
agreements in the form delivered to Investor, and holders of certain stock
options have agreed to non-compete provisions as part of their option
agreements.
(d) None of the computer software, computer firmware, computer hardware
(whether general or special purpose), and other similar or related items of
automated, computerized, and/or software system(s) that are used or relied on by
HI or by any of its Subsidiaries in the conduct of their respective businesses
will malfunction, will cease to function, will generate incorrect data or will
produce incorrect results when processing, providing, and/or receiving (i)
date-related data from, into and between the twentieth and twenty-first
centuries or (ii) date-related data in connection with any valid date in the
twentieth and twenty-first centuries including leap days, in each case in any
manner that would have a material adverse effect on HI or its Subsidiaries or
their respective operations or businesses.
5.13 Litigation. Except as set forth on the attached Schedule 5.13, there
are no actions, suits, proceedings, orders, investigations or claims pending or,
to the best of HI's knowledge, threatened against or affecting the HI or any
Subsidiary (or to the best of HI's knowledge, pending or threatened against or
affecting any of the officers, directors, or employees of HI and its
Subsidiaries with respect to their businesses or proposed business activities),
or pending or threatened by HI or any Subsidiary against any third party, at law
or in equity, or before or by any governmental department, commission, board,
bureau, agency or instrumentality (including, without limitation, any actions,
suit, proceedings or investigations with respect to the transactions
contemplated by this Agreement and the Transaction Documents); neither HI nor
any Subsidiary is subject to any arbitration proceedings under collective
bargaining agreements or otherwise or, to the best of HI's knowledge, any
governmental investigations or inquiries; and, to the best of HI's knowledge,
there is no basis for any of the foregoing. Neither HI nor any Subsidiary is
subject to any judgment, order or decree of any court or other governmental
agency, and neither HI nor any Subsidiary has received any opinion or memorandum
or legal advice from legal counsel to the effect that it is exposed, from a
legal standpoint, to any liability or disadvantage which may be material to its
business.
5.14 Brokerage. There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement binding upon HI or any
Subsidiary. HI shall pay, and hold Investor harmless against, any liability,
1oss or expense (including, without limitation,
reasonable attorneys' fees and out-of-pocket expenses) arising in connection
with any such claim.
5.15 Insurance. HI and its Subsidiaries maintain insurance coverage of
types and amounts reasonable and customary for corporations of similar size
engaged in similar lines of business. Neither HI nor any Subsidiary is in
default with respect to its obligations under any insurance policy maintained by
it, and neither HI nor any Subsidiary has been denied insurance coverage.
5.16 Employees. HI is not aware that any executive or key employee of HI
or any Subsidiary or any group of employees of HI or any Subsidiary has any
plans to terminate employment with HI or any Subsidiary. HI and each Subsidiary
have complied in all material respects with all laws relating to the employment
of labor (including, without limitation, provisions thereof relating to wages,
hours, equal opportunity, collective bargaining and the payment of social
security and other taxes), and HI is not aware that it or any Subsidiary has any
material labor relations problems (including, without limitation, any union
organization activities, threatened or actual strikes or work stoppages or
material grievances). Neither HI, its Subsidiaries nor, to the best of HI's
knowledge, any of their employees is subject to any noncompete, nondisclosure,
confidentiality, employment, consulting or similar agreements relating to,
affecting or in conflict with the present or proposed business activities of HI
and its Subsidiaries, except for agreements between HI and its present and
former employees. No employee of HI or any Subsidiary is represented by any
labor union, nor are such employees covered under any collective bargaining
agreement.
5.17 ERISA. For purposes of this Section 5.17, the term "HI" includes all
organizations under common control with HI pursuant to Section 414(b) or (c) of
the IRC.
(a) Multiemployer Plans. HI does not have any obligation to contribute to
(or any other liability, including current or potential withdrawal liability,
with respect to) any "multiemployer plan" (as defined in Section 3(37) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")).
(b) Retiree Welfare Plans. HI does not maintain or have any obligation to
contribute to (or any other liability with respect to) any plan or arrangement
whether or not terminated, which provides medical, health, life insurance or
other welfare-type benefits for current or future retired or terminated
employees (except for limited continued medical benefit coverage required to be
provided under Section 4980B of the IRC or as required under applicable state
law).
(c) Defined Benefit Plans. HI does not maintain, contribute to or have any
liability under (or with respect to) any employee plan which is a tax-qualified
"defined benefit plan" (as defined in Section 3(35) of ERISA), whether or not
terminated.
