Exhibit 10.6
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SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
This Series B Convertible Preferred Stock Purchase Agreement (this
"Agreement") is made and entered into as of July 31, 1998, by and among:
ENGAGE TECHNOLOGIES, INC., a corporation duly organized and existing under
the laws of the State of Delaware, United States of America and having its
principal place of business at 000 Xxxxxxxxxx Xxxxxx, Xxxxx Xxxxx, Xxxxxxx,
Xxxxxxxxxxxxx 00000, Xxxxxx Xxxxxx of America ("Engage");
SUMITOMO CORPORATION, a corporation duly organized and existing under the
laws of Japan and having its principal place of business at 0-0,
Xxxxxxxxxxxx 0-xxxxx, Xxxxxxx-xx, Xxxxx, Xxxxx ("SC"); and
SUMITOMO CORPORATION OF AMERICA, a corporation duly organized and existing
under the laws of the State of New York, United States of America and
having a place of business at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-
0042, United States of America ("SCOA", and together with SC, the
"Purchasers").
RECITALS
WHEREAS, Engage desires to sell to the Purchasers, and the Purchasers
desire to purchase from Engage, the Engage Shares (as defined below), all on the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. AGREEMENT TO PURCHASE AND SELL STOCK.
1.1 Authorization. Prior to the Closing (as defined below), Engage's
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Board of Directors will have authorized the issuance of the Engage Shares (as
defined below) pursuant to the terms and conditions of this Agreement. The
Engage Shares, when issued, will have the rights and preferences set forth in
the Certificate of Designation attached hereto as Exhibit A (the "Certificate of
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Designation").
1.2 Agreement to Purchase and Sell Common Stock. At the Closing (as
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defined below), Engage hereby agrees to sell to the Purchasers and the
Purchasers hereby agree to purchase from Engage an aggregate of 238,597 shares
of Series B Convertible Preferred Stock of Engage, $0.01 par value per share
(the "Engage
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Shares"), at a price per share of $8.3823 for an aggregate purchase price of US
$1,999,991.60, as follows: (a) Engage hereby agrees to sell to SC and SC hereby
agrees to purchase from Engage 178,947 Engage Shares for an aggregate purchase
price of US $1,499,987.40, and (b) Engage hereby agrees to sell to SCOA and SCOA
hereby agrees to purchase from Engage 59,650 Engage Shares for an aggregate
purchase price of US $500,004.20.
2. CLOSING.
2.1 The Closing. The purchase and sale of the Engage Shares shall take
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place at the offices of Xxxxxx & Dodge LLP, Xxx Xxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000, at 10:00 a.m. Massachusetts time, within three (3) business
days after the conditions set forth in Articles 5 and 6 have been satisfied, or
at such other time and place as Engage and the Purchasers mutually agree upon
(which time and place are referred to in this Agreement as the "Closing"). At
the Closing, Engage will deliver to the Purchasers certificates representing the
Engage Shares, against delivery to Engage by the Purchasers of the consideration
set forth in Section 1.2 by wire transfer of funds to an account designated by
Engage at least two business days prior to the Closing. It is expected that
Closing documents will be delivered by facsimile with original signature pages
sent by overnight courier.
3. REPRESENTATIONS AND WARRANTIES OF ENGAGE. Engage hereby represents
and warrants to the Purchasers, at the date of execution of this Agreement and
at the Closing, that the statements in this Section 3 are true and correct,
except as set forth in the Disclosure Letter from Engage to the Purchasers of
even date herewith (the "Disclosure Letter"):
3.1 Organization, Good Standing and Qualification. Engage is a
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corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, United States of America and has all corporate power
and authority required to (a) carry on its business as presently conducted, and
(b) enter into this Agreement and consummate the transactions contemplated
hereby. Engage is qualified to do business and is in good standing in each
jurisdiction in which the failure to so qualify would have a Material Adverse
Effect. As used in this Agreement, "Material Adverse Effect" means a material
adverse effect on, or a material adverse change in, or a group of such effects
on or changes in, the business, operations, financial condition, results of
operations, prospects, assets or liabilities of Engage and its Subsidiaries (as
defined below), taken as a whole.
