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AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
RELATING TO 2,727,273 SHARES OF
SERIES A CONVERTIBLE PREFERRED STOCK
EARTHLINK NETWORK, INC.
DATED AS OF: SEPTEMBER 10, 1996
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AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
THIS AMENDED AND RESTATED STOCK PURCHASE AGREEMENT is made as of September
10, 1996, by and between EARTHLINK NETWORK, INC., a Delaware corporation (the
"Company"), and the investors listed on SCHEDULE I hereto, each of which is
herein referred to as an "Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF SERIES A PREFERRED STOCK.
(a) The Company shall adopt and file with the Secretary of State
of the State of Delaware on or before the Closing (as defined below) the
Certificate of Designation, Preferences and Rights of Series A Convertible
Preferred Stock in the form attached hereto as EXHIBIT A.
(b) Subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties and covenants contained
herein, each Investor agrees, severally but not jointly, to purchase at the
Closing, and the Company agrees to sell and issue to each Investor at the
Closing, that number of shares of the Company's Series A Convertible Preferred
Stock, $.01 par value (the "Series A Preferred Stock"), set forth opposite such
Investor's name on SCHEDULE I hereto for the aggregate purchase price set forth
thereon, which shall be equivalent to $5.50 per share.
1.2 CLOSING. The purchase and sale of the Series A Preferred Stock
shall take place at the offices of Xxxxxx, Xxxxx & Xxxxxxx LLP, 0000 Xxx Xxxxx
Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000, at 9:00 A.M., on September 10, 1996,
or at such other time and place as the Company and Investors acquiring in the
aggregate more than 1,900,000 of the shares of Series A Preferred Stock sold
pursuant hereto agree upon orally or in writing (which time and place are
designated as the "Closing"). At the Closing, the Company shall deliver to
each Investor a certificate representing the Series A Preferred Stock which
such Investor is purchasing against delivery to the Company by such Investor of
the full purchase price therefor by bank check payable to the Company's order
or by wire transfer to such account as the Company shall designate, at the
option of such Investor. With respect to Invemed Associates, Inc., ("Invemed")
payment may be made by applying to the purchase price for the shares being
purchased hereunder by Invemed amounts due to Invemed under that certain
promissory note in the initial principal amount of $500,000, dated August 21,
1996, issued by the Company to Invemed. No Investor shall be obligated to
purchase any shares of Series A Preferred Stock at the Closing unless an
aggregate of at least 2,727,273 (2,713,637 shares in the event that the sale of
13,636 shares to North Carolina residents must be delayed to comply with
applicable state securities law) shares of Series A Preferred Stock to be sold
hereunder pursuant to Section 1.1(b) are purchased
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concurrently therewith.
1.3 SUBSEQUENT SALE OF SERIES A PREFERRED STOCK.
(a) To the extent that any Investor does not comply with its
obligations hereunder, until the 30th day immediately following the Closing the
Company may sell, to any Investor or to any other person approved by the Board
of Directors of the Company, up to the balance of the shares of Series A
Preferred Stock to be sold hereunder pursuant to Section 1.1(b) hereof but
which are not purchased by such Investors at the Closing, at a price not less
than the price per share paid by the Investors herein. In addition, during
such 30-day period, the Company may sell 13,636 shares of Series A Preferred
Stock to the North Carolina residents referred to in Section 1.2.
(b) No purchase of any shares of Series A Preferred Stock hereof
shall be deemed to have been made pursuant to this Agreement and no rights
hereunder shall inure to any such purchaser, unless such purchase is made at
the Closing pursuant to Section 1.1(b) hereof or thereafter in accordance with
Section 1.3(a) hereof.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Investor that, except as set forth on a
SCHEDULE OF EXCEPTIONS attached as SCHEDULE II hereto, each of which exceptions
shall specifically identify the relevant subparagraph hereof to which it
relates and shall be deemed to be representations and warranties as if made
hereunder:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted (described in the preliminary prospectus of the Company, dated June
27, 1996 (the "Prospectus"), attached hereto as EXHIBIT B, heretofore furnished
to the Investors). The Company is duly qualified to transact business and is
in good standing in each jurisdiction except where the failure so to qualify
would not have a material adverse effect on its business, condition (financial
or other), results of operations, properties or prospects (a "Material Adverse
Effect").
2.2 CAPITALIZATION. The authorized capital stock of the Company
consists, or will consist at or prior to the Closing, of:
(a) PREFERRED STOCK: 10,000,000 shares of Preferred Stock (the
"Preferred Stock"), par value $.01 per share, of which 2,727,273 shares have
been designated Series A Preferred Stock. No shares of Preferred Stock,
including without limitation any shares of Series A Preferred Stock, are
presently issued and outstanding, although up to 2,727,273 shares of Series A
Preferred Stock will be sold pursuant to this Agreement. The rights,
privileges and preferences of the Series A Preferred Stock will be as stated in
the Company's Certificate of Designations, Preferences and Rights of Series A
Preferred Stock attached hereto as EXHIBIT A.
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(b) COMMON STOCK: 50,000,000 shares of Common Stock of which
11,970,465 shares are issued and outstanding and are owned by the persons and
in the amounts specified in SCHEDULE III hereto.
(c) Except for the conversion or exercise privileges of the
Series A Preferred Stock to be issued under this Agreement and the Warrants, a
form of which is attached as EXHIBIT E hereto, 2,625,000 shares of Common
Stock reserved for issuance upon the exercise of options granted to employees,
directors or consultants, 1,338,305 shares of Common Stock reserved for
issuance upon the exercise of outstanding warrants, and 723,333 shares of
Common Stock reserved for issuance upon the exercise of warrants the Company
may issue pursuant to outstanding agreements, there are not outstanding, nor
are there any agreements or understandings to issue in the future, any options,
warrants, rights for (including conversion or preemptive rights), nor are there
or agreements for the purchase or acquisition from the Company of any shares of
its capital stock. Except as provided in that certain Buy-Sell Agreement dated
June 10, 1994 among the Company, Xxx Xxxxxx, Xxxx Xxxxxxx and Xxxxx X'Xxxxxxx,
no shares of the Company's outstanding capital stock, or stock issuable upon
exercise or exchange of any outstanding options, warrants or rights, or other
stock issuable by the Company, are subject to any rights of first refusal or
other rights to purchase such stock in favor of the Company. All holders of
options and warrants, together with exercise prices, vesting provisions and
termination dates of their respective options and warrants, are listed in
SCHEDULE III hereto.
2.3 SUBSIDIARIES. The Company does not presently own any equity
interest in any other corporation, association, or other business entity.