(d) Defined Contribution Plans. HI does not maintain, contribute to or
have any
liability under (or with respect to) any employee plan which is a tax-qualified
"defined contribution plan" (as defined in Section 3(34) of ERISA), whether or
not terminated.
(e) Other Plans. Except as set forth in Schedule 5.17, HI does not
maintain, contribute to or have any liability under (or with respect to) any
plan or arrangement providing benefits to current or former employees, including
any parachute, severance, or bonus plan or plan for deferred compensation,
except employee health, welfare, and similar benefit plans in the ordinary
course of business, whether or not terminated.
(f) Party in Interest. HI is not a party in interest (as defined under
Section 3(14) of ERISA) or a disqualified person (as defined in Section
4975(e)(2) of the IRC) with respect to any Investor.
(g) No Parachute Payment. No benefit under any Benefit Plan, including
without limitation, any severance or parachute payment plan or agreement, will
be established or become accelerated, vested, or payable by reason of any
transaction contemplated under this Agreement.
5.18 Compliance With Laws. Neither HI nor any Subsidiary has violated any
law or any governmental regulation or requirement which violation has had or
would reasonably be expected to have a material adverse effect upon the
financial condition, operating results, assets, operations or business prospects
of HI and its Subsidiaries taken as a whole, and neither HI nor any Subsidiary
has received notice of any such violation. Neither HI nor any Subsidiary is
subject to, or has reason to believe it may become subject to, any material
liability (contingent or otherwise) or material corrective or remedial
obligation arising under any federal, state, local or foreign law, rule or
regulation (including the common law) relating to or regulating health, safety,
pollution or the protection of the environment.
No governmental orders, permissions, consents, approval or authorizations
are required to be obtained and no registrations or declarations are required to
be filed in connection with the execution and delivery of this Agreement and the
issuance of the Shares or the Underlying Common Shares, except such as has been
duly and validly obtained or filed, or with respect to any filings that must be
made after the Closing, as will be filed in a timely manner. HI and each of its
Subsidiaries have all franchises, permits, licenses and any similar authority
necessary for the conduct of its business as now being conducted and as
presently proposed to be conducted, the lack of which could materially and
adversely affect the business, properties, prospects or financial condition of
HI or its Subsidiaries.
Assuming the accuracy of the representations and warranties of the
Investor contained herein, the offer, sale and issuance of the Shares and the
Underlying Common Shares will be exempt from the registration requirements of
the Securities Act, and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws. Neither HI
nor any agent on its
behalf has solicited or will solicit any offers to sell or has offered to sell
or will sell all or any part of the Shares to any person or persons so as to
bring the sale of such Shares by HI within the registration provisions of the
Securities Act or any state securities laws.
5.19 Environmental and Safety Matters. HI has complied and is in
compliance with all Environmental and Safety Requirements in all material
respects (including without limitation all permits and licenses required
thereunder). HI has received no oral or written notice of any violation of, or
any liability (contingent or otherwise) or corrective or remedial obligations
under, any Environmental and Safety Requirements. No facts or circumstances with
respect to the past or current operations or facilities (whether currently or
previously owned, leased, or operated) of HI or any predecessor or Affiliate
thereof or entities previously owned by HI (including without limitation any
onsite or offsite disposal or release of hazardous materials, substances or
wastes) would give rise to any liability or corrective or remedial obligation
under any Environmental and Safety Requirement.
5.20 Affiliated Transactions. Except as set forth on the attached Schedule
5.20, (i) no officer, director, stockholder or Affiliate of HI or any
Subsidiary, (ii) to HI's knowledge, any employee of HI or any Subsidiary or
(iii) to HI's knowledge, any individual related by blood, marriage or adoption
to any individual described in clauses (i) or (ii) above or any entity in which
any such Person or individual owns any beneficial interest, is a party to any
agreement, contract, commitment or transaction with HI or any Subsidiary or has
any material interest in any material property used by HI or any Subsidiary.
5.21 Disclosure. Neither this Agreement, the Transaction Documents, nor
any of the exhibits, schedules, attachments, written statements, documents,
certificates or other items prepared or supplied to Investor by or on behalf of
HI with respect to the transactions contemplated hereby contain any untrue
statement of a material fact or omit a material fact necessary to make each
statement contained herein or therein not misleading. There is no fact which HI
has not disclosed to Investor in writing and of which any of its officers,
directors or executive employees is aware and which has had or would reasonably
be expected to have a Material Adverse Effect.
