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Exhibit 4.3
SECURITIES PURCHASE AGREEMENT
between
SAGE NETWORKS, INC.
and
THE SEVERAL PURCHASERS NAMED IN SCHEDULE I
Dated as of January 28, 1999
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TABLE OF CONTENTS
Page
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ARTICLE I THE PREFERRED SHARES AND THE WARRANTS ...............................1
Section 1.1. Issuance, Sale and Delivery of the Preferred Shares .........1
Section 1.2. Issuance, Sale and Delivery of the Warrants .................1
Section 1.3. Purchase Price of Preferred Shares and Warrants .............1
Section 1.4. Warrants not Issued as Compensation .........................1
Section 1.5. Closing .....................................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY ......................2
Section 2.1. Organization, Qualifications and Corporate Power ............2
Section 2.2. Authorization of Agreements, Etc. ...........................3
Section 2.3. Validity ....................................................4
Section 2.4. Authorized Capital Stock ....................................4
Section 2.5. Financial Statements ........................................5
Section 2.6. Events Subsequent to the Date of the Unaudited
Financial Statements ......................................5
Section 2.7. Litigation; Compliance with Law .............................6
Section 2.8. Patents, Trademarks, Etc. ...................................7
Section 2.9. Leasehold Interests; Title to Property ......................7
Section 2.10. Insurance ...................................................8
Section 2.11. Taxes .......................................................8
Section 2.12. Agreements ..................................................8
Section 2.13. Loans and Advances ..........................................9
Section 2.14. Assumptions, Guaranties, Etc. of Indebtedness of
Other Persons .............................................9
Section 2.15. Governmental Approvals ......................................9
Section 2.16. Disclosure ..................................................9
Section 2.17. Brokers .....................................................9
Section 2.18. Officers ...................................................10
Section 2.19. Transactions With Affiliates ...............................10
Section 2.20. Employees and Consultants ..................................10
Section 2.21. ERISA ......................................................10
Section 2.22. Labor Relations ............................................11
Section 2.23. Environmental Matters ......................................11
Section 2.24. Investment Company Act .....................................12
Section 2.25. Private Offering ...........................................12
Section 2.26. Holding Company ............................................12
Section 2.27. Year 2000 Compliance .......................................12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS .................13
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ARTICLE IV CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS ...................14
ARTICLE V COVENANTS OF THE COMPANY ...........................................17
Section 5.1. Financial Statements, Reports. Etc .........................17
Section 5.2. Inspection, Consultation and Advice ........................17
Section 5.3. Board of Directors Meetings ................................18
Section 5.4. Indemnification of Directors ...............................18
Section 5.5. Employee and Consultant Nondisclosure and Development
Agreements ...............................................18
Section 5.6. Termination of Covenants ...................................18
Section 5.7. Certain Non-Dilutive Stock Issuances .......................18
Section 5.8. Issue Tax ..................................................18
ARTICLE VI MISCELLANEOUS .....................................................19
Section 6.1. Expenses ...................................................19
Section 6.2. Survival of Agreements .....................................19
Section 6.3. Brokerage ..................................................19
Section 6.4. Parties in Interest ........................................19
Section 6.5. Notices ....................................................19
Section 6.6. Governing Law ..............................................20
Section 6.7. Entire Agreement ...........................................20
Section 6.8. Counterparts ...............................................20
Section 6.9. Amendments .................................................20
Section 6.10. Severability ...............................................20
Section 6.11. Titles and Subtitles .......................................20
Section 6.12. Assignment .................................................20
Section 6.13. Certain Defined Terms ......................................20
INDEX TO SCHEDULES
SCHEDULE I Purchasers
SCHEDULE II Disclosure Schedule
SCHEDULE III Security Holders
INDEX TO EXHIBITS
EXHIBIT A Form of Investors Agreement
EXHIBIT B Form of Amendment to Certificate of Incorporation
EXHIBIT C Form of Warrant
EXHIBIT D Form of Non-Disclosure and Development Agreement
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THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is made as of
January 28, 1999 between Sage Networks, Inc., a Delaware corporation (the
"Company"), and the several purchasers named in the attached Schedule I
(individually a "Purchaser" and collectively the "Purchasers").
WHEREAS, the Company wishes to issue and sell to the Purchasers an
aggregate of 2,647,658 shares (the "Preferred Shares") of the authorized but
unissued Series A Convertible Preferred Stock, $.01 par value, of the Company
(the "Series A Preferred Stock"); and
WHEREAS, the Company wishes to issue and sell to the Purchasers an
aggregate of 749,625 warrants (the "Warrants") for the purchase of Common Stock,
$.01 par value, (the "Common Stock") of the Company; and
WHEREAS, the Purchasers, severally, wish to purchase the Preferred
Shares and the Warrants on the terms and subject to the conditions set forth in
this Agreement;
NOW, THEREFORE, in consideration of the promises and mutual
covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
THE PREFERRED SHARES AND THE WARRANTS
Section 1.1. Issuance, Sale and Delivery of the Preferred Shares.
The Company agrees to issue and sell to each Purchaser, and each Purchaser
hereby agrees to purchase from the Company, the number of Preferred Shares set
forth opposite the name of such Purchaser under the heading "Number of Preferred
Shares to be Purchased" on Schedule I.
Section 1.2. Issuance, Sale and Delivery of the Warrants. The
Company agrees to issue and sell to each Purchaser, and each Purchaser hereby
agrees to purchase from the Company, the number of Warrants set forth opposite
the name of such Purchaser under the heading "Number of Warrants to be
Purchased" on Schedule I.
Section 1.3. Purchase Price of Preferred Shares and Warrants. The
aggregate purchase price for the Preferred Shares and the Warrants to be paid by
each Purchaser is the amount set forth opposite the name of such Purchaser under
the heading "Aggregate Purchase Price" on Schedule I.
Section 1.4. Warrants not Issued as Compensation. The Company and
the Purchasers, having adverse interests and as a result of arm's length
bargaining, agree that (i) the Warrants are being issued in consideration of
certain financial accommodations provided by the Purchasers to the Company, (ii)
neither the Purchasers nor any of their affiliates or associates have rendered
or agreed to render any services to
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the Company in connection with this Agreement or the issuance of the Warrants,
and (iii) the Warrants are not being issued to the Purchasers as compensation
for services.
Section 1.5. Closing. The closing shall take place at the office of
Xxxxx Xxxxxxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at
10 a.m., on January 28, 1999, or at such other location, date and time as may be
agreed upon between the Purchasers and the Company or via facsimile at such date
and time as may be agreed upon between the Purchasers and the Company (such
closing being called the "Closing" and such date and time being called the
"Closing Date"). At the Closing, the Company shall issue and deliver to each
Purchaser (i) a stock certificate or certificates in definitive form, registered
in the name of such Purchaser, representing the Preferred Shares being purchased
by it and (ii) a warrant or warrants in the form attached hereto as Exhibit C,
registered in the name of such Purchaser, representing the Warrants being
purchased by it, in each case, at the Closing. As payment in full for the
Preferred Shares and the Warrants being purchased by it under this Agreement,
and against delivery of the stock certificate or certificates and warrant
therefor as aforesaid, on the Closing Date each Purchaser shall deliver to the
Company by wire transfer the amount set forth opposite the name of such
Purchaser under the heading "Aggregate Purchase Price for Preferred Shares" on
Schedule I.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers that, except
as set forth in the Disclosure Schedule attached as Schedule II:
Section 2.1. Organization, Qualifications and Corporate Power.