3.2 Capitalization. As of the date hereof, the authorized stock of Engage
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consists of 20,000,000 shares of Common Stock, par value $0.01 per share
("Common Stock") of which 93,750 shares are issued and outstanding, and
5,000,000 shares of Preferred Stock, $0.01 par value ("Preferred Stock")
consisting of: 800,000 shares of Preferred Stock designated "Series A Preferred"
of which 800,000 are issued and
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outstanding and 4,200,000 undesignated shares of Preferred Stock. As of the
Closing, the authorized stock of Engage will consist of 20,000,000 shares of
Common Stock of which 93,750 shares will be issued and outstanding, 5,000,000
shares of Preferred Stock consisting of: 1,500,000 shares of Preferred Stock
designated "Series A Preferred" of which 1,500,000 will be issued and
outstanding, 238,597 shares of Preferred Stock designated "Series B Preferred"
(the "Series B Preferred Stock") of which none shall be issued and outstanding,
and 3,261,403 undesignated shares of Preferred Stock. Immediately prior to the
Closing, all issued and outstanding shares will have been duly authorized,
validly issued, and will be fully paid and nonassessable and free of any liens
or encumbrances other than any liens or encumbrances created by or imposed upon
the holders thereof. As of the date hereof, CMG Information Services, Inc. is
the record holder of all of the outstanding shares of Series A Preferred Stock
of Engage. As of the date hereof and as of the Closing, Engage shall have
reserved 2,800,987 shares of Common Stock for issuance to officers, directors,
employees or independent contractors or affiliates of Engage under Engage's
employee benefit plans. As of the Closing, options shall have been issued under
such employee benefit plans representing approximately 2,000,000 of such shares.
All shares of Common Stock subject to issuance as aforesaid, upon issuance on
the terms and conditions specified in the instruments pursuant to which they are
issuable, shall be duly authorized, validly issued, fully paid and
nonassessable. There are no other equity securities, convertible securities,
options, warrants, calls, rights, commitments or agreements of any character to
which Engage is a party or by which it is bound obligating Engage to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of the capital stock of Engage or obligating
Engage to grant, extend or enter into any such equity security, convertible
security, option, warrant, call, right, commitment or agreement.
3.3 Authorization. All corporate action on the part of Engage, its
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officers, directors and stockholders necessary for the authorization, execution,
delivery of, and the performance of all obligations of Engage under this
Agreement and the authorization, issuance, reservation for issuance and delivery
of all of the Engage Shares being sold under this Agreement has been taken or
will be taken prior to the Closing, and this Agreement constitutes a valid and
binding obligation of Engage, enforceable against Engage in accordance with its
terms, except as enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization or other laws of general application relating to or
affecting the enforcement of creditors' rights generally and (ii) the effect of
rules of law governing the availability of equitable remedies.
3.4 Valid Issuance of Stock.
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(a) Valid Issuance. The Engage Shares, and the shares of Common
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Stock issuable upon conversion thereof, when issued, sold and delivered in
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accordance with the terms of this Agreement for the consideration provided for
herein, or the terms of the Certificate of Designation, as applicable, will be
duly and validly issued, fully paid and nonassessable and will be free of any
liens or encumbrances. The sale of the Engage Shares is not and will not be
subject to any preemptive rights or rights of first refusal that have not been
waived.
(b) Compliance with Securities Laws. Assuming the correctness of the
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representations made by each of the Purchasers in Section 4 hereof, the Engage
Shares will be issued in full compliance with the registration requirements of
the Securities Act of 1933, as amended, and the rules and regulations of the
Securities and Exchange Commission (the "Commission") issued under such act
(collectively, the "Securities Act"), or in compliance with applicable
exemptions therefrom, and the registration and qualification requirements of all
applicable securities laws of the states of the United States.