2.4 AUTHORIZATION. All corporate action on the part of the Company,
its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement and the agreements listed in Section
4.7 and attached as exhibits hereto (such agreements being herein referred to
as the "Ancillary Agreements"), the performance of all obligations of the
Company under each of this Agreement and the Ancillary Agreements, and the
authorization, issuance (or reservation for issuance) and delivery of the
Series A Preferred Stock being sold hereunder and the Common Stock issuable
upon conversion of the Series A Preferred Stock has been taken or will be taken
prior to the Closing, and this Agreement and the Ancillary Agreements
constitute (or will constitute upon the execution thereof) the valid and
legally binding obligations of the Company and each of the other parties
thereto (other than the Investors), enforceable in accordance with their
respective terms, except as may be limited by (a) applicable bankruptcy,
insolvency, reorganization or other laws of general application relating to or
affecting the enforcement of creditors' rights generally and (b) the effect of
rules of law governing the availability of equitable remedies.
2.5 VALID ISSUANCE OF PREFERRED AND COMMON STOCK.
(a) The Series A Preferred Stock which is being purchased by the
Investors hereunder, when issued, sold and delivered in accordance with the
terms hereof or thereof, will be duly authorized and validly issued, fully paid
and nonassessable and, assuming the accuracy of the representations of the
Investors in this Agreement, will be issued in compliance
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with all applicable federal and state securities laws. The Common Stock
issuable upon conversion of the Series A Preferred Stock purchased under this
Agreement has been or, as of the Closing, will be duly and validly reserved for
issuance and, upon issuance in accordance with the terms of the Certificate of
Designation, Preferences and Rights of the Series A Preferred Stock shall be
duly and validly issued, fully paid and nonassessable, and, assuming the
accuracy of the representations of the Investors in this Agreement, will be
issued in compliance with all applicable securities laws, as presently in
effect, of the United States and each of the states whose securities laws
govern the issuance of any of the Series A Preferred Stock hereunder.
(b) The outstanding shares of Common Stock are all duly and
validly authorized and issued, fully paid and nonassessable, and were issued in
compliance with all applicable federal and state securities laws, subject to
such exceptions relating to certain issuances that will not individually or in
the aggregate have a Material Adverse Effect.
2.6 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or foreign governmental authority on the
part of the Company is required in connection with the execution of this
Agreement and the consummation of the transactions contemplated hereby or
thereby, except for filings under the Blue Sky laws of such states where such
filings are required and the filing of a Form D with the Securities and
Exchange Commission, which filings have been made or will be timely made, as
appropriate.
2.7 LITIGATION. Except as set forth in the SCHEDULE OF EXCEPTIONS,
and except for matters involving claims by individual customers of the Company
relating to termination or service interruption that will not, individually or
in the aggregate, have a Material Adverse Effect, there is no action, suit,
proceeding or investigation pending or currently threatened against the Company
of any nature whatsoever, including without limitation any action, suit,
proceeding, arbitration, claim or investigation which questions the validity of
this Agreement or the right of the Company to enter into it or to consummate
the transactions contemplated hereby, nor is the Company aware that there is
any basis for the foregoing. The foregoing also includes, without limitation,
actions pending or threatened (or any basis therefor known to the Company)
involving the prior employment of any of the Company's employees, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. The Company is not a party or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding, arbitration, claim or investigation by the Company currently
pending or which the Company intends to initiate.
2.8 INTELLECTUAL PROPERTY. The Company has sufficient title and
ownership of all patents, trademarks, service marks, trade names, copyrights,
trade secrets, information, proprietary rights and processes (the foregoing,
"Intellectual Property") necessary for its business as now conducted and as
proposed to be conducted as described in the Prospectus without any conflict
with or infringement of the rights of others. A list of all patents, patent
applications, trademarks, service marks, tradenames, and copyrights other than
common law marks and unregistered copyrights owned by the Company is set forth
in the SCHEDULE OF EXCEPTIONS. There
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are no outstanding options, licenses, or agreements of any kind to which the
Company is a party or by which it is bound relating to any Intellectual
Property, whether owned by the Company or another person or entity, except as
set forth in the SCHEDULE OF EXCEPTIONS and except for rights granted by the
Company to third parties for the distribution, resale, marketing or bundling of
its products and services. The Company has not received any communications
alleging that the Company has violated or, by conducting its business as
proposed, would violate any of the Intellectual Property or other proprietary
rights of any other person or entity except as set forth in the SCHEDULE OF
EXCEPTIONS. The Company has no knowledge that any of its employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of such
employee's best efforts to promote the interests of the Company or that would
conflict with the Company's business as proposed to be conducted. To the
Company's knowledge, neither the execution nor delivery of this Agreement, nor
the carrying on of the Company's business by the employees of the Company, nor
the conduct of the Company's business as proposed, will conflict with or result
in a breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any of such employees
is now obligated. The Company does not presently utilize or intend to utilize
any inventions of any of its employees (or people it currently intends to hire)
made prior to their employment by the Company.
2.9 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is in compliance
with each, and is not in violation, breach or default of any, provision of its
Certificate of Incorporation or By-Laws, or any judgment, order, writ, or
decree, or any material contract, agreement, instrument or commitment to which
it is a party or by which it or its properties is bound, or provision of any
statute, rule or regulation applicable to the Company, its assets or its
business (except, with respect to statutes, rules or regulations, for such
violations that, individually or in the aggregate, would not have a Material
Adverse Effect). The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not result in any
such violation or breach or be in conflict with or constitute, with or without
the passage of time or giving of notice, either a default under any such
provision, instrument, judgment, order, writ, decree or contract or an event
which results in the creation or any lien, charge or encumbrance upon any
assets of the Company except such as would not, individually or in the
aggregate, have a Material Adverse Effect.
2.10 AGREEMENTS.
(a) Except for agreements explicitly contemplated hereby and
except as set forth in the SCHEDULE OF EXCEPTIONS, there are no binding
agreements between the Company and any of its officers, directors, affiliates,
employees, former employees or shareholders.
(b) Except as set forth in the SCHEDULE OF EXCEPTIONS, there are
no binding agreements to which the Company is a party or by which it is bound
which involve obligations of, or payments to, the Company in excess of $200,000.
2.11 REGISTRATION RIGHTS. Except as set forth in the SCHEDULE OF
EXCEPTIONS, the
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Company has not granted or agreed to grant any registration rights, including
without limitation piggyback rights, to any person or entity. Notwithstanding
anything contained in the SCHEDULE OF EXCEPTIONS, the Company is not obligated
to include securities of the Company held by any person or entity in an initial
public offering of the Company's common stock pursuant to any grant or
agreement to grant registration rights to any person or entity except for
registration rights with respect to 13,334 shares of Common Stock.
2.12 TITLE TO PROPERTY AND ASSETS. The Company has good and
marketable title to its material property and assets, free and clear of all
mortgages, liens, claims and encumbrances, except such encumbrances and liens
which arise in the ordinary course of business and do not materially impair the
Company's ownership or use or the value of such property or assets. With
respect to the property and assets it leases, the Company is in compliance in
all material respects with such leases, enjoys peaceful and undisturbed
possession thereunder, and holds a valid leasehold interest free of any
material liens, claims or encumbrances.