(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and is duly
licensed or qualified to transact business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification. The Company has the corporate power
and authority to own and hold its properties and to carry on its business as now
conducted and as proposed to be conducted, to execute, deliver and perform this
Agreement and the Investors Agreement with the Purchasers in the form attached
as Exhibit A (the "Investors Agreement"), to issue, sell and deliver the
Preferred Shares and the Warrants and to reserve for issuance the shares of
Common Stock, $.01 par value, of the Company ("Common Stock") issuable upon
conversion of the Preferred Shares and upon exercise of the Warrants
(collectively, the "Conversion Shares").
(b) The Company has no subsidiaries except as set forth on Schedule
II. Except with respect to the subsidiaries listed on Schedule II, the Company
does not (i) own of record or beneficially, directly or indirectly, (A) any
shares of capital stock or securities convertible into capital stock of any
other corporation or (B) any participating
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interest in any partnership, joint venture or other non-corporate business
enterprise or (ii) control, directly or indirectly, any other entity. Each
subsidiary of the Company is a corporation duly incorporated, validly existing
and in good standing under the laws of its respective jurisdiction of
incorporation and is duly licensed or qualified to transact business as a
foreign corporation and is in good standing in each jurisdiction in which the
nature of the business transacted by it or the character of the properties owned
or leased by it requires such licensing or qualification. Each subsidiary of the
Company has the corporate power and authority to own and hold its properties and
to carry on its business as now conducted and as proposed to be conducted. All
of the outstanding shares of capital stock of each such subsidiary are owned
beneficially and of record by the Company free and clear of any liens, charges,
restrictions, claims or encumbrances of any nature whatsoever; and there are no
outstanding subscriptions, warrants, options, convertible securities, or other
rights (contingent or other) pursuant to which any such subsidiary is or may
become obligated to issue any shares of its capital stock to any person other
than the Company.
Section 2.2. Authorization of Agreements, Etc.
(a) The execution and delivery by the Company of this Agreement and
the Investors Agreement, the performance by the Company of its obligations
hereunder and thereunder, the issuance, sale and delivery of the Preferred
Shares and the Warrants, and the issuance and delivery of the Conversion Shares
(i) have been duly authorized by all requisite corporate action, (ii) will not
violate any provision of law, any order of any court or other agency or
government, the Certificate of Incorporation, as amended (the "Charter") or the
By-laws of the Company, as amended, or any provision of any indenture, agreement
or other instrument to which the Company or any of its properties or assets is
bound, or conflict with, result in a breach of, constitute (with due notice or
lapse of time or both) a default under, accelerate or terminate any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge, restriction, claim or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company and (iii) will
not require any notice, consent or waiver under any material indenture,
agreement or other instrument to which the Company is a party or by which any of
its properties or assets are bound.
(b) When issued in accordance with this Agreement, the Preferred
Shares will be duly authorized, validly issued, fully paid and nonassessable
shares of Series A Preferred Stock with no personal liability attaching to the
ownership thereof and will be free and clear of all liens, charges,
restrictions, claims and encumbrances imposed by or through the Company except
as set forth in this Agreement, the Investors Agreement and the Charter. When
issued in accordance with this Agreement, the Warrants will be duly authorized
and validly issued and will be free and clear of all liens, charges,
restrictions, claims and encumbrances imposed by or through the Company except
as set forth in this Agreement, the Investors Agreement, the Warrant and the
Charter. Prior to the Closing Date, the Conversion Shares will be duly reserved
for issuance upon conversion of the Preferred Shares and exercise of the
Warrants and, when so issued, will be duly
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authorized, validly issued, fully paid and nonassessable shares of Common Stock
with no personal liability attaching to the ownership thereof and will be free
and clear of all liens, charges, restrictions, claims and encumbrances imposed
by or through the Company except as set forth in the Investors Agreement.
Neither the issuance, sale or delivery of the Preferred Shares or the Warrants
nor the issuance or delivery of the Conversion Shares is subject to any
preemptive right of stockholders of the Company, or to any right of first
refusal or other right in favor of any person, which have not been duly and
validly waived.
Section 2.3. Validity. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms. The Investors
Agreement and the Warrants, when executed and delivered in accordance with this
Agreement, will constitute the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms.
Section 2.4. Authorized Capital Stock. The authorized capital stock
of the Company consists of 37,647,658 shares. Immediately prior to the Closing,
the authorized capital stock of the Company will consist of (i) 35,000,000
shares of Common Stock of which 19,217,197 shares will be validly issued and
outstanding, fully paid and nonassessable with no personal liability attaching
to the ownership thereof and (ii) 2,647,658 shares of Preferred Stock, $.01 par
value, all of which shall have designated Series A Convertible Preferred Stock
of which no shares will have been issued. The stockholders of record and holders
of subscriptions, warrants, options, convertible securities, and other rights
(contingent or other) to purchase or otherwise acquire equity securities of the
Company, and the number of shares of Common Stock and the number of such
subscriptions, warrants, options, convertible securities, and other such rights
held by each, are as set forth in the attached Schedule III. The Company has
attached a copy of the post-closing capitalization schedule as a part of
Schedule III. The designations, powers, preferences, rights, qualifications,
limitations and restrictions in respect of each class and series of authorized
capital stock of the Company are as set forth in the Amendment to the Charter, a
copy of which is attached as Exhibit B and all such designations, powers,
preferences, rights, qualifications, limitations and restrictions are valid,
binding and enforceable in accordance with applicable laws. Except as set forth
in the attached Schedule III, (i) no person owns of record or is known to the
Company to own beneficially any share of Common Stock, (ii) no subscription,
warrant, option, convertible security, or other right (contingent or other) to
purchase or otherwise acquire equity securities of the Company is authorized or
outstanding, and (iii) there is no commitment by the Company to issue shares,
subscriptions, warrants, options, convertible securities or other such rights or
to distribute to holders of any of its equity securities any evidence of
indebtedness or asset. Except as provided for in the Charter or as set forth in
the attached Schedule II, the Company has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interest therein or to pay any dividend or make any other distribution in
respect thereof. Except as set forth in Schedule II, the Company is not a party
to any voting trusts or
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agreement, stockholders' agreement, pledge agreement, buy-sell agreement, or any
agreement giving rights of first refusal, preemptive rights or proxies relating
to any securities of the Company, and to the best of the Company's knowledge
there are no voting trusts or agreements, stockholders' agreements, pledge
agreements, buy-sell agreements, rights of first refusal, preemptive rights or
proxies relating to any securities of the Company. All the outstanding
securities of the Company were issued in compliance with applicable federal and
state securities laws.
Section 2.5. Financial Statements.
(a) The Company has furnished to the Purchasers the audited balance
sheet of the Company as of December 31, 1997 and the related audited statements
of income, stockholders' equity and cash flows of the Company for the year ended
December 31, 1997 (the "Audited Financial Statements"). The Audited Financial
Statements have been prepared in accordance with generally accepted accounting
principles consistently applied and fairly present the financial position of the
Company as of December 31, 1997 and the results of its operations, stockholders'
equity and cash flows for the year ended December 31, 1997.