3.5 Subsidiaries and Affiliates.
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(a) The Disclosure Letter sets forth a list of all entities in which
Engage beneficially owns, directly or indirectly, 50% or more of the outstanding
stock or other equity interests (collectively, the "Subsidiaries"). The
Disclosure Letter also includes (i) a complete list of each partnership or joint
venture agreement or arrangement to which Engage is a party and the nature and
amount of the interest of Engage in such entities and (ii) a complete list of
the corporations, partnerships, limited liability companies or other entities
with respect to which Engage beneficially owns, directly or indirectly, the
outstanding stock or other equity interests and the percentage ownership of such
entity by Engage. Except as set forth in the Disclosure Letter, there is no
other entity with respect to which: (i) Engage beneficially owns, directly or
indirectly, any outstanding stock or other ownership interests of such entity;
(ii) Engage may be deemed to be in control because of factors or relationships
(contractual or otherwise) other than the quantity of stock or other interests
owned; (iii) Engage may be liable under any circumstances for the payment of
additional amounts with respect to its interest, whether in the form of
assessments, capital calls, installment payments, general partner liability or
otherwise; or (iv) the investment by Engage is accounted for by the equity
method.
(b) All capital stock or other equity interests owned by Engage as
described pursuant to Section 3.5(a) are owned by Engage or its Subsidiaries, as
the case may be, as record and beneficial owner thereof free and clear of all
liens, charges, encumbrances, equities and claims whatsoever. There is no
outstanding or authorized option, subscription, warrant, call, right, commitment
or other agreement of any character obligating Engage to issue, sell, transfer,
pledge or otherwise encumber any share of capital stock or other equity interest
described pursuant to Section 3.5(a) or any security or other instrument
convertible into or exercisable for or
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evidencing the right to subscribe for any such share of capital stock or other
equity interest.
(c) Each Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of its state of organization. Each
Subsidiary is duly qualified to do business as a foreign corporation and is in
good standing in every jurisdiction in which the nature of the business
conducted by it or the character or location of the properties owned or leased
by it makes such qualification necessary, except where the failure to be so
qualified would not have a Material Adverse Effect. Each Subsidiary has all
requisite corporate power and authority to own or lease and operate its
properties and assets and to carry on its business as now conducted.
3.6 Governmental Consents. No consent, approval, order or authorization
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of, or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of Engage is required
in connection with the consummation of the transactions contemplated by this
Agreement, except the filing of such qualifications or filings under the
Securities Act and the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission issued under such act (collectively, the
"Exchange Act") and all applicable state securities laws as may be required in
connection with the transactions contemplated by this Agreement. All such
qualifications and filings will, in the case of qualifications, be effective on
the Closing and will, in the case of filings, be made within the time prescribed
by law.
3.7 Non-Contravention. The execution, delivery and performance of this
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Agreement by Engage and the consummation by Engage of the transactions
contemplated hereby do not and will not (i) contravene or conflict with the
Certificate of Incorporation, Certificate of Designation of Series A Preferred
Stock or Bylaws of Engage; (ii) constitute a violation of any provision of any
federal, state, local or foreign law binding upon or applicable to Engage; or
(iii) constitute a default or require any consent under, give rise to any right
of termination, cancellation or acceleration of, or to a loss of any benefit to
which Engage is entitled under, or result in the creation or imposition of any
lien, claim or encumbrance on any assets of Engage under, any contract to which
Engage is a party or any permit, license or similar right relating to Engage or
by which Engage may be bound or affected in such a manner as, individually or
together with all other such matters, would have Material Adverse Effect.
3.8 Litigation. There is no action, suit, proceeding, claim, arbitration
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or investigation ("Action") pending or, to the best of Engage's knowledge,
threatened: (a) against Engage or its Subsidiaries, their respective activities,
properties or assets or against any officer, director or employee of Engage in
connection with such officer's, director's or employee's relationship with, or
actions taken on behalf of, Engage, in
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each case which is reasonably likely to have a Material Adverse Effect, or (b)
that seeks to prevent, enjoin, alter or delay the transactions contemplated by
this Agreement. Engage is not a party to or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality. No Action by Engage is currently pending nor does Engage intend
to initiate any Action which is reasonably likely to have a Material Adverse
Effect.
3.9 Compliance with Law and Charter Documents. Engage is not in violation
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or default of any provisions of its Certificate of Incorporation or Bylaws, each
as amended. Engage and its Subsidiaries have complied and are in compliance
with all applicable statutes, laws, and regulations and executive orders of the
United States of America and all states, foreign countries and other
governmental bodies and agencies having jurisdiction over Engage's and its
Subsidiaries' businesses or properties, except for any violations that would
not, either individually or in the aggregate, have a Material Adverse Effect.