2.13 FINANCIAL STATEMENTS. Contained in the Prospectus, which is
attached hereto as EXHIBIT B, is (a) an audited balance sheet at December 31,
1994 and 1995 and statements of operations, cash flows and stockholders' equity
for the period from May 26, 1994 through December 31, 1994 and the year ended
December 31, 1995, and (b) an unaudited balance sheet at March 29, 1996 (the
"Balance Sheet"), unaudited statements of operations and cash flows for the
three months ended March 31, 1995 and March 29, 1996 and unaudited statements
of stockholders' equity for the three months ended March 29, 1996. In
addition, attached hereto as EXHIBIT C are (c) an unaudited balance sheet at
June 28, 1996, unaudited statements of operations and cash flows for the three
and six months ended June 30, 1995 and June 28, 1996 and unaudited statements
of stockholders' equity for the six months ended June 28, 1996 (all of the
financial statements referenced in (a), (b) and (c) are collectively referred
to herein as the "Financial Statements"). The Financial Statements (x) have
been prepared in accordance with the books and records of the Company, which
books and records, in reasonable detail, accurately and fairly reflect the
transactions and disposition of assets of the Company, (y) present fairly the
financial position of the Company at the date or dates therein indicated and
the results of operations for the periods therein specified, and (z) have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis through the periods indicated and with each other, except,
with respect to the statements referred to in (b) or (c) for the omission of
notes thereto as permitted pursuant to Regulation S-X promulgated by the
Securities and Exchange Commission. Except as set forth in the Financial
Statements, the Company has no liabilities, contingent or otherwise, other than
liabilities incurred in the ordinary course of business subsequent to June 28,
1996 and obligations under contracts and commitments incurred in the ordinary
course of business and not required under generally accepted accounting
principles to be reflected in the Financial Statements, which, individually or
in the aggregate, are not material to the financial condition of the Company.
The Company maintains and will continue to maintain a standard system of
accounting established and administered in accordance with generally accepted
accounting principles.
2.14 CHANGES. There has not been, since June 28, 1996 with respect to
the matters set forth in (a)-(c) below, and since March 29, 1996 with respect
to the matters set forth
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in (d)-(h) below:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business which have not
been, in the aggregate, materially adverse;
(b) any declaration or payment of any dividend, or any authorization
or payment of any distribution, on any of the capital stock of the Company, or
any redemption or repurchase of any capital stock of the Company;
(c) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results, prospects or business of the Company (as such
business is presently conducted and as it is proposed to be conducted);
(d) any waiver by the Company of a valuable right or of a material
debt owed to it;
(e) any satisfaction or discharge of any lien, claim or encumbrance or
payment of any obligation by the Company, except in the ordinary course of
business and which is not material to the assets, properties, financial
condition, operating results or business of the Company (as such business is
presently conducted and as it is proposed to be conducted);
(f) any change or amendment to a material contract or arrangement by
which the Company or any of its assets or properties is bound or subject;
(g) any material change in any compensation arrangement or agreement
with any employee; or
(h) to the Company's knowledge, any other event or condition of any
character which could reasonably be expected to have a Material Adverse Effect.
2.15 EMPLOYEE BENEFIT PLANS. Except as set forth in the SCHEDULE OF
EXCEPTIONS, the Company has no pension, retirement, bonus, stock option, profit
sharing, health, disability, life insurance, hospitalization or similar plans
or arrangements maintained for the benefit of, or relating to, present or
former officers, directors or employees. The Company does not have any
employee benefit plan as defined in the Employee Retirement Income Security Act
of 1974, as amended ("ERISA").
2.16 TAX RETURNS, PAYMENTS AND ELECTIONS. The Company has timely
filed all tax returns and reports as required by law. These returns and
reports are true and correct in all material respects. The Company has paid
all taxes and other assessments due, except those contested by it in good faith
which are listed in the SCHEDULE OF EXCEPTIONS. The provision for taxes of the
Company as shown in the Financial Statements is adequate for taxes due or
accrued as of the dates thereof.
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2.17 INSURANCE. The Company has in full force and effect (i) fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its material
properties that might be damaged or destroyed, and (ii) such other insurance
policies as are listed in the SCHEDULE OF EXCEPTIONS.
2.18 MINUTE BOOKS. The minute books of the Company provided to
Xxxxxx, Xxxxx & Xxxxxxx LLP contain a complete summary of all meetings of
directors and stockholders since the time of incorporation and all meetings of
directors and stockholders of the Company's predecessor corporation, EarthLink
Network, Inc., a California corporation, and reflect all transactions referred
to in such minutes or records accurately in all material respects.
2.19 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or
agents of the Company. There is no strike or other labor dispute involving the
Company pending, or to the knowledge of the Company threatened, which could
have a Material Adverse Effect, nor is the Company aware of any labor
organization activity involving its employees. The Company is not aware that
any officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company, nor does the Company have a
present intention to terminate the employment of any of the foregoing. Except
as set forth in the SCHEDULE OF EXCEPTIONS, the employment of each employee of
the Company is terminable at the will of the Company without further liability
of the Company to such employee except for the payment of such employee's
normal salary accrued but not paid through the date of such termination.
2.20 ENVIRONMENTAL MATTERS. To the Company's knowledge, the Company
is not in violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, "environmental laws"), does not own or operate
any real property contaminated with any substance that is subject to any
environmental laws, is not liable for any off-site disposal or contamination
pursuant to any environmental laws, and is not subject to any claim relating to
any environmental laws, which violation, contamination, liability or claim
would individually or in the aggregate have a Material Adverse Effect, and the
Company is not aware of any pending investigation which might lead to such a
claim.
2.21 DISCLOSURE. The Company has fully provided each Investor with
all the information which such Investor has requested for deciding whether to
purchase the Series A Preferred Stock and all information which the Company
believes is reasonably necessary to enable such Investor to make such decision.
Neither this Agreement, nor any other agreement, document, certificate or
written statement furnished to the Investors or Xxxxxx, Xxxxx & Bockius LLP by
or on behalf of the Company in connection with the transactions contemplated
hereby (including without limitation, the Financial Statements, the Prospectus,
and the Exhibits and
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Schedules hereto) when read together contain any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading; except that, with
respect to any financial projections submitted to the Investors, the Company
represents and warrants only that such financial projections were prepared in
good faith based on reasonable assumptions and are not inconsistent with any
other projections prepared by or for the Company or reflected in any internal
Company plans, budgets or forecasts. To the best of the Company's knowledge,
the particular financial projections submitted to the Investors, based upon the
investment in the Series A Preferred Stock contemplated hereby, fairly present
its management's good faith estimates as of the date of this Agreement.