(b) The Company has furnished to the Purchasers the unaudited
balance sheet of the Company and its consolidated subsidiaries as of December
31, 1998 and the related unaudited statements of income, stockholders' equity,
and cash flows of the Company for the year then ended (together, the "Unaudited
Financial Statements"). The Unaudited Financial Statements have been prepared in
accordance with generally accepted accounting principles consistently applied
(except that such Unaudited Financial Statements do not contain footnotes and
are subject to normal year-end adjustment including but not limited to
adjustments to purchase price of acquired companies and the effects of changes
to the useful lives of intangible assets) and fairly present the financial
position of the Company and its consolidated subsidiaries as of December 31,
1998 and the results of its operations, stockholders' equity and cash flows for
the year then ended. Since the date of the Unaudited Financial Statements,
except as disclosed to the Purchasers (i) there has been no change in the
assets, liabilities (whether accrued, fixed, contingent or other) or financial
condition of the Company from that reflected in the Unaudited Financial
Statements except for changes in the ordinary course of business which in the
aggregate have not had a Material Adverse Effect (as defined below) and (ii) no
subsequent occurrence or development, individually or in the aggregate, whether
or not insured against, has had a Material Adverse Effect. As used herein, a
"Material Adverse Effect" means any effect that is, or would reasonably be
expected to be, individually or in the aggregate, materially adverse to the
business, financial condition, property, affairs or operations of the Company
and its consolidated subsidiaries.
Section 2.6. Events Subsequent to the Date of the Unaudited
Financial Statements. Except as set forth in the attached Schedule II, since the
date of the Unaudited Financial Statements, neither the Company nor any
subsidiary thereof has (i) issued any stock, bond or other corporate security,
(ii) borrowed any amount or incurred
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or become subject to any liability (absolute, accrued or contingent), except
current liabilities incurred and liabilities under contracts entered into in the
ordinary course of business, (iii) discharged or satisfied any lien or
encumbrance or incurred or paid any obligation or liability (absolute, accrued
or contingent) other than current liabilities shown on the Unaudited Financial
Statements and current liabilities incurred since the date of the Unaudited
Financial Statements in the ordinary course of business, (iv) declared or made
any payment of dividends or distribution to stockholders or purchased or
redeemed any shares of its capital stock or other security, (v) mortgaged,
pledged, encumbered or subjected to lien any of its assets, tangible or
intangible, other than liens of current real property taxes not yet due and
payable, (vi) sold, assigned or transferred any of its tangible assets except in
the ordinary course of business, or canceled any debt or claim, (vii) sold,
assigned, transferred or granted any exclusive license with respect to any
patent, trademark, trade name, service xxxx, copyright, trade secret or other
intangible asset, (viii) suffered any material damage, destruction or loss of
property (whether or not covered by insurance) or waived any right of
substantial value whether or not in the ordinary course of business, (ix) made
any change in officer compensation except in the ordinary course of business,
(x) made any material change in the manner of business or operations of the
Company or any subsidiary thereof, (xi) entered into any transaction except in
the ordinary course of business or as otherwise contemplated hereby or (xii)
entered into any commitment (contingent or otherwise) to do any of the
foregoing.
Section 2.7. Litigation; Compliance with Law. Except as set forth in
the attached Schedule II, there is no (i) action, suit, claim, proceeding or
investigation pending or, to the best of the Company's knowledge, threatened
against the Company or any of its assets or its properties, at law or in equity,
before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, (ii)
arbitration proceeding relating to the Company or any subsidiary thereof pending
under collective bargaining agreements or otherwise or (iii) governmental
inquiry pending or, to the best of the Company's knowledge, threatened against
the Company or any subsidiary thereof. There are no actions or proceedings
pending or threatened by the Company or any subsidiary thereof against any third
party. Neither the Company nor any subsidiary thereof is in default with respect
to any order, writ, injunction or decree served upon the Company or such
subsidiary of any court or of any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign. To the best of the Company's knowledge, (x) the Company and
each subsidiary thereof has complied in all material respects with all laws,
rules, regulations and orders applicable to its business, operations,
properties, assets, products and services and (y) there is no such law, rule,
regulation or order that would prohibit the Company or any subsidiary thereof
from conducting its business as conducted or as proposed to be conducted. The
Company and each subsidiary thereof has all necessary permits, licenses and
other authorizations required to conduct its business as conducted and as
proposed to be conducted, and the Company and each subsidiary thereof has been
operating its business pursuant to and in compliance with the terms of all such
permits, licenses and other authorizations, in any
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such case, other than any failure with such terms which would not have a
Material Adverse Effect.
Section 2.8. Patents, Trademarks, Etc. The Company owns or possesses
adequate licenses, assignments or other rights to use all patents, patent
applications, trademarks, trademark applications, service marks, service xxxx
applications, trade names, copyrights, software, source code, object code,
manufacturing processes, formulae, trade secrets, customer lists and know how,
including any third party rights connected therewith (collectively,
"Intellectual Property") necessary to the conduct of its business as conducted
and as proposed to be conducted, and no claim is pending against the Company or,
to the best of the Company's knowledge, threatened to the effect that the
operations of the Company infringe upon or conflict with the asserted rights of
any other person under any Intellectual Property. The Company has not licensed
on an exclusive basis any of its Intellectual Property.
To the knowledge of the Company, no claim is pending against the
Company or threatened to the effect that any such Intellectual Property owned or
licensed by the Company, or which the Company otherwise has the right to use, is
invalid or unenforceable by the Company. There are no restrictions on the
ability of the Company to compete against any third party.
The Company has taken reasonable measures to protect and preserve
the security, confidentiality and value of its Intellectual Property, including
its trade secrets and other confidential information. To the knowledge of the
Company, no employee or consultant of the Company has used any trade secrets or
other confidential information of any other person in the course of their work
for the Company. To the knowledge of the Company, the Company is not making
unlawful use of any confidential information or trade secrets of any past or
present employees of the Company.
The Company does not have any agreements or arrangements with former
employers of any of its employees relating to confidential information or trade
secrets of such employers. To the knowledge of the Company, the activities of
the Company's employees on behalf of the Company do not violate any agreements
or arrangements known to the Company which any such employees have with former
employers or any other entity to whom such employees may have rendered
consulting services.
Section 2.9. Leasehold Interests; Title to Property. (a) Neither the
Company nor any subsidiary thereof owns any real property. Each lease or
agreement to which the Company or any subsidiary thereof is a party under which
it is a lessee of any property, real or personal, which leases and agreements
are set forth on the attached Schedule II, is a valid and subsisting agreement.
No event has occurred and is continuing which, with due notice or lapse of time
or both, would constitute a default or event of default by the Company or any
subsidiary thereof under any such lease or agreement or, to the best of the
Company's knowledge, by any other party thereto. The Company has not received
any notice of termination under any such lease.
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(b) The Company and its subsidiaries own their respective properties
and assets reflected on the Unaudited Financial Statements or acquired by them
since the date of the Unaudited Financial Statements (other than properties and
assets disposed of in the ordinary course of business since the date of the
Unaudited Financial Statements), and all such properties and assets are free and
clear of mortgages, pledges, security interests, liens, charges, claims,
restrictions and other encumbrances, except for (i) liens for or current taxes
not yet due and payable, (ii) liabilities reflected on the Unaudited Financial
Statements or set forth on the attached Schedule II and (iii) liabilities which
are not material in nature or amount.
Section 2.10. Insurance. The insurance policies set forth on
Schedule II constitute all of the policies of insurance maintained by the
Company and are in full force and effect. All premiums with respect to such
policies that have become due and payable have been paid, and no notice of
cancellation or termination has been received with respect to any such policy.