5.22 Brokers. HI has not involved any brokers or finders in connection
with this Agreement or the transactions contemplated hereby, and agrees to
indemnify the Investor for any breach of this Section 5.22 by it.
5.23 Closing Date. The representations and warranties of HI contained in
this Article 5 and elsewhere in this Agreement and the Transaction Documents and
all information contained in any exhibit, schedule or attachment hereto or in
any certificate or other writing delivered by, or on behalf of, HI to Investor
shall be true and correct in all material respects on the date of this Agreement
as though then made.
5.24 Subsidiaries.
(a) The only Subsidiaries of HI on the date of Closing are Xxxxxx X. Black
Corporation which is a wholly owned Subsidiary of HI, Xxxxx Xxxxxx & Associates,
Inc. which is a wholly owned Subsidiary of Xxxxxx X. Black Corporation, and GSBC
Ohio Corporation which is a wholly owned Subsidiary of Xxxxxx X. Black
Corporation.
(b) All outstanding capital stock of the Subsidiaries has been duly
authorized and validly issued and is fully paid and non-assessable and is owned
beneficially and of record as described in Section 5.24(a) free and clean of all
Lines, options, or claims of any kind. There are no outstanding options,
warrants, subscriptions, rights, convertible securities or other agreements or
plans under which any Subsidiary may become obligated to issue, sell, or
transfer shares of its capital stock.
ARTICLE 6 - RESTRICTIONS ON TRANSFERS
6.1 Restricted Securities. The Restricted Securities are transferable only
pursuant to (a) a Public Offering, (b) Rule 144 or Rule 144A under the
Securities Act (or any similar or successor rule, regulation, or law then in
force) if any such rule is available, or (c) subject to the conditions specified
in Section 6.2 below, any other legally available means of transfer.
6.2 Opinion Delivery. In connection with the transfer of any of the
Restricted Securities (other than a transfer described in Section 6.1(a) or (b)
above) and subject to Section 6.3 below, the Investor shall deliver written
notice to HI describing in reasonable detail the transfer or proposed transfer,
together with an opinion of legal counsel which (to HI's reasonable
satisfaction) is knowledgeable in securities law matters to the effect that such
transfer of the Restricted Securities may be effected without registration of
such Restricted Securities under the Securities Act. In addition, if the holder
of the Restricted Securities delivers to HI an opinion of such counsel that no
subsequent transfer of such Restricted Securities shall require registration
under the Securities Act, HI shall promptly deliver to the Investor new
certificates for such Restricted Securities which do not bear the Securities Act
legend set forth in Section 6.5. If HI is not required to deliver new
certificates for such Restricted Securities not bearing such legend, the
Investor, or if applicable a subsequent transferee thereof, shall not transfer
the same until the prospective transferee has confirmed to HI in writing its
agreement to be bound by the conditions contained in this Article 6.
6.3 Restrictions on Transfer. The Investor shall not sell, transfer,
assign, pledge, or otherwise dispose of (whether with or without consideration)
the Shares or any interest therein (a "Transfer") to any Person who, in the
reasonable judgment of HI based upon information made available by HI to
Investor, is a direct competitor of HI, or otherwise absent compliance with this
Section 6.3; provided that this Section 6.3 shall be of no further force and
effect at such time as HI consummates a Public Offering. Notwithstanding the
foregoing, this Section 6.3 shall not
apply to a transfer to an Affiliate of Investor, provided that such Affiliate
becomes subject to the terms of this Section 6.3. If Investor proposes to
Transfer all or part of the Shares, Investor shall deliver a written notice
("Transfer Notice") to HI. The Transfer Notice shall describe the number of
Shares proposed to be transferred (the "Offered Shares") and the proposed
transferee and price per share. HI may elect to purchase all, but not less than
all, of the Offered Shares at the price described in the Transfer Notice. If HI
elects to purchase all of the Offered Shares, HI shall give the Investor written
notice of such election no later than ten (10) days after delivery of the
Transfer Notice. If an election to purchase all of the Offered Shares has been
made, the Offered Shares shall be transferred to HI at the price stated in the
Transfer Notice no later than fourteen (14) days after notice of the election to
purchase has been given. If HI has elected not to purchase all of the Offered
Shares (or has failed to exercise its rights under this Section 6.3), the
Investor may conclude a Transfer at the price per share stated in the Transfer
Notice, or at a higher price per share, at any time within a one hundred thirty
(130) day period after the delivery of the Transfer Notice provided that the
transferee has agreed in writing to be bound by the terms of this Article 6 as
if it was an original signatory to this Agreement.