2.22 TERMINATION OF LETTER AGREEMENT. The Company has terminated its
letter agreement with New Media Group dated August 7, 1996, and has no
obligations or liabilities of any nature whatsoever to New Media Group, its
partners, directors, officers, employees, agents, successors or assigns arising
under such letter agreement or the termination thereof except as set forth in
the Termination Agreement with New Media Group dated September 9, 1996, a true
and correct copy of which has been furnished to the Investors or Xxxxxx, Xxxxx
& Xxxxxxx LLP.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor,
severally with respect to such Investor but not jointly nor with respect to any
other Investor, hereby represents and warrants that:
3.1 AUTHORIZATION. The Investor has full power and authority to enter
into this Agreement and this Agreement constitutes its valid and legally
binding obligation, enforceable in accordance with its terms, except as may be
limited by (A) applicable bankruptcy, insolvency, reorganization or other laws
of general application relating to or affecting the enforcement of creditors'
rights generally and (b) the effect of rules of law governing the availability
of equitable remedies.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Series A Preferred Stock
to be received by such Investor will be acquired for investment for such
Investor's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and such Investor has no present
intention of selling, granting any participation in, or otherwise distributing
the same, but subject to the ability of such of the Investors as may be
partnerships to to its partners and any of the Investors to transfer shares to
an affiliate (within the meaning of Rule 405 promulgated under the Securities
Act of 1933, as amended (the "Act")) of such Investor.
3.3 DISCLOSURE OF INFORMATION. Each Investor has had an opportunity
to ask questions and receive answers from the Company regarding the terms and
conditions of the offering of the Series A Preferred Stock. The foregoing,
however, does not limit or modify the representations and warranties of the
Company in Section 2 of this Agreement or the right of the Investors to rely
thereon.
3.4 INVESTMENT EXPERIENCE. Each Investor is an experienced investor
in securities and acknowledges that it is able to fend for itself, can bear the
economic risk of its investment and has such knowledge and experience in
financial or business matters that it is
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capable of evaluating the merits and risks of the investment in the Series A
Preferred Stock. Each Investor also represents it is an "accredited investor"
within the meaning of Rule 501(a) promulgated under the Act.
3.5 RESTRICTED SECURITIES. Such Investor understands that the shares
of Series A Preferred Stock it is purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may not be
resold without registration under the Act and applicable state securities laws,
except in certain limited circumstances. In this connection, each Investor
represents that it is familiar with Rule 144 under the Act, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
Each Investor understands that the Company is under no obligation to register
any of the securities sold hereunder except as provided in the Registration
Rights Agreement as described below. Each Investor understands that no public
market now exists for the Series A Preferred Stock and that it is uncertain
whether a public market will ever exist for the Series A Preferred Stock.
3.6 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, each Investor further agrees not to make
any disposition of all or any portion of the Series A Preferred Stock or Common
Stock issuable upon conversion thereof unless and until:
(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a statement of
the circumstances surrounding the proposed disposition, and (ii) such Investor
shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require
registration of such shares under the Act. It is agreed that the Company will
not require opinions of counsel for transactions made pursuant to Rule 144 by
an Investor except in unusual circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an Investor (i) that is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or (ii) to an affiliate of such Investor, or (iii) that is an
individual to any member of his immediate family, trusts for the benefit of the
Investor or his immediate family members or partnerships of which the Investor
or his immediate family members are partners or (iv) to any charitable trusts
or foundations established by the holder (and in the case of Quantum Industrial
Partners LDC, to any investment vehicle managed by Xxxxx Management or any
successors), if the transferee agrees in writing to be subject to the terms
hereof to the same extent as if he were an original Investor hereunder.
Moreover, no such registration statement or opinion of counsel shall be
necessary for a transfer by an Investor at any time after the provisions of
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subparagraph (k) of Rule 144 are applicable to an Investor or transferee
thereof. Notwithstanding the foregoing, no such transfers will be permitted to
the extent that such a transfer violates applicable securities law or
regulation.
3.7 LEGENDS. It is understood that the certificates evidencing the
Series A Preferred Stock (and the Common Stock issuable upon conversion or
exercise thereof) may bear the following legend as well as any other legends as
may be required by applicable law:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF
ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT
AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS."
3.8 ACCURACY OF CERTAIN INFORMATION. The state or country of each
individual Investor's residence or principal office, as appropriate, is
accurately reflected on the signature page hereto, and, unless otherwise noted,
is the same state as in the address included on the signature page.
4. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING. The obligations of
each Investor under Section 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not
consent in writing thereto:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement shall be true on and as
of the Closing in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of such
Closing.
4.2 PERFORMANCE. The Company shall have performed and complied in all
material respects with all agreements, obligations and conditions contained in
this Agreement that are required to be performed or complied with by it on or
before the Closing.
4.3 COMPLIANCE CERTIFICATE. If the Closing does not occur
simultaneously with the execution of this Agreement, the President of the
Company shall deliver to each Investor at the Closing an accurate certificate
certifying that the conditions specified in Sections 4.1 and 4.2 have been
fulfilled and stating that the representations and warranties of the Company
are true and correct on the date of Closing as if made on the date of Closing.
4.4 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
Page 13
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to each
Investor and Xxxxxx, Xxxxx & Bockius LLP, counsel to Quantum Industrial
Partners LDC, Invemed and certain of their associates, and they shall have
received all such counterpart original and certified or other copies of such
documents as they may reasonably request.
4.5 BOARD OF DIRECTORS. The directors of the Company shall consist of
the following persons: Sky X. Xxxxxx, Xxxxxxx X. Xxxxx, Xxxxxx Xxxxx, Xxxxxx M,
Kavner, Xxxxxxx X. Xxxx, Xx., Xxxxx X. X'Xxxxxxx, Xxxx X. Xxxxxxx and Xxxxxx
Xxxxxxxxx.
4.6 BUSINESS AND LEGAL REVIEW. The Investors and Xxxxxx, Xxxxx &
Bockius LLP shall have completed a business and legal review of the Company,
which reasonably meets with their satisfaction.
4.7 CERTAIN ANCILLARY AGREEMENTS. The Registration Rights Agreement
in the form attached as EXHIBIT D shall have been executed by the respective
parties identified on such Exhibits other than such Investor, and the Warrant
in the form attattached as EXHIBIT E shall have been issued to the parties
listed in such EXHIBIT E.
4.8 OPINION OF COMPANY COUNSEL. Each Investor shall have received
from Hunton & Xxxxxxxx, counsel for the Company, an opinion, dated as of the
Closing, in the form attached hereto as EXHIBIT F.
4.9 BLUE SKY COMPLIANCE. The Company shall have complied with all
requirements of federal and state securities or "blue sky" laws with respect to
the issuance of the Series A Preferred Stock to the Investors hereunder.
5. CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligations of the
Company to each of the Investors under this Agreement are subject to the
fulfillment or waiver, on or before the Closing, of each of the following
conditions by each of the Investors:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each Investor contained in this Agreement are true and correct in
all material respects as of the Closing as if made on and as of the date of
such Closing.
5.2 PAYMENT OF PURCHASE PRICE. The Investors shall have delivered to
the Company, in the aggregate, the Purchase Price for at least 2,727,273 shares
of Series A Preferred Stock (2,713,637 shares in the event that the sale of
13,636 share to North Carolina residents must be delayed to comply with
applicable state securities law).
5.3 ANCILLARY AGREEMENTS. Each of the Ancillary Agreements shall have
been executed and delivered by the parties thereto other than the Company, its
officers and directors.