Section 2.11. Taxes. The Company has filed all foreign, federal,
state and local income, excise or franchise tax returns, real estate and
personal property tax returns, sales and use tax returns and other tax returns
required to be filed by it (and such returns are true and correct in all
material respects) and has paid all taxes owed by it, except taxes which have
not yet accrued or otherwise become due or for which adequate provision has been
made in the Audited Financial Statements and Unaudited Financial Statements, as
appropriate. The provision for taxes on the Unaudited Financial Statements is
sufficient as of its date for the payment of all accrued and unpaid federal,
state, county and local taxes of any nature of the Company, and any applicable
taxes owing to any foreign jurisdiction, whether or not assessed or disputed.
All taxes and other assessments and levies which the Company is required to
withhold or collect have been withheld and collected and have been paid over to
the proper governmental authorities, except where the failure to pay would not
have a Material Adverse Effect. With regard to the income tax returns of the
Company, the Company has not received notice of any audit or of any proposed
deficiencies from any taxing authority, and no controversy with respect to taxes
of any type is pending or, to the knowledge of the Company, threatened. There
are in effect no waivers of applicable statutes of limitations with respect to
any taxes owed by the Company for any year.
Section 2.12. Agreements. The Company believes that none of the
business agreements, instruments and documents to which the Company or any
subsidiary thereof is a party are individually material to the business of the
Company and its consolidated subsidiaries based on the revenues payable or
receivable thereunder, and all such agreements, instruments and documents are
valid, binding and in full force and effect. The Company is a party to several
agreements to provide connectivity which contain penalties if the agreements are
terminated by the Company prior to the end of the stated term thereof. The
Company and each subsidiary thereof, and to the best of the Company's knowledge,
each other party thereto, have in all material respects performed all the
obligations required to be performed by them to date (or each non-performing
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party has received a valid, enforceable and irrevocable written waiver with
respect to its non-performance), have received no notice of default and are not
in default (with due notice or lapse of time or both) under any agreement,
instrument, commitment, plan or arrangement to which the Company or any
subsidiary thereof is a party or by which it or its property may be bound. The
Company is in compliance with all of the terms and provisions of its Charter and
By-laws, as amended.
Section 2.13. Loans and Advances. Neither the Company nor any
subsidiary has any outstanding loans or advances to any person and is not
obligated to make any such loans or advances, except, in each case, for advances
to employees of the Company or a subsidiary thereof in respect to reimbursable
business expenses anticipated to be incurred by them in connection with their
performance of services for the Company or such subsidiary.
Section 2.14. Assumptions, Guaranties, Etc. of Indebtedness of Other
Persons. Neither the Company nor any subsidiary thereof has assumed, guaranteed,
endorsed or otherwise become directly or contingently liable on any indebtedness
of any other person (including, without limitation, liability by way of
agreement, contingent or otherwise, to purchase, to provide funds for payment,
to supply funds to or otherwise invest in the debtor, or otherwise to assure the
creditor against loss), except for guaranties by endorsement of negotiable
instruments for deposit or collection in the ordinary course of business.
Section 2.15. Governmental Approvals. Subject to the accuracy of the
representations and warranties of the Purchasers set forth in Article III, no
registration or filing with, or consent or approval of or other action by, any
Federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by the Company of
this Agreement or the Investors Agreement, the issuance, sale and delivery of
the Preferred Shares and the Warrants or, upon conversion or exercise thereof,
the issuance and delivery of the Conversion Shares, other than filings pursuant
to Federal and/or state securities laws (all of which filings have been made by
the Company, other than those which are required to be made after the Closing
and which will be duly made on a timely basis) in connection with the sale of
the Preferred Shares and the Warrants.
Section 2.16. Disclosure. To the best of the Company's knowledge and
the knowledge of each of its subsidiaries, neither this Agreement, nor any
Schedule or Exhibit to this Agreement, the Unaudited Financial Statements nor
any other document, certificate or written instrument furnished to the
Purchasers by the Company pursuant to this Agreement, contains an untrue
statement of a material fact or omits a material fact necessary to make the
statements contained herein or therein not misleading.
Section 2.17. Brokers. The Company has no contract, arrangement or
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
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Section 2.18. Officers. Set forth in Schedule II is a list of the
names of the officers of the Company. None of such persons has an employment
agreement or understanding, whether oral or written, with the Company, which
does not expire in accordance with its terms on or before December 31, 1999.
Section 2.19. Transactions With Affiliates. Except as set forth on
the attached Schedule II, no director, officer, employee or stockholder of the
Company or any subsidiary thereof, or member of the family of any such person,
or any corporation, partnership, trust or other entity in which any such person,
or any member of the family of any such person, has a substantial interest or is
an officer, director, trustee, partner or holder of more than 5% of the
outstanding capital stock thereof, is a party to any transaction with the
Company or any subsidiary, including any contract, agreement or other
arrangement providing for the employment of, furnishing of services by, rental
of real or personal property from or otherwise requiring payments to any such
person or firm, other than employment at will arrangements in the ordinary
course of business.
Section 2.20. Employees and Consultants. Except as set forth on the
attached Schedule II, each of the officers of the Company, each key employee and
each other employee now employed by the Company or any subsidiary thereof and
each consultant to the Company or any subsidiary thereof, in each case, who has
access to confidential information of the Company or any subsidiary thereof has
executed a Nondisclosure and Development Agreement (collectively, the
"Nondisclosure and Development Agreements") in the form attached hereto as
Exhibit D, and such agreements are in full force and effect. No officer or key
employee of the Company has advised the Company (orally or in writing) that he
intends to terminate employment with the Company.
Section 2.21. ERISA.
(a) Schedule II lists each Employee Plan and each Benefit
Arrangement, copies or descriptions of which have previously been made available
or furnished to the Purchasers.
(b) No Employee Plan is a Multiemployer Plan and no Employee Plan is
subject to Title IV of ERISA. The Company and its Affiliates have not incurred
any liability under Title IV of ERISA arising in connection with the termination
of any plan covered or previously covered by Title IV of ERISA. There is no
pending, threatened or anticipated action, suit or claim relating to the
Employee Plans or Benefit Arrangements (other than routine claims for benefits).
No transaction has occurred with respect to an Employee Plan that would
reasonably be expected to subject the Company to a material tax or penalty. All
contributions required to be made by the Company under the terms of any Employee
Plan or Benefit Arrangement have been timely made or have been reflected in the
Unaudited Financial Statements. No Employee Plan or Benefit Arrangement covers
any non-United States employee of the Company or non-United States former
employee of the Company.
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(c) Each Employee Plan and each Benefit Arrangement has been
maintained in compliance with its terms and with the requirements prescribed by
any and all statutes, orders, rules and regulations which are applicable to such
Employee Plan or Benefit Arrangement.
(d) Each Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from tax pursuant to Section 501(a) of the Code. The Company has
furnished to the Purchasers copies of the most recent Internal Revenue Service
determination letters with respect to each such plan.
Section 2.22. Labor Relations. Neither the Company nor any
subsidiary is engaged in any unfair labor practice (under any applicable Federal
or state law) that would reasonably be expected to have a Material Adverse
Effect, nor is there any charge or complaint current or pending, nor to the
Company's best knowledge, threatened against the Company or any subsidiary
thereof relating to such practice. Neither the Company's nor any it its
subsidiary's employees are not represented by a labor union and no union
organizing activity has commenced. Neither the Company nor any subsidiary
thereof is a party to any collective bargaining agreement.
Section 2.23. Environmental Matters.