6.4 Legend.
(a) Each certificate or instrument representing the Shares shall be
imprinted with a legend in substantially the following form:
"The securities represented hereby have not been registered under
the Securities Act of 1933, as amended. The transfer of the
securities represented by this certificate is subject to the
conditions specified in the Investment Agreement, dated as of
October 15, 1999, as amended and modified from time to time, between
the issuer (the "Company") and Excite, Inc., as amended and modified
from time to time. A copy of such Agreement will be furnished by the
Company to the holder hereof upon written request and without
charge."
(b) Upon the later of (i) the termination of this Agreement pursuant to
Article 9 hereof, and (ii) such time as the Shares are no longer Restricted
Securities, at Investor's request, HI shall remove the legend set forth in
Section 6.4(a) above from the certificates for the Shares.
6.5 Lock-Up Agreement. To the extent that Investor has been released from
the Lockup Agreement, in connection with an initial Public Offering of Common
Shares, at the request of the underwriters for such offering, Investor agrees to
enter into a reasonable and customary negotiated holdback agreement providing
for a holdback not exceeding 180 days.
ARTICLE 7 -FINANCIAL INFORMATION
7.1 Delivery of Financial Information. HI shall make such financial and
other information, as it makes available to the holders of all of its Common
Shares, available to Investor. In addition, HI shall provide Investor with (a)
copies of its annual audited consolidated financial statements within ninety
(90) days after the end of its fiscal year; (b) copies of its unaudited
quarterly financial statements within forty-five (45) days after the end of each
calendar quarter; (c) without duplication of any other items furnished under
this Section 7.1, copies of any annual, special or interim audit reports or
management or comment letters submitted to HI by independent public accountants
as soon as practicable following such submission; (d) as soon as practicable,
copies of all financial statements, proxy material or reports sent to all
holders of any class of capital stock of HI; and (e) copies of all reports or
registration statements filed by or on behalf of HI with the SEC pursuant to the
Securities Act or the Securities Exchange Act. All such financial statements
shall be prepared in accordance with GAAP (except that any interim financial
statements may omit notes and may be subject to normal year-end adjustments). HI
will make good faith efforts to provide Investor with copies of any public or
press releases issued by or on behalf of HI, but shall have no liability for
inadvertent omissions in the delivery of same.
7.2 Confidentiality. Investor and its Affiliates shall maintain the
confidentiality of the financial statements and other information provided to it
pursuant to Section 7.1 above, provided that Investor may disclose such
information (a) in connection with a Transfer of the Shares if such Person
agrees to maintain the confidentiality of such financial statements and other
information as provided in this Section7.2, (b) previously known on a
non-confidential basis by Investor, (ii) in the public domain through no fault
of Investor, (c) lawfully acquired by Investor from sources other than HI who,
to the knowledge of Investor, had such documents, reports or other information
without any breach of any obligation of confidentiality, (d) to officers,
directors, employees, accountants, counsel, consultants, advisors and agents of
Investor in connection with Investor's review of such documents, reports or
other information so long as such Persons are informed by Investor to treat such
information confidentially and not to use any of such documents, reports or
other information for any reason or purpose other than in connection with
Investor's review, or (e) if Investor is required to disclose by judicial,
regulatory or administrative process or by other requirements of law.
ARTICLE 8 - COVENANTS OF HI
8.1 Office for Payment, Exchange and Registration; Location of Office;
Notice of Change of Name or Office.
(a) So long as any of the Shares or Underlying Shares are outstanding, HI
agrees to maintain an office or agency where Shares may be presented for
payment, exchange, conversion, exercise or registration of transfer as provided
in this Agreement. Such office or agency initially shall be the office of HI set
forth in the preamble to this Agreement.
(b) HI agrees to give Investor at least twenty (20) days' prior written
notice of any change in HI the location of the office of HI required to be
maintained under this Section 8.2.
8.2 Reservation of Shares. HI agrees that there have been reserved, and HI
shall at all times keep reserved, free from preemptive rights, out of its
authorized Common Stock a number of shares of Common Stock sufficient to provide
for the exercise of the conversion rights related to the Underlying Shares.