6. COVENANTS OF THE COMPANY.
Page 14
6.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall deliver to
Quantum Industrial Partners LDC and to Invemed (or their respective designated
representatives):
(a) as soon as practicable, but in any event within ninety (90)
days after the end of each fiscal year of the Company, statements of
operations, cash flow and stockholders' equity for such fiscal year and a
balance sheet of the Company as of the end of such year, such year-end
financial reports to be in reasonable detail, prepared in accordance with
generally accepted accounting principles ("GAAP"), and audited and certified by
independent public accountants of nationally recognized standing selected by
the Company;
(b) as soon as practicable, but in any event within forty-five
(45) days after the end of each of the first three (3) quarters of each fiscal
year of the Company, unaudited statements of operations, cash flow and
stockholders' equity for such fiscal quarter and an unaudited balance sheet as
of the end of such fiscal quarter, in reasonable detail and prepared in
accordance with GAAP;
(c) within thirty (30) days of the end of each month, unaudited
statements of operations and cash flow for such month and an unaudited balance
sheet as of the end of such month, in reasonable detail and prepared in
accordance with GAAP, together with an analysis by management of the Company's
financial condition and results of operations during such period and
explanation by management of any differences between such condition or results
and the budget and business plan for such period;
(d) as soon as practicable, but in any event thirty (30) days
prior to the end of each fiscal year, a budget and business plan for the next
fiscal year, prepared on a monthly basis, including balance sheets and sources
and applications of funds statements for such months and, as soon as prepared,
any other budgets or revised budgets prepared by the Company;
(e) with respect to the financial statements called for in
subsections (b) and (c) of this Section 6.1, an instrument executed by the
Chief Financial Officer or President of the Company and certifying that such
financial statements were prepared in accordance with GAAP consistently applied
with prior practice for earlier periods and fairly present the financial
condition of the Company and its results of operation for the period specified,
subject to normal year-end audit adjustment, and certifying that such officer
has reviewed the provisions of this Agreement and has no knowledge of any
default by the Company in the performance or observance of any of the
provisions of this Agreement or, if such officer has such knowledge, specifying
such default and the nature thereof;
(f) such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as the Investor may
from time to time reasonably request, provided, however, that the Company shall
not be obligated to provide any information which it reasonably considers to be
a trade secret the disclosure of which the Company reasonably believes may
adversely affect its business.
6.2 INSPECTION; OBSERVER RIGHTS. The Company shall permit each
Investor (so
Page 15
long as such Investor holds shares of Series A Preferred Stock or shares of
Common Stock issued upon conversion thereof, that represent, in the aggregate,
at least 5% of total number of shares of Common Stock issued or issuable upon
conversion of the Series A Preferred Stock purchased hereunder by the
Investors, adjusted to reflect subsequent changes after the date hereof in the
number of shares of Common Stock outstanding by reason of stock dividends,
stock splits or recapitalization or the like), to visit and inspect the
Company's properties, to examine its books of account and records and to
discuss the Company's affairs, finances and accounts with its officers, all at
such reasonable times as may be requested by the Investor; provided, however,
that the Company shall not be obligated pursuant to this Section 6.2 to provide
access to any information which it reasonably considers to be a trade secret
the disclosure of which the Company reasonably believes may adversely affect
its business. The Company will give each of Quantum Industrial Partners LDC
and Invemed (or their respective designated representatives) not less than
three days' prior written notice of each meeting of the Board of Directors of
the Company and of any other committee or group exercising responsibilities
comparable to those exercised by the Board of Directors, specifying the time
and place of such meeting and, to the extent then known, the matters to be
discussed thereat and inviting each such Investor (or such representative) to
attend and participate therein (without, however, a right to vote thereat in
such capacity). In connection with proposed actions by unanimous consent in
writing, copies of the proposed form of unanimous consent shall be transmitted
to Quantum Industrial Partners LDC and Invemed at the time and in the manner
transmitted to the Board of Directors.
6.3 EMPLOYEE STOCK ISSUANCES. The Company covenants and agrees that
it shall not issue, or grant options with respect to, any securities to
employees unless the amount and terms of each such issuance or grant shall
first have been approved by the Compensation Committee constituted as specified
in by Section 6.5(j) hereof.
6.4 BOARD OF DIRECTORS. The Company shall use its best efforts to
maintain a Board of Directors consisting of not more than nine persons, one of
whom shall be elected by the holders of Series A Preferred Stock in accordance
with the Certificate of Designation, Preferences and Rights of the Series A
Preferred Stock. The Company shall promptly reimburse such director or the
director elected by holders of Series A Preferred Stock for any reasonable
expenses incurred by him in connection with his activities as a director of the
Company. The Company shall indemnify such director against liability to the
fullest extent permitted by applicable law. The Company shall use its best
efforts to hold meetings of its Board of Directors not less than once every
three months.
6.5 OTHER AFFIRMATIVE COVENANTS. Without limiting any other covenants
and provisions hereof, the Company covenants and agrees that it will perform
and observe, and cause each of its subsidiaries in existence from time to time
to observe and perform, the following covenants and provisions, unless, with
respect to a specific transaction, a waiver of certain specified provisions of
this Section 6.5 in connection solely with such transaction is given by the
affirmative vote of the holders of no less than 60% of the outstanding shares
of Series A Preferred Stock voting as a separate class:
(a) PAYMENT OF TAXES AND TRADE DEBT. Pay and discharge all
taxes,
Page 16
assessments and governmental charges or levies imposed upon it or upon its
income, profits or business, or upon any properties belonging to it, prior to
the date on which penalties attach thereto, and all lawful claims which, if
unpaid, might become a lien or charge upon any properties of the Company,
provided that the Company shall not be required to pay any such tax,
assessment, charge, levy or claim which is being contested in good faith and by
appropriate proceedings if the Company shall have set aside on its books
sufficient reserves (segregated to the extent required by generally accepted
accounting principles), if any, with respect thereto; and pay, when due, or in
conformity with customary trade terms but not later than 90 days from the due
date, all lease obligations, all trade debt, and all other indebtedness
incident to the operations of the Company, except such as are being contested
in good faith and by proper proceedings if the Company shall have set aside on
its books sufficient reserves (segregated to the extend required by generally
accepted accounting principles), if any, with respect thereto.
(b) MAINTENANCE OF INSURANCE. Maintain insurance with
responsible and reputable insurance companies or associations in such amounts
and covering such risks as is customarily carried by companies engaged in
similar businesses and owning similar properties in the same general areas in
which the Company operates.
(c) PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain
its corporate existence, rights, franchises and privileges in the jurisdiction
of its incorporation, and qualify and remain qualified as a foreign corporation
in each jurisdiction in which such qualification is necessary or desirable in
view of its business and operations or the ownership or lease of its
properties; and preserve and maintain all licenses and other rights to use
Intellectual Property owned or possessed by it and deemed by the Company to be
necessary or useful to the conduct of its business; provided, however, that
nothing herein shall be construed to prevent the Company from ceasing or
omitting to exercise any rights, powers, privileges or franchises that in the
reasonable judgment of its Board of Directors can no longer be exercised in its
best interests.