(a) The Company and each subsidiary thereof has (i) complied in all
material respects with the Environmental Laws applicable to it, (ii) provided to
the Purchasers a copy of any order, notice, permit, application, or any other
written communication or report received by the Company from any governmental
authority or any other person or sent by or for the Company to a governmental
authority in connection with any matter relating to environmental laws
applicable to the Company and (iii) has provided the Purchasers with copies of
any environmental assessment reports, certificates, engineering studies or other
written material or data the Company may have relating to environmental laws
applicable to the Company. There is no Environmental Claim pending or, to the
knowledge of the Company, threatened against the Company or any subsidiary
thereof with respect to the operations or business of the Company or any
subsidiary thereof.
(b) For purposes of this Section 2.24 (i) "Environmental Claim"
means any claim, action, cause of action, investigation of which the Company,
including any of its management employees, are aware, or written notice by any
person alleging potential liability (including, without limitation, potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries or penalties)
arising out of, based on or resulting from (a) the presence, or release into the
environment, of any Material of Environmental Concern at any location owned,
leased, used or operated by the Company or any subsidiary thereof, or (b)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law; (ii) "Environmental Laws" means all Federal, state and local
laws
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and regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata and natural resources), including,
without limitation, laws and regulations relating to emissions, discharges,
releases or threatened releases of Materials of Environmental Concern, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environmental Concern;
and (iii) "Materials of Environmental Concern" means chemicals, pollutants,
contaminants, industrial, toxic or hazardous wastes, substances or constituents,
petroleum and petroleum products (or any by-product or constituent thereof),
asbestos or asbestos-containing materials, or PCBs.
Section 2.24. Investment Company Act. The Company is not a
"registered investment company" within the meaning of the Investment Act of
1940, as amended.
Section 2.25. Private Offering. Assuming the correctness of the
representations and warranties set forth in Article III hereof, the offer and
sale of the Preferred Shares and the Warrants to the Purchasers hereunder is
exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act"). The Company has complied and will comply with all applicable
federal and state securities laws in connection with the offer, issuance and
sale of the Preferred Shares and the Warrants. Neither the Company nor anyone
acting on its behalf has or will sell, offer to sell or solicit offers to buy
the Preferred Shares or the Warrants or similar securities to, or solicit offers
with respect thereto from, or enter into any preliminary conversations or
negotiations relating thereto with, any person, so as to bring the issuance and
sale of the Preferred Shares and the Warrants under the registration provisions
of the Securities Act and applicable state securities laws.
Section 2.26. Holding Company. The Company is not a "holding
company" or a "subsidiary company" as such terms are defined in the Public
Utility Holding Company Act of 1934, as amended.
Section 2.27. Year 2000 Compliance. The Company is using reasonable
procedures to verify that the software used in its products will recognize and
process date fields after the turn of the century, and perform date-dependent
calculations and operations (including sorting, comparing and reporting) after
the turn of the century correctly, and is using reasonable efforts to ensure
that its software will not produce invalid and/or incorrect results as a result
of the change of century (all without human intervention, other than original
data entry of valid dates), provided that the software receives correct and
properly formatted date inputs from all software and hardware that exchanges
data with or provides data to the software.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser severally represents and warrants to the Company
that:
(a) it is an "accredited investor" within the meaning of Rule 501
under the Securities Act and was not organized for the specific purpose of
acquiring the Preferred Shares or Warrants;
(b) it received any materials in connection with the offering of the
Preferred Shares and Warrants and first learned of such offering in the state
listed as its address set forth on Schedule I hereto, and intends that the state
securities laws of that state alone shall govern its purchase of Preferred
Shares;
(c) it has sufficient knowledge and experience in investing in
companies similar to the Company in terms of the Company's stage of development
so as to be able to evaluate the risks and merits of its investment in the
Company and it is able financially to bear the risks thereof;
(d) it has had an opportunity to discuss the Company's business,
management and financial affairs with the Company's management;
(e) the Preferred Shares and the Warrants being purchased by it are
being acquired for its own account for the purpose of investment and not with a
view to or for sale in connection with any distribution thereof without
prejudice, however, to its rights at all times to sell or otherwise dispose of
all or part of such Preferred Shares, subject to the provisions of Section 6.12
of this Agreement, or pursuant to a registration statement under the Securities
Act or pursuant to an exemption from the registration requirements under the
Securities Act;
(f) it understands that (i) the Preferred Shares, the Warrants and
the Conversion Shares have not been registered under the Securities Act by
reason of their issuance in a transaction exempt from the registration
requirements of the Securities Act, (ii) the Preferred Shares and Warrants and,
upon conversion or exercise thereof, the Conversion Shares must be held
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration, (iii) the Preferred Shares,
the Warrants and the Conversion Shares will bear a legend to such effect and
(iv) the Company will make a notation on its transfer books to such effect; and
(g) if it sells any Conversion Shares pursuant to Rule 144A
promulgated under the Securities Act, it will take all necessary steps in order
to perfect the exemption from registration provided thereby, including (i)
obtaining on behalf of the Company information to enable the Company to
establish a reasonable belief that the purchaser is a qualified institutional
buyer and (ii) advising such purchaser that Rule 144A is being relied upon with
respect to such resale.
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ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS
The obligation of each Purchaser to purchase and pay for the
Preferred Shares and the Warrants being purchased by it on the Closing Date is,
at its option, subject to the satisfaction, on or before the Closing Date, of
the following conditions:
(a) Opinion of Company's Counsel. The Purchasers shall have received
from Xxxxx Xxxxxxxxxx LLP, special counsel for the Company or from the general
counsel of the Company, one or more opinions dated as of the Closing Date, in
form and scope satisfactory to the Purchasers and their counsel, to the effect
that:
(i) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of incorporation. The
Company has the corporate power and authority to execute, deliver and perform
this Agreement and the Investors Agreement, to issue, sell and deliver the
Preferred Shares and the Warrants and, upon conversion or exercise thereof, to
issue and deliver the Conversion Shares. The Company has the corporate power and
authority to own its properties and to conduct its business as it is presently
being conducted.
(ii) This Agreement and the Investors Agreement have been duly
authorized, executed and delivered by the Company and constitute the legal,
valid and binding obligations of the Company, enforceable in accordance with
their respective terms (subject, as to enforcement of remedies, to the
discretion of courts in awarding equitable relief and to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting the rights of
creditors generally), except that such counsel need not express any opinion as
to the validity or enforceability of the indemnification and contribution
provisions of the Investors Agreement.
(iii) The execution and delivery by the Company of this Agreement
and the Investors Agreement, the performance by the Company of its obligations
hereunder and thereunder, the issuance, sale and delivery of the Preferred
Shares and the Warrants and, upon conversion or exercise thereof, the issuance
and delivery of the Conversion Shares, will not (x) violate any provision of law
applicable to the Company, the Charter or By-laws, as amended, of the Company,
(y) to the knowledge of such counsel, violate any order of any court or other
agency of government specifically applicable to the Company or its property or
any agreement of the Company, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a material default under,
accelerate or terminate any such indenture, agreement or other instrument, or
result in the creation or imposition of any lien, charge, restriction, claim or
encumbrance of any nature whatsoever upon any of the properties or assets of the
Company.
(iv) The authorized capital stock of the Company as of the date
hereof consists of (i) 2,647,658 shares of Series A Convertible Preferred Stock,
$.0l par value (the "Series A Preferred Stock") and (ii) 35,000,000 shares of
Common Stock.
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Immediately prior to the Closing, 19,217,197 shares of Common Stock will be
validly issued and outstanding, fully paid and nonassessable with no personal
liability attaching to the ownership thereof and no shares of Series A Preferred
Stock will have been issued. The Series A Preferred Stock, when issued to the
Purchasers pursuant to the terms of this Agreement and for the consideration set
forth herein, will be validly issued and outstanding, fully paid and
nonassessable with no personal liability attaching to the ownership thereof.