3.10 Financial Statements. Engage has provided the Purchasers with copies
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of the unaudited financial statements of Engage for the fiscal year ended July
31, 1997 and the audited financial statements of Accipiter, Inc. ("Accipiter")
for the fiscal year ended December 31, 1997 (collectively, the "Annual Financial
Statements"), and unaudited financial statements of Engage for the nine-month
period ended April 30, 1998, which statements include the operations of
Accipiter for the relevant period (the "Balance Sheet Date"). Such unaudited
financial statements of Engage and Accipiter, Inc. fairly present, in conformity
with generally accepted accounting principles ("GAAP") applied on a consistent
basis (except as may be indicated in the notes thereto), the financial position
of Engage and Accipiter as at the dates thereof and the consolidated results of
their operations and cash flows for the periods then ended (subject to normal
year-end audit adjustments in the case of unaudited interim financial
statements).
3.1 Absence of Certain Changes Since Balance Sheet Date. Except as set
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forth in the Disclosure Letter, since the Balance Sheet Date, the business and
operations of Engage and its Subsidiaries have been conducted in the ordinary
course consistent with past practice, and there has not been:
(a) any declaration, setting aside or payment of any dividend or
other distribution of the assets of Engage with respect to any shares of capital
stock of Engage or any repurchase, redemption or other acquisition by Engage or
any Subsidiary of Engage of any outstanding shares of Engage's or any
Subsidiary's capital stock;
(b) any damage, destruction or loss, whether or not covered by
insurance, except for such occurrences that have not resulted, and are not
expected to result, in a Material Adverse Effect;
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(c) any waiver by Engage or a Subsidiary of a valuable right or of a
material debt owed to it, except for such waivers that have not resulted and are
not expected to result, in a Material Adverse Effect;
(d) any material change or amendment to, or any waiver of any
material rights under a material contract or arrangement by which Engage or a
Subsidiary or any of its respective assets or properties is bound or subject,
except for changes, amendments, or waivers that are expressly provided for or
disclosed in this Agreement or the Disclosure Letter or that have not resulted,
and are not expected to result, in a Material Adverse Effect;
(e) any change by Engage in its accounting principles, methods or
practices or in the manner it keeps its accounting books and records, except any
such change required by a change in GAAP; and
(f) any other event or condition of any character, except for such
events and conditions that have not resulted, and are not expected to result,
either individually or collectively, in a Material Adverse Effect.
3.12 Rights in Proprietary Information. Except as set forth in the
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Disclosure Letter, Engage has not received any communications alleging that
Engage has violated or, by conducting its business, would violate any of the
patents, trademarks, service marks, or other proprietary rights of any other
person or entity, nor does Engage have reason to believe that it has violated
or, by conducting its business, would violate any of the patents, trademarks,
service marks, or other proprietary rights of any person or entity. Engage has
sufficient right to proprietary information to conduct its business as currently
conducted.
3.13 Conduct of Business; Liabilities. Engage is not in default under, and
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to the best of Engage's knowledge no condition exists that would by notice or
lapse or time would constitute a default of Engage under (i) any mortgage, loan
agreement, evidence of indebtedness, or other instrument evidencing borrowed
money to which Engage is a party or by which Engage or the properties of Engage
are bound or (ii) any judgment, order, or injunction of any court, arbitrator,
or governmental agency that would reasonably be expected to have a Material
Adverse Effect.
3.14 Permits. Engage has all franchises, permits, licenses and any similar
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authority necessary for the conduct of its business as it is now being
conducted, the lack of which could have a Material Adverse Effect, and believes
it can obtain, without undue burden or expense, any similar authority for the
conduct of its business as planned to be conducted. Engage is not in default in
any material respect under any of such franchises, permits, licenses or other
similar authority.