(d) COMPLIANCE WITH LAWS. Comply in all material respects with
the requirements of all applicable laws, rules, regulations and orders of any
governmental authority.
(e) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. 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 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.
(f) MAINTENANCE OF PROPERTIES. Maintain and preserve all of its
material properties and assets, necessary or useful in the proper conduct of
its business, in good repair, working order and condition, ordinary wear and
tear excepted.
(g) BUDGETS APPROVAL. Prior to the commencement of each fiscal
year commencing after the date hereof, prepare and submit to, and obtain
approval by the Board of Directors of, monthly capital and operating expense
budgets, cash flow projections, profit and loss
Page 17
projections, and a business plan. The Company shall not enter into any
material activity not envisioned by the budget and business plan except as
authorized by the Board of Directors.
(h) FINANCINGS. Promptly, fully and in detail, inform the Board
of Directors of any discussions, offers or contracts relating to possible
financings of any nature for the Company, whether initiated by the Company or
any other person, except for minor financings of less than $200,000 which do
not include as a feature thereof any right to acquire any of the equity
securities of the Company.
(i) COMPENSATION. Prepare and submit to, and obtain the approval
of, the Compensation Committee of the Board of Directors (which shall consist
of four members of the Board of Directors of which at least one member shall be
a director elected by the holders of the Series A Preferred Stock and the other
three members shall be persons who are not employees of the Company) of
compensation for Company officers.
6.6 CERTAIN NEGATIVE COVENANTS. Without limiting any other covenants
and provisions hereof, the Company covenants and agrees that it will comply
with and observe the following negative covenants and provisions and will not,
unless, with respect to a specific transaction, a waiver of certain specified
provisions of this Section 6.6 in connection solely with such transaction is
given by the affirmative vote of the holders of no less than 60% of the
outstanding shares of Series A Preferred Stock voting as a separate class:
(a) DEALINGS WITH AFFILIATES. Enter into any transaction,
including, without limitation, any loans or extensions of credit or royalty
agreements with any officer or director of the Company or holder of any class
of capital stock of the Company, or any member of their respective immediate
families or any corporation or other entity directly or indirectly controlled
by one or more of such officers, directors or stockholders or members of their
immediate families except in the ordinary course of business and on terms not
less favorable to the Company than it would obtain in a transaction between
unrelated parties.
(b) CHANGE IN NATURE OF BUSINESS. Make, or permit any material
change in the nature of its business as carried on at the date hereof or as
contemplated in the Prospectus.
(c) ACQUISITION OF SHARES BY THE COMPANY. Redeem, purchase or
otherwise acquire for value (or pay into or set aside for a sinking fund for
such purchase), any share or shares of any equity security of the Company.
6.7 TERMINATION OF CERTAIN COVENANTS. The covenants set forth in
subsections 6.1(c), (d), (e) and (f), and Sections 6.2, 6.3, 6.4, 6.5, and 6.6
shall terminate as to Investors and be of no further force or effect upon the
consummation of a public offering of the Common Stock with a minimum offering
price per share of $8.00 (adjusted to reflect changes after the Closing in the
number of shares of Common Stock outstanding by reason of stock dividends,
stock splits or recapitalizations or the like) and net proceeds to the Company
of not less than $20 million.
7. MISCELLANEOUS.
Page 18
7.1 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing for a period ending on the later of one year from Closing or 90 days
following receipt by each Investor of audited financial statements for the
fiscal year ended December 27, 1996 and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf of the
Investors or the Company. The termination of such provisions shall not
constitute a waiver of the Company's or the Investors' compliance with
applicable law.
7.2 SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.3 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of New York as applied to agreements entered into
and to be performed entirely within New York.
7.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement. All references in this Agreement to
sections, paragraphs, exhibits and schedules shall, unless otherwise provided,
refer to sections and paragraphs hereof and exhibits and schedules attached
hereto, all of which exhibits and schedules are incorporated herein by this
reference.
7.6 PRONOUNS. Whenever from context it appears appropriate, pronouns
stated in one gender shall include the masculine, the feminine and the neuter.
7.7 NOTICES. All notices and other communications provided for or
permitted hereunder shall be in writing, addressed to the party to be notified
at the address indicated for such party on the signature page hereof, or at
such other address as such party may designate (in the case of the Investors,
upon ten days' advance written notice to the Company, in the case of the
Company upon ten days' advance notice to the Investors), and shall be deemed to
have been duly delivered (a) when delivered by hand, if personally delivered,
(b) if sent by mail to a party whose address is in the same country as the
sender, three days after being deposited in the mail, postage prepaid, (c) if
sent by facsimile transmission on a Business Day, when receipt is acknowledged
or, if sent on a day that is not a Business Day, on the next Business Day
following the day on which receipt is acknowledged, (d) if sent by a recognized
commercial delivery service that guarantees delivery on the following Business
Day with respect to such notice (e.g., Federal Express, United Parcel Service),
on the Business Day following delivery to such service and (e) if sent by
Page 19
recognized international courier, freight prepaid, with a copy sent by
telecopier, to a party whose address is not in the same country as the sender,
three Business Days after the later of (i) being telecopied and (ii) delivery
to such courier. As used herein, the term "Business Day" means any day other
than a Saturday, Sunday, or a day on which banks in the State of California or
New York are required or permitted to close.
7.8 FINDER'S FEE. Each party represents that it neither is nor will
be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the
Company from any liability for any commission or compensation in the nature of
a finders' fee (and the costs and expenses of defending against such liability
or asserted liability) for which the Investor or any of its officers, partners,
employees, or representatives is responsible. The Company agrees to indemnify
and hold harmless each Investor from any liability for any commission or
compensation in the nature of a finders' fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company
or any of its officers, employees or representatives is responsible.
7.9 EXPENSES. Irrespective of whether the Closing is effected, the
Company shall pay all reasonable costs and expenses incurred by the Investors
with respect to the negotiation, execution, delivery and performance of this
Agreement, including without limitation, the reasonable fees and expenses of
Xxxxxx, Xxxxx & Xxxxxxx LLP, special counsel for the Quantum Industrial
Partners, Invemed Associates, Inc. and certain of their associates.
7.10 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
shares of Series A Preferred Stock (or Common Stock issuable upon conversion of
such shares) that represent at least 60% of the total number of shares of
Common Stock issued or issuable upon conversion of all of the Series A
Preferred Stock sold to the Investors pursuant to this Agreement. Any
amendment or waiver effected in accordance with this Section shall be binding
upon each holder of any securities purchased under this Agreement at the time
outstanding (including securities into which such securities are convertible),
each future holder of such securities, and the Company; provided, however, that
no condition set forth in Section 4 hereof may be waived with respect to any
Investor who does not consent thereto.
7.11 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
7.12 AGGREGATION OF STOCK. All shares of the Series A Preferred Stock
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
7.13 EFFECTIVENESS. This Amended and Restated Stock Purchase Agreement
shall be effective when it is signed by or on behalf of the holders of shares
of Series A Preferred Stock
Page 20
that represent at least 60% of the total number of shares of Common Stock
issuable upon conversion of all of the Series A Preferred Stock sold to the
Investors pursuant to this Agreement.