Immediately prior to the Closing, based on a review by such counsel of the stock
record and minute books of the Company, the amount of Common Stock issuable
pursuant to warrants, options, convertible securities, and other rights
(contingent or other) to purchase or otherwise acquire equity securities of the
Company, and the number of shares of Common Stock and the number of such
subscriptions, warrants, options, convertible securities, and other such rights
held by each, will be as set forth in Schedule II and Schedule III.
(v) Except as otherwise set forth on Schedule II of this Agreement,
to the best of such counsels' knowledge, there is no litigation or governmental
proceeding or investigation pending or threatened before any New York or United
States federal court or governmental agency or body against the Company or any
subsidiary thereof.
(vi) The Preferred Shares, the Warrants and the Conversion Shares
have been duly authorized. The issuance, sale and delivery of the Preferred
Shares and the Warrants and the issuance and delivery of the Conversion Shares
upon conversion of the Preferred Shares and the exercise of the Warrants have
been duly authorized by all required corporate action; the Preferred Shares have
been validly issued, are fully paid and nonassessable with no personal liability
attaching to the ownership thereof; the Warrants have been validly issued and
the Conversion Shares have been duly reserved for issuance upon conversion of
the Preferred Shares and exercise of the Warrants and, when issued in accordance
with the terms of this Agreement and the Company's Charter, as amended, will be
validly issued, fully paid and nonassessable with no personal liability
attaching to the ownership thereof. Neither the issuance, sale or delivery of
the Preferred Shares nor the issuance or delivery of the Conversion Shares is
subject to any preemptive right of stockholders of the Company arising under law
or the Charter or By-laws of the Company, each as amended, or, to the knowledge
of such counsel, to any contractual right of first refusal or other right in
favor of any person, except as set forth on Schedule II. Except as otherwise set
forth on Schedule II of this Agreement, to the best of our knowledge, there are
no agreements to acquire shares of capital stock of the Company or commitments
on the part of the Company to issue securities or rights to securities of the
Company.
(vii) Assuming the accuracy of the representations and warranties of
the Purchasers set forth in Article III, the offer and sale of the Preferred
Shares and the Warrants pursuant to the terms of this Agreement and the
Investors Agreement are exempt from the registration requirements of Section 5
of the Securities Act, as amended, and, under such securities laws as they
presently exist, the issuance of Conversion Shares
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upon conversion of the Preferred Shares or exercise of the Warrants will also be
exempt from such registration and qualification requirements.
(b) Representations and Warranties to be True and Correct. The
representations and warranties contained in Article II shall be true, complete
and correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and an
authorized officer of the Company shall have certified to such effect to the
Purchasers in writing.
(c) Performance. The Company shall have performed and complied in
all material respects with all agreements contained herein required to be
performed or complied with by it prior to or at the Closing Date, and an
authorized officer of the Company shall have certified to the Purchasers in
writing to such effect and to the further effect that all of the conditions set
forth in this Article IV have been satisfied.
(d) Supporting Documents. The Purchasers and their counsel shall
have received copies of the following documents:
(i) (A) the Charter, certified as of a recent date by the Secretary
of State of the State of Delaware and (B) a certificate of said Secretary dated
as of a recent date as to the due incorporation and good standing of the
Company;
(ii) a certificate of the Secretary or an Assistant Secretary of the
Company dated the Closing Date and certifying: (A) that attached thereto is a
true and complete copy of the By-laws of the Company as in effect on the date of
such certification; (B) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors and the stockholders of the
Company authorizing the execution, delivery and performance of this Agreement
and the Investors Agreement, the issuance, sale and delivery of the Preferred
Shares and the Warrants and the reservation, issuance and delivery of the
Conversion Shares, and that all such resolutions are in full force and effect;
(C) that the Charter has not been amended since the date of the certificate
delivered pursuant to clause (i)(B) above; and (D) to the incumbency and
specimen signature of each officer of the Company executing this Agreement and
the Investors Agreement, the Warrants, the stock certificates representing the
Preferred Shares and any certificate or instrument furnished pursuant hereto;
and
(iii) such additional supporting documents and other information
with respect to the operations and affairs of the Company as the Purchasers or
their counsel reasonably may request.
(e) Investors Agreement. The Company and Web Hosting Organization
LLC (the "Prior Investor") shall have executed and delivered the Investors
Agreement.
(f) Charter. The Charter shall read in its entirety as set forth in
Exhibit B.
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(g) Prior Investor Funding. The Prior Investor shall have exercised
all of its rights to purchase Common Stock pursuant to the Subscription
Agreement dated December 8, 1997 with the Company (the "Subscription Agreement")
and shall pay the remaining consideration thereof within 30 days following the
date of this Agreement. If such payment is not made within such period, the
Purchasers shall be entitled to (i) antidilution adjustments in accordance with
the Charter and (ii) preemptive rights in accordance with the Investors
Agreement in connection with any subsequent purchase of Common Stock in the
Company by the Prior Investor. If such payment is made during such period, the
Purchasers shall not be entitled to such antidilution adjustments or preemptive
rights.
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with each of the Purchasers that:
Section 5.1. Financial Statements, Reports, Etc. The Company shall
furnish to each Purchaser holding any Preferred Shares until the consummation of
a firm commitment underwritten public offering of Common Stock by the Company
with a nationally recognized investment banking firm which results in gross
proceeds to the Company equal to or greater than $30,000,000 and in which the
pre-money valuation of the Company immediately prior to such offering is equal
to or greater than $150,000,000 (a "Qualifying Public Offering"):
(a) within ninety (90) days after the end of each fiscal year of the
Company a consolidated balance sheet of the Company and its subsidiaries as of
the end of such fiscal year and the related consolidated statements of income,
stockholders' equity and cash flows for the fiscal year then ended, prepared in
accordance with generally accepted accounting principles and certified by a firm
of independent public accountants of recognized national standing selected by
the Board of Directors of the Company;
(b) within thirty (30) days after the end of each month in each
fiscal year monthly financial statements of the Company and its subsidiaries in
the form prepared for the Board of Directors of the Company;
(c) no later than forty-five (45) days prior to the start of each
fiscal year, an annual budget for the Company and its subsidiaries in respect of
such fiscal year.
Section 5.2. Inspection, Consultation and Advice. So long as a
Purchaser shall own at least 40% of the Preferred Shares purchased pursuant to
this Agreement and prior to the Company's initial public offering, the Company
shall permit and cause each of its subsidiaries to permit each Purchaser and
such persons as it may designate, at such Purchaser's expense, to visit and
inspect any of the properties of the Company and its subsidiaries, examine their
books, discuss the affairs, finances and accounts of the Company and its
subsidiaries with their officers and public accountants
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and consult with the management of the Company and its subsidiaries as to their
affairs, finances and accounts, all during normal business hours and upon
reasonable prior request; provided, however, that prior to inspecting or
discussing any Confidential Information any such person (other than the
Purchasers and their employees, members or partners) shall enter into a
confidentiality agreement with the Company with respect to such Confidential
Information.
Section 5.3. Board of Directors Meetings. The Company shall use its
best efforts to ensure that meetings of its Board of Directors are held at least
once each quarter until the Board of Directors of the Company determines that
quarterly meetings are not required. The Company will reimburse the members of
the Board of Directors for their reasonable out of pocket expenses incurred in
connection with attending such meetings.