8.3 Listing of Shares. HI agrees that if any shares of HI's Common Stock
are listed on any national securities exchange or on Nasdaq, then HI will take
such action as may be necessary, from time to time, to list all outstanding
Common Shares on such exchange or on Nasdaq.
8.4 Securities Exchange Act Registration. HI agrees that as soon as HI is
either required to or does file a registration statement with respect to Common
Stock of HI under Section 6 of the Securities Act or Section 12(b) or Section
12(g), whichever is applicable, of the Securities Exchange Act, then thereafter:
(a) HI will maintain effective a registration statement (containing such
information and documents as the SEC shall specify and otherwise complying with
the Securities Exchange Act), under Section 12(b) or Section 12(g), whichever is
applicable, of the Securities Exchange Act, with respect to the Common Stock of
HI, and HI will file on time such information, documents and reports as the
Commission may require or prescribe for companies whose stock has been
registered pursuant to Section 12(b) or Section 12(g), whichever is applicable.
(b) HI will make whatever filings with the SEC, or otherwise take such
other action as may be necessary to comply with the current reporting provisions
of Rule 144(c) under the Securities Act in order to facilitate resales of HI
Common Stock.
8.5 Delivery of Information for Rule 144A Transactions. If Investor
proposes to transfer any Shares or Underlying Shares pursuant to Rule 144A under
the Securities Act (as in
effect from time to time), HI agrees to provide (upon the request of Investor or
the prospective transferee) to Investor and (if requested) to the prospective
transferee any financial or other information concerning HI which is required to
be delivered by such holder to any transferee of such Shares or Underlying
Shares pursuant to such Rule 144A.
8.6 Registration Statement . HI shall provide to Investor and its counsel,
promptly after they are prepared, drafts of any registration statements covering
securities of HI. HI shall provide Investor with a reasonable time to review and
comment upon any such registration statement (and documents to be filed with the
SEC in connection therewith) prior to filing any such registration statement or
other related document with the SEC).
8.7 Private Placement Status. Neither HI, any Subsidiary, nor any agent
nor other Person acting on HI's behalf will do or cause to be done (or will omit
to do or to cause to be done) any act which act (or which omission) would result
in bringing the issuance or sale of the Shares within the provisions of Section
5 of the Securities Act or the filing, notification, or reporting requirements
of any state securities law.
8.8 No Impairment. HI will not, and will not permit any Subsidiary to take
action to avoid the observance or performance of any of the terms of the Share
Purchase Agreements, the Transaction Documents, or the Shares.
ARTICLE 9 - TERMINATION
9.1 Termination. All agreements, representations and warranties,
covenants, and obligations of the Investor and any Subsidiary contained in this
Agreement, the Transaction Documents, the Shares or any document or certificate
delivered pursuant hereto or thereto shall survive, and shall continue in effect
following, the execution, delivery of this Agreement, the Transaction Documents,
the closings hereunder and thereunder, any investigation at any time made by or
on behalf of the Purchasers or by any other Person, the issuance, sale and
delivery of the Shares, any disposition thereof and any payment, exercise
conversion or cancellation of the Shares; provided that the provisions of
Section 6.3, Article 7, and Section 8.2 shall terminate following the conversion
of all Shares held by the Investor into Common Shares. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of HI pursuant thereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by HI
as to such factual matters hereunder solely as of the date of such certificate
or instrument.
ARTICLE 10 - REMEDIES
10.1 Indemnification. HI agrees to indemnify and hold Investor and its
Affiliates harmless from and against and will pay to Investor and each Affiliate
the full amount of any loss, damage, liability or expense (including amounts
paid in settlement and reasonable attorneys' fees
and expenses) to Investor and any Affiliate resulting either directly or
indirectly from any breach of the representations or warranties, or failure to
perform any of the covenants or agreements of the Investor or any Subsidiary
contained in this Agreement, the Transaction Documents or the Shares.
10.2 Remedies. In the case of a breach of any representation or warranty,
or failure to perform any of the agreements or covenants of HI or any Subsidiary
contained in this Agreement, the Transaction Documents or any Shares, the holder
of any Shares then outstanding may proceed to protect and enforce the rights of
such holder by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement or covenant contained
herein or therein or in such Share or for an injunction against a violation of
any of the terms hereof or thereof or of such Share, or in aid of the exercise
of any power granted hereby or thereby or by such Share or by law or for any
other remedy (including without limitation damages).