Page 21
IN WITNESS WHEREOF, the undersigned holders of shares of Series A
Preferred Stock that represent at least 60% of the total number of shares of
Common Stock issuable upon conversion of all of the Series A Preferred Stock
sold to the Investors pursuant to this Agreement have executed, or caused to be
executed on their behalf by an agent thereunto duly authorized, this Amended
and Restated Agreement as of the date first above written.
The Company: EARTHLINK NETWORK, INC.
By:
Title: President and CEO
Address: 0000 Xxx Xxxx Xxxxx
Xxxxxxxx, XX 00000
The Investors:
QUANTUM INDUSTRIAL PARTNERS LDC
By:
Title:
Xxxx Xxxxxxxxx 0
Xxxxxxxxxx, Xxxxxxx
Xxxxxxxxxxx Antilles
With copy to: Xxxxx Fund Management
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxx, Esquire
XXXXX X. XXXXXXXX
00 Xxxxxxxx Xxxxxxx
Xxxxxx Xxxxx Xxxxxx, XX 00000
XXXXXXX X. XXXXXXXXXXXXX
c/o Soros Fund Management
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Page 00
XXXXXXX XXXXX
c/o Soros Fund Management
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
State of Residence: New Jersey
XXXX X. XXXXXXXXX
c/o Soros Fund Management
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
State of Residence: Connecticut
XXXXXX X. XXXXXXX
c/o Soros Fund Management
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
State of Residence: Connecticut
XXXXXX X. XXXXXXXX
00 Xxxxx Xxx
Xxxxxxx, XX 00000
XXXXXXXXX X. XXXXXX
c/o Soros Fund Management
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Page 23
XXXX XxXXXXX
c/o Soros Fund Management
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
XXXXXXX X. XXXX
c/o Soros Fund Management
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
State of Residence: New Jersey
XXXX X. XXXXXX
c/o Soros Fund Management
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
TRUST FOR XXXXXXXXX X. XXXXX UNDER
XXXXXX XXXXX 1982 PRIVATE LEAD TRUST
DATED AS OF APRIL 1, 1982
By: ___________________________________
TRUSTEE
TRUST FOR XXXXXX XXXXX UNDER
XXXXXX XXXXX 1982 PRIVATE LEAD TRUST
DATED AS OF APRIL 1, 1982
By: ___________________________________
TRUSTEE
Page 24
TRUST FOR XXXXXXX XXXXX UNDER
XXXXXX XXXXX 1982 PRIVATE LEAD TRUST
DATED AS OF APRIL 1, 1982
By: ___________________________________
TRUSTEE
TRUST FOR XXXXXXXX XXXXX UNDER
XXXXXX XXXXX 1982 PRIVATE LEAD TRUST
DATED AS OF APRIL 1, 1982
By: ___________________________________
TRUSTEE
TRUST FOR XXXXXX XXXXX UNDER
XXXXXX XXXXX 1982 PRIVATE LEAD TRUST
DATED AS OF APRIL 1, 1982
By: ___________________________________
TRUSTEE
XXXXXX XXXXX
c/x Xxxxx Fund Management
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
INVEMED ASSOCIATES, INC.
By:
Title:
22nd Floor
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Page 25
XXXXXXXX X. XXXXXX
c/o Invemed Associates, Inc.
22nd Floor
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
G. XXXXX XXXXXX
c/o UNIFI, INC.
0000 Xxxx Xxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
XXXXXXXX XXXXXXX
000 Xxxx 000xx Xxxxxx
Xxx Xxxx, XX 00000
XXXXXX X. XXXXXX
c/o Xxxxx Xxxx
Salem Nationalease, Corp.
000 Xxxxxxxx Xxxx.
Xxxxxxx-Xxxxx, Xxxxx Xxxxxxxx 00000
Page 26
XXXXXX X. XXXXXXX
c/o CS First Boston Corporation
Park Avenue Plaza
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
XXXXXX XXXXXXXXX
c/o Invemed Associates, Inc.
22nd Floor
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
CARLISLE XXXXX
c/o Invemed Associates, Inc.
22nd Floor
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
XXXXXXX XXXXX
c/o Invemed Associates, Inc.
22nd Floor
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
XXXX XXXXXX
000 Xx0000 Xxxxxxx Xxxxx
Xxxxx, XX 00000
Page 27
XXXXXXX XXXXXX
000 Xxxx Xxxxx
Xxxxx, XX 00000
XXXX XXXXXXXX
0000 Xxxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
XXXXXX XXXXX
000 Xxxxx Xxxx
Xxxxxxx, XX 00000
XXXXX XXXXX
000 X. Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
BOSTON INTERNATIONAL BOSTON INTERNATIONAL
PARTNERS, L.P., II PARTNERS, L.P.
By:_______________________ By:
Name:_____________________ Name:
Title:____________________ Title:
00xx Xxxxx 00xx Xxxxx
000 Xxxx Xxxxxx 000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000 Xxx Xxxx, XX 00000
XXX XxXXXXXXXXX
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Page 28
XXXXX XXXXX
2121 Avenue of the Stars
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
INTERNET TECHNOLOGY VENTURES
By:
Name:
Title:
000 Xxxx 00xx Xxxxxx, XX0X
Xxx Xxxx, XX 00000
XXXX XXXX
0000 Xxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
XXXXX XXXXX
0000 Xxxxxx xx xxx Xxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
XXX XXXXXX
000 Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Page 29
XXXXX XXXXXX
0000 Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
XXXXX XXXXXX
0000 Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
XXXXXXX XxXXXXXX
c/o Xxxx Xxxxxxx
000 X. Xxxxxxx Xxxxxx
Xxxxx Xxxxxxx, XX 00000
MINDFUL PARTNERS
By:
Name:
Title:
000 Xxxxxxx Xxxxxxx
Xxxxx 0000
Xxxx Xxxxxx, XX 00000
Page 30
XXXXX X'XXXXXXX
0000 Xxxxxxx Xxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
XXXXX X'XXXXXXX
0000 Xxxxxxx Xxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
XXXXXXX XXXXXXX
Suite 900
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
XXXXXX XXXXXXXX
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
XXXXXX XXXXXXXX
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
XXXX XXXXXXXX
00xx Xxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Page 31
XXXXX XXXXXXXX
0000 Xxxxxx xx xxx Xxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
YVES SISTERONE
0000 Xxxxxx xx xxx Xxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
XXXX XXXXXXX, FBO XXXX XXXXXXX
000 X. Xxxxxxx Xxxxxx
Xxxxx Xxxxxxx, XX 00000
XXXX XXXXXXX, FBO XXXXXX XXXXXXX
000 X. Xxxxxxx Xxxxxx
Xxxxx Xxxxxxx, XX 00000
XXXX XXXXXXX
000 X. Xxxxxxx Xxxxxx
Xxxxx Xxxxxxx, XX 00000
XXX XXXXXXX
00 Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000
Page 32
XXXXXX PARTNERS
By:
Name:
Title:
Suite 0000
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
XXXXXX XXXXXXX
000 Xxxxx 00
Xxxxxxxxxxx, XX 00000
___________________________________
XXXXX XXXXXXX
00 Xxxxx Xxx
Xxxxx-xx-Xxxxx, XX 00000
XXXXXXX XXXXXX REINSURANCE CO.