Section 5.4. Indemnification of Directors. The Company shall at all
times maintain provisions in its By-laws or Charter indemnifying all directors
against liability to the maximum extent permitted under the laws of the state of
its incorporation.
Section 5.5. Employee and Consultant Nondisclosure and Development
Agreements. The Company shall use its reasonable commercial efforts to obtain,
and shall cause its subsidiaries to use their reasonable commercial efforts to
obtain, Nondisclosure and Development Agreements and Non-Competition Agreements
from all future employees and consultants who will have access to confidential
information of the Company or any of its subsidiaries, upon their employment by
the Company or any of its subsidiaries.
Section 5.6. Termination of Covenants. The covenants set forth in
Sections 5.1 through 5.5 shall terminate and be of no further force or effect on
the earlier of (i) the date on which the Purchasers (in the aggregate) no longer
own at least 40% of the Preferred Shares (or Common Stock issued on conversion
thereof) purchased pursuant to this Agreement and (ii) the date of consummation
of the Company's initial public offering.
Section 5.7. Certain Non-Dilutive Stock Issuances. Common Stock
issued by the Company in an amount which does not result in antidilution
protection for the Purchasers in accordance with Article IV, (c), Section
4(d)(I)(5)(H) of the Charter of the Company shall be used solely as
consideration for acquisitions by the Company pursuant to its acquisition
strategy as set forth in the Company's Confidential Offering Memorandum dated
March 12, 1998, as amended through January 15, 1999, without regard to the
aggregate amount of such offering specified in such Confidential Offering
Memorandum.
Section 5.8. Issue Tax. The issuance of certificates for shares of
Common Stock upon conversion of Series A Preferred Stock or exchange of the
Warrant shall be made without charge to the holders thereof for any issuance tax
in respect thereof, provided that the Company shall not be required to pay any
tax which may be
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payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Series A Preferred
Stock which is being converted or the Warrant which is being exercised.
ARTICLE VI
MISCELLANEOUS
Section 6.1. Expenses. Each party hereto will pay its own expenses
in connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated, provided, however, that the Company shall pay
the reasonable fees and expenses of the Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP, counsel
for the Purchasers in connection with such transactions.
Section 6.2. Survival of Agreements. All covenants, agreements,
representations and warranties made herein or in the Investors Agreement shall
survive the execution and delivery of this Agreement and the Investors
Agreement, the issuance, sale and delivery of the Preferred Shares, the Warrants
and the issuance and delivery of the Conversion Shares.
Section 6.3. Brokerage. Each party hereto will indemnify and hold
harmless the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
Section 6.4. Parties in Interest. All representations, covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not. Without limiting the
generality of the foregoing, all representations, covenants and agreements
benefiting the Purchasers shall inure to the benefit of any and all subsequent
holders from time to time of Preferred Shares, Warrants or Conversion Shares.
Section 6.5. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered in person,
mailed by certified or registered mail, return receipt requested, or sent by
telecopier or telex, addressed as follows:
(a) if to the Company, at 00 Xxxxxxx Xxxxxx, Xxxxx Xxxxxx, X.X.
00000, Attention: General Counsel, with a copy to E. Xxx Xxxx, Xxxxx Xxxxxxxxxx
LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, X.X. 00000; and
(b) if to any Purchaser, at the address of such Purchaser set forth
in Schedule I, with a copy to Xxxxxxx X. Arel, Testa, Xxxxxxx & Xxxxxxxxx, LLP,
000 Xxxx Xxxxxx, Xxxx Xxxxxx Xxxxx, Xxxxxx, XX 00000;
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(c) or, in any such case, at such other address or addresses as
shall have been furnished in writing by such party to the others.
Section 6.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the General Corporation Law of the State of
Delaware as to matters within the scope thereof, and by the laws of the State of
New York as to all other matters.
Section 6.7. Entire Agreement. This Agreement, including the
Schedules and Exhibits hereto, and the Investors Agreement constitutes the sole
and entire agreement of the parties with respect to the subject matter hereof.
Section 6.8. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 6.9. Amendments. This Agreement may not be amended or
modified, and no provisions hereof may be waived, without the written consent of
the Company and the holders of at least a majority of the Conversion Shares.
Section 6.10. Severability. If any provision of this Agreement shall
be declared void or unenforceable by any judicial or administrative authority,
the validity of any other provision and of the entire Agreement shall not be
affected thereby.
Section 6.11. Titles and Subtitles. The titles and subtitles used in
this Agreement are for convenience only and are not to be considered in
construing or interpreting any term or provision of this Agreement.
Section 6.12. Assignment. The rights granted pursuant to this
Agreement may be assigned or otherwise conveyed by a Purchaser to any purchaser
of the Preferred Shares or Warrants from such Purchaser provided that (i) such
assignee is an investment fund or similar investment vehicle, (ii) such assignee
is not a direct competitor of the Company and (iii) the Purchaser shall notify
the Company of such transfer prior to its occurrence.
Section 6.13. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "Benefit Arrangement" means each employment, severance or other
similar contract, arrangement or policy (written or oral) and each plan or
arrangement (written or oral) providing for severance benefits, insurance
coverage (including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits
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which (i) is not an Employee Plan and (ii) covers any employee or former
employee of the Company.
(b) "Confidential Information" means all confidential information
and trade secrets of the Company including, without limitation, the identity,
lists or descriptions of any customers, referral sources or organizations;
financial statements, cost reports or other financial information contract
proposals, or bidding information; business plans and training operations
methods and manuals; personnel records; fee structure; and management systems,
policies or procedures, including related forms and manuals.
(c) "Employee Plan" means each "employee benefit plan," as such term
is defined in Section 3(3) of ERISA, that (A)(i) is subject to any provision of
ERISA and (ii) is maintained to by the Company, or (B)(i) is subject to any
provision of Title IV of ERISA and (ii) is maintained or contributed to by any
of the Company's ERISA Affiliates.
(d) "ERISA" means the Employment Retirement Income Security Act of
1974, as amended.
(e) "ERISA Affiliate" of any entity means any other entity that,
together with such entity, would be treated as a single employer under Section
414 of the Code.
(f) "Multiemployer Plan" means each Employee Plan that is a
Multiemployer plan, as defined in Section 3(37) of ERISA.
(g) "person" shall mean an individual, corporation, trust,
partnership, joint venture, unincorporated organization, government agency or
any agency or political subdivision thereof, or other entity.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company and the Purchasers have executed
this Securities Purchase Agreement as of the day and year first above written.
SAGE NETWORKS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Co-Chairman
PURCHASERS:
SOFTBANK TECHNOLOGY VENTURES
IV, L.P.
By: STV IV LLC, its general partner
By: /s/ Xxxxxxx X. Xxx
-------------------------------------
Xxxxxxx X. Xxx, Managing Member
SOFTBANK TECHNOLOGY ADVISORS FUND,
L.P.
By: STV IV LLC, its general partner
By: /s/ Xxxxxxx X. Xxx
-------------------------------------
Xxxxxxx X. Xxx, Managing Member
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SCHEDULE I
Purchasers
--------------------------------------------------------------------------------
Name and Address Number of Preferred Number of Warrants Aggregate Purchase
of Purchaser Shares to be to be Purchased Price
Purchased
--------------------------------------------------------------------------------
SOFTBANK 2,597,882 735,532 $12,755,600.62
TECHNOLOGY
VENTURES IV,
L.P.
000 X. Xxx Xxxxxx
Xxxxxx, Xxxxx 000
Xxx Xxxx, XX
00000
--------------------------------------------------------------------------------
SOFTBANK 49,776 14,093 244,400.16
TECHNOLOGY
ADVISORS FUND,
L.P.