Holders of all Shares shall, in addition to other remedies provided by
law, have the right to have the provisions of this Agreement, the Transaction
Documents or other such Shares specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any breach or threatened
breach of the provisions of this Agreement, the Transaction Documents or any
Shares will cause irreparable injury to holders of Shares and that money damages
will not provide an adequate remedy. Nothing contained herein shall be construed
as prohibiting a holder of Shares from pursuing any other remedies available to
such holder for such breach or threatened breach, including without limitation
the recovery of damages from the HI.
10.3 No Counterclaim. All amounts payable by HI in connection with the
Shares shall be paid without counterclaim, set off, deduction or defense and
without abatement, suspension, deferment, diminution or reduction.
ARTICLE 11 - MISCELLANEOUS
11.1 Successor/Assigns. This Agreement shall inure to the benefit of, and
shall be binding upon, the respective successors, legal representatives, and
assigns of the parties, provided, however, that this Section 10.1 is not
intended to supersede any restrictions on transfer of any interest expressly
provided elsewhere in this Agreement.
11.2. Governing Law. This Agreement shall be construed according to, and
governed by, the internal laws of the State of New York without reference to
principles of conflicts of laws; provided, however, that the matters contained
herein that are specifically within the purview of the General Corporation Law
of the State of Delaware shall be governed by such law.
11..3 Arbitration.
(a) The parties agree to this Section 11.3 as the exclusive manner and
means for resolution of all disputes of any kind or nature between them related
to this Agreement and/or the transactions contemplated hereby.
(b) Any dispute shall be settled by final and binding arbitration by a
panel of three arbitrators sitting in Rochester, New York, in accordance with
the rules of the American Arbitration Association. The arbitrators shall
promptly obtain such information regarding the matter as they deem necessary and
shall decide the matter and render a written decision which shall be delivered
to the parties. Each party shall pay the party's own fees and expenses in
connection with any arbitration proceedings, except that the parties shall
equally bear the fees and out-of-pocket expenses of the arbitrators. Any
decision shall be a final and non-appealable determination of the matter, shall
be binding upon each of the parties, and shall be enforceable by the courts of
the State of New York (Seventh Judicial District) and the courts of the United
States (Western District of New York).
11.4 Entire Agreement. This Agreement contains the entire agreement of the
parties and supersedes all prior communications and agreements related to the
subject matter hereof. Any modification, supplement, or amendment to this
Agreement must be in writing signed by both of the parties.
11.5 Notices. Any notice or demand upon any party hereto shall be deemed
to have been sufficiently given or served for all purposes hereof when delivered
in person or by nationally recognized overnight courier with receipt requested,
or three business days after it is mailed certified mail postage prepaid, return
receipt requested, addressed to the address shown in the preamble to this
Agreement or to such other address as may be designated by any party by notice
given to the other in the manner described in this Section 10.5.
11.6 Severability/Construction. If any provision of this Agreement is held
to be invalid or unenforceable for any reason, the remaining provisions will
continue in full force without being impaired or invalidated. The parties agree
to replace any invalid provision with a valid provision which most closely
approximates the intent and economic effect of the invalid provision. The
parties agree that this Agreement has been prepared in cooperation, and that it
shall not be construed as against any particular party as drafter.
11.7 Expenses. Except as otherwise expressly provided herein, both parties
shall be responsible for their own costs and expenses in connection herewith.
11.8 Waiver. The waiver by either party of a breach of any provision of
this Agreement will not operate or be interpreted as a waiver of any other or
subsequent breach. No waiver or amendment hereof shall be effective unless in
writing signed by both HI and Investor. No course of dealing and no delay on the
part of any holder of any Shares or any party to this Agreement in exercising
any rights or remedies shall operate as a waiver thereof or otherwise
prejudice such holder's or party's rights. No right or remedy conferred hereby
or by the Transaction Documents or by any Share shall be exclusive of any other
right or remedy referred to herein or therein in such Share or available at law,
in equity, by statute or otherwise.
11.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
shall be taken together and deemed to be one instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the date first above written.
XXXXXX INTERACTIVE INC.
By: /s/ Xxxxxx X. Black
--------------------------
Xxxxxx X. Black
Chief Executive Officer
EXCITE, INC.
By: /s/ Xxxx Xxxxxxx
------------------------------
Title: Executive Vice President