By:___________________________________
Name:_________________________________
Title:________________________________
c/o Xxxxxx Xxxxxxx
000 Xxxxx 00
Xxxxxxxxxxx, XX 00000
___________________________________
Page 33
XXXXX XXXXXX
0000 Xxxxxxxx Xxx
Xxxx Xxxxxx, XX 00000
XXXXXXX XXXXXXXXX
000 X 0 Xxxxx Xxx
Xxxx Xxxxx, XX 00000
XXXXXXX XXXXX
0000 X. Xxxxxxxx
Xxxxxxxx, XX 00000
For purposes of Section 7.13 only:
SHARES HELD IN VOTING TRUST, pursuant to that
certain Voting Trust Agreement effective June 10,
1995.
XXXX XXXXXXX, Trustee
XXXXX X'XXXXXXX, Trustee
Page 34
THE FOLLOWING SCHEDULES AND EXHIBITS WILL BE PROVIDED UPON REQUEST:
SCHEDULE I Schedule of Investors
SCHEDULE II Schedule of Exceptions to Representations,
Financial Statements
SCHEDULE III List of Stockholders
EXHIBIT A Certificate of Designation Preferences and Rights of Series A
Convertible Preferred Stock
EXHIBIT B Preliminary Prospectus, dated June 27, 1996
EXHIBIT C Unaudited balance sheet at June 28, 1996, unaudited statements of
operations and cash flows for the three and six month periods
ended June 28, 1996, and unaudited statement of stockholders'
equity for the six months ended June 28, 1996.
EXHIBIT D Registration Rights Agreement
EXHIBIT E Form of Warrant
EXHIBIT F Opinion of Company Counsel
Page 35
SCHEDULE I
A. SFM Investors
NAME NUMBER OF SHARES OF PURCHASE PRICE
SERIES A PREFERRED STOCK
-----------------------------------------------------------------------------------
Quantum Industrial Partners LDC 1,212,727 $ 6,669,998.50
Xxxxx X. Xxxxxxxx 1,364 7,502.00
Xxxxxxx X. Xxxxxxxxxxxxx 45,455 250,002.50
Xxxxxxx Xxxxx 4,546 25,003.00
Xxxx X. Xxxxxxxxx 13,636 74,998.00
Xxxxxx X. Xxxxxxx 4,546 25,003.00
Xxxxxx X. Xxxxxxxx 1,364 7,502.00
Xxxxxxxxx X. Xxxxxx 11,818 64,999.00
Xxxx XxXxxxx 909 4,999.50
Xxxxxxx X. Xxxx 909 4,999.50
Xxxx X. Xxxxxx 3,636 19,998.00
Trust for Xxxxxxxxx X. Xxxxx Under 18,182 100,001.00
Xxxxxx Xxxxx 1982 Private Lead Trust
Dated as of April 1, 1982
Trust for Xxxxxx Xxxxx Under Xxxxxx 18,182 100,001.00
Xxxxx 1982 Private Lead Trust Dated
as of April 1, 1982
Trust for Xxxxxxx Xxxxx Under Xxxxxx 18,182 100,001.00
Xxxxx 1982 Private Lead Trust Dated
as of April 1, 1982
Page 36
Trust for Xxxxxxxx Xxxxx Under Xxxxxx 18,182 $ 100,001.00
Xxxxx 1982 Private Lead Trust Dated
as of April 1, 1982
Trust for Xxxxxx Xxxxx Under Xxxxxx 18,182 100,001.00
Xxxxx 1982 Private Lead Trust Dated
as of April 1, 1982
Xxxxxx Xxxxx 429,090 2,359,995.00
Invemed Associates, Inc. 90,909 499,999.50
Xxxxxxxx X. Xxxxxx 9,091 50,000.50
G. Xxxxx Xxxxxx 9,091 50,000.50
Xxxxxxxx Xxxxxxx 2,727 14,998.50
Xxxxxx X. Xxxxxx 4,545 24,997.50
Xxxxxx X. Xxxxxxx 7,273 40,001.50
Xxxxxx Xxxxxxxxx 4,545 24,997.50
Carlisle Xxxxx 4,545 24,997.50
Xxxxxxx Xxxxx 4,545 24,997.50
B. Other Investors
NAME NUMBER OF SHARES OF PURCHASE PRICE
SERIES A PREFERRED STOCK
-----------------------------------------------------------------------------------
Xxxx Xxxxxx 30,000 $ 165,000.00
Xxxxx Xxxxxx 18,182 100,001.00
Xxxx Xxxxxxxx 18,182 100,001.00
Page 37
Xxxxxx Xxxxx 30,000 $ 165,000.00
Xxxxx Xxxxx 10,000 55,000.00
Boston International Partners, L.P. 11,363 62,496.50
Boston International Partners, X.X. XX 11,364 62,502.00
Xxxxx Xxxxxxx 4,000 22,000.00
Xxx XxXxxxxxxxx 22,727 124,998.50
Xxxxx Xxxxx 4,545 24,997.50
Eastern States Reinsurance Company 36,364 200,002.00
Internet Technology Ventures 90,909 499,999.50
Xxxx Xxxx 20,000 110,000.00
Xxxxx Xxxxx 4,546 25,003.00
Xxx Xxxxxx 20,000 110,000.00
Xxxxx Xxxxxx 10,000 55,000.00
Xxxxx Xxxxxx 10,000 55,000.00
Xxxxxxx XxXxxxxx 9,091 50,000.50
Mindful Partners 11,818 64,999.00
Xxxxx X'Xxxxxxx 1,818 9,999.00
Xxxxx X'Xxxxxxx 18,182 100,001.00
Xxxx Xxxxxxx 18,182 100,001.00
Xxxxxx Xxxxxxxx 13,637 75,003.50
Page 38
Xxxxxx Xxxxxxxx 4,545 $ 24,997.50
Xxxx Xxxxxxxx 4,545 24,997.50
Xxxxx Xxxxxxxx 4,545 24,997.50
Yves Sisteron 4,546 25,003.00
Xxxx Xxxxxxx, FBO Xxxx Xxxxxxx 1,818 9,999.00
Xxxx Xxxxxxx, FBO Xxxxxx Xxxxxxx 1,818 9,999.00
Xxxx Xxxxxxx 74,911 412,010.50
Xxx Xxxxxxx 2,000 11,000.00
Xxxxxx Partners 181,818 999,999.00
Xxxxx Xxxxxx 39,091 215,000.50
Xxxxxxx Xxxxxxxxx 4,545 24,997.50
Xxxxxxx Xxxxx 20,000 110,000.00