000 X. Xxx Xxxxxx
Xxxxxx, Xxxxx 000
Xxx Xxxx, XX
00000
--------------------------------------------------------------------------------
Total 2,647,658 749,625 $13,000,000.78
--------------------------------------------------------------------------------
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SCHEDULE II
Disclosure Schedule
Section 2.1(b) Subsidiaries
Sage Networks Acquisition Corp.
B.N. Technology, Inc.
Section 2.4 Authorized Capital Stock
The Prior Investor has the right to acquire 6.6 million additional shares
of Common Stock pursuant to the Subscription Agreement dated as of
December 8, 1997. The Prior Investor has exercised such right but has not
yet funded such purchase.
Each of Xxxxxx X. Xxxxx, Santa Fe Capital Group of New Mexico, Inc.,
Software Business Technologies, Inc., All Information Systems, Inc., Jab
Web, Inc., BestWare, Inc., Xxxxx Xxxxxxx and Xxxxxx Xxxxxxx, Xxxxxx Xxxxx
and Xxxxxx Xxxxxxx and Xxxxxx Karasy have entered into letter agreements
with the Company granting the Company a right of first refusal with
respect to the shares of Common Stock of the Company owned by each of
them.
The Company has entered into letters of intent with respect to the
acquisitions of Net Daemons Associates, Inc., Digiweb, Inc. and
Telephonetics International, Inc. which are contemplated to include Common
Stock of the Company as all or a portion of the consideration.
Section 2.6 Subsequent Events
The Prior Investor has the right to acquire 6.6 million additional shares
of Common Stock pursuant to the Subscription Agreement dated as of
December 8, 1997. The Prior Investor has exercised such right but has not
yet funded such purchase.
The Company is negotiating the terms of a $6 million equipment lease
facility with Funding Resources Inc.
The Company has entered into letters of intent with respect to the
acquisitions of Net Daemons Associates, Inc., Digiweb, Inc. and
Telephonetics International, Inc. which are contemplated to include Common
Stock of the Company as all or a portion of the consideration.
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Section 2.7 Litigation
The Company is the subject, from time to time, of investigations by
governmental and quasi governmental entities relating to the use by its
customers of Web sites which are hosted by the Company.
Section 2.9 Leasehold Interests
The Company leases space located in the following buildings:
00 Xxxxxxxxx Xxxxxx Xxxx
Xxxxx X-000
Xxxxxxx, XX 00000
00 Xxxxxxxx Xxxxxx, Xxxxx 000
0000 Xxxxxxxx Xxxx X.X.
Xxxxxxx, XX 00000
(HomeCom Communications, Inc.)
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxx, XX 00000
00 Xxxx Xxxxxx
Xxx Xxxx, XX
(Tri Star Web Creations)
00000 Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
(All Information Systems, Inc.)
0000-0000 Xxxxxx Xxxx.
Xxx Xxxxxxx, XX 00000
(B.N. Technology, Inc.)
0000 Xxxxxxxx Xxxxx
Xxxxx X0
XxXxxx, XX 00000
0000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxxx Xxxxxx, XX
00 Xxxxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
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Section 2.10 Insurance Policies
Section 2.18 Officers
Xxxxxxx X. Xxxxxxx, Co-Chairman, Secretary
Xxxxxxx X. Xxxx, Co-Chairman
Xxxxxxx Xxxxx, President and Treasurer
Xxxxx Xxxxxxxx, Executive Vice President
Xxxxx X. Xxxxx, Senior Vice President, General Counsel
Xxxxxxx X. Xxxxxx, Senior Vice President, Strategic Mergers and
Acquisitions
Xxxxxxx Xxxxxx, Chief Financial Officer
Section 2.19 Transactions with Affiliates
Sage Equities, Inc., which is controlled by Xxxxxxx X. Xxxxxxx, and
Intensity Ventures, Inc., which is controlled by Xxxxxxx X. Xxxx, are
parties to oral consulting arrangements with the Company. Xxxxxxx X. Xxxx
is a general partner of a Purchaser.
Section 2.20 Nondisclosure and Development Agreements
Since December, 1998, the Company has required each employee to sign such
an agreement. Prior to such time, some employees may not have signed such
agreements. It is the Company's intention to require such agreements from
each employee.
Section 2.21(a) Employee Plans and Benefit Arrangements
Substantially all of the Company's employees are employed through
arrangements with TriNet Employer Group. All liability for the plans (with the
exception of the Sage Networks 401k Savings Plan) reside with TriNet Employer
Group. Benefit offerings from TriNet Employer Group became effective on February
9, 1998
Article VII Medical Plans
Preferred Provider Plans (available nationally)
United Healthcare Preferred Provider Organization (PPO)- High Plan
United Healthcare PPO - Basic Plan
HMO/EPO Plans (availability varies regionally)
United Healthcare Managed Care HMO/EPO (availability varies by location)
United Healthcare Select HMO (available most areas (except CA))
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Tufts HMO (New England)
Aetna/US Healthcare HMO (NY, NJ, PA)
United Healthcare Choice HMO (California)
Kaiser HMO (California)
Alliant Select HMO (Washington State)
United Healthcare EPO (in selected areas - where no HMO is available)
ARTICLE VIII Dental Insurance
Delta Dental Plan of California - available in all areas
Administered by TriNet
ARTICLE IX Vision Plan
Vision Service Plan (VSP) - available in all areas
Administered by TriNet
ARTICLE X Life/Disability Insurance
Metropolitan Life Life Insurance - 2X annual salary
Administered by TriNet
Optional Supplemental Life Insurance may be purchased in $10,000 increments up
to $800,000 from Met Life. A separate underwriting process takes place to
purchase the optional amounts.
ARTICLE XI Short Term Disability/Long Term Disability
From Metropolitan Life
Administered by TriNet
Short Term Disability - (up to 180 days) - minimum of 60% income replacement up
to $2,300/xx
Xxxx Term Disability -- (after 180 days)- minimum of 60% income replacement up
to $10,000 per month
ARTICLE XII Section 125 Flexible Spending Accounts
Administered by TriNet per IRS and other government regulations
Health Care: Minimum Contribution: $200; Maximum $4,800.
Dependent Care: Minimum Contribution: $200; Maximum $5,000.
ARTICLE XIII Employee Assistance Programs
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Relationships with counseling organizations administered by TriNet
Free of charge to employees to provide assistance with personal issues
Concern EAP -- An employee assistance program (e.g. substance abuse,
emotional/psychological counseling, financial counseling, relationship
problems).
Dependent Care Referral Program -- Assistance for elder care or day care.
Employee counseling and referral service. Provider Organization: Family Care,
Inc., Pleasanton, CA
ARTICLE XIV Optional Legal Services
Legal Insurance Network Services
For employee to gain access to a "legal HMO" to obtain legal advice or lower
legal fees.
Available in all areas
Administered by TriNet
Insured by the ARAG Group
West DesMoines, Iowa
401k Plan
Employees are eligible to participate in the 401k plan after 30 days of service.
Sage Networks 401k Employee Savings Plan
MassMutual Account No. FL 51084-1-1-1
Administered by Sage Networks, Inc.
Plan Provider:
MassMutual
0000 Xxxxx Xxxxxx
Xxxxxxxxxxx, XX
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SCHEDULE III
The Company is a party to a Subscription Agreement and a Registration
Rights Agreement with the Prior Investor, each of which is dated December 8,
1997.
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