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3.15 Full Disclosure. The information contained in this Agreement and the
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Disclosure Letter with respect to the business, operations, assets, results of
operations and financial condition of Engage and its Subsidiaries, and the
transactions contemplated by this Agreement are true and complete in all
material respects and do not omit to state any material fact necessary in order
to make the statements herein and therein, in light of the circumstances under
which they were made, not misleading.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS. Each of
the Purchasers hereby jointly and severally represents and warrants to Engage,
at the date of execution of this Agreement and at the Closing, and agrees that:
4.1 Organization and Good Standing. SC is a corporation duly organized,
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validly existing and in good standing under the laws of Japan and has all
corporate power and authority required to carry on its business as presently
conducted, and to enter into this Agreement and to consummate the transactions
contemplated hereby. SCOA is a corporation duly organized, validly existing and
in good standing under the laws of the State of New York and has all corporate
power and authority required to carry on its business as presently conducted,
and enter into this Agreement and to consummate the transactions contemplated
hereby.
4.2 Authorization. This Agreement has been duly authorized by all
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necessary corporate action on the part of each Purchaser. This Agreement
constitutes a valid and binding obligation of each Purchaser, enforceable
against each Purchaser in accordance with its terms, except as enforceability
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. Each Purchaser has full corporate power and
authority to enter into this Agreement.
4.3 Governmental Consents. No consent, approval, order or authorization
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of, or registration, qualification, designation, declaration or filing with, any
federal, state, local or foreign governmental authority on the part of either
Purchaser is required in connection with the consummation of the transactions
contemplated by this Agreement, except for such authorizations of the relevant
authorities under all applicable laws of Japan as may be required in connection
with the transactions contemplated by this Agreement. All such authorizations,
qualifications and filings will, in the case of authorizations and
qualifications, be effective on the Closing and will, in the case of filings, be
made within the time prescribed by law.
4.4 Purchase for Own Account. The Engage Shares are being acquired for
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investment for each Purchaser's own account, not as a nominee or agent, and not
with a view to the public resale or distribution thereof within the meaning of
the
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Securities Act, and neither Purchaser has the present intention of selling,
granting any participation in, or otherwise distributing the same.
4.5 Investment Experience. Each Purchaser understands that the purchase
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of the Engage Shares involves substantial risk. Each Purchaser has experience
as an investor in corporate securities and acknowledges that it is able to fend
for itself, can bear the economic risk of its investment in the Engage Shares
and has such knowledge and experience in financial or business matters that it
is capable of evaluating the merits and risks of this investment in the Engage
Shares and protecting its own interests in connection with this investment.
4.6 Accredited Investor Status. Each Purchaser is an "accredited
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investor" within the meaning of Regulation D promulgated under the Securities
Act.
4.7 Restricted Securities. Each Purchaser understands that the Engage
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Shares are characterized as "restricted securities" under the Securities Act,
inasmuch as they are being acquired from Engage in a transaction not involving a
public offering and that under the Securities Act such securities may be resold
without registration under the Securities Act only in certain limited
circumstances. Each Purchaser is familiar with Rule 144 promulgated under the
Securities Act, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act.
4.8 Legends. Each Purchaser agrees that the certificates for the Engage
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Shares shall bear the following legend in addition to any legend required to
provide notice of Engage's rights under Section 7.
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended, or with any state securities
commission, and may not be transferred or disposed of by the holder in the
absence of a registration statement which is effective under the Securities
Act of 1933, as amended, and applicable state laws and rules, or, unless,
immediately prior to the time set for transfer, such transfer may be
effected without violation of the Securities Act of 1933, as amended, and
other applicable state laws and rules."
In addition, each Purchaser agrees that Engage may place stop transfer orders
with its transfer agents with respect to such certificates to the extent
necessary to enforce compliance with the requirements of the Securities Act.
The appropriate portion of the legend and the stop transfer orders will be
removed promptly upon delivery to Engage of such satisfactory evidence as
reasonably may be required by Engage, that such legend or stop orders are not
required to ensure compliance with the Securities Act.
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5. CONDITIONS TO THE PURCHASERS' OBLIGATIONS AT CLOSING. The obligations
of the Purchasers under Sections 1 and 2 of this Agreement are subject to the
fulfillment or waiver, on or before the Closing, of each of the following
conditions:
5.1 Representations and Warranties True. Each of the representations and
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warranties of Engage contained in Section 3 will be true and correct in all
material respects on and as of the date hereof and on and as of the date of the
Closing, except as set forth in the Disclosure Letter, with the same effect as
though such representations and warranties had been made as of the Closing.
5.2 Performance. Engage will have performed and complied with all
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agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing and
will have obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.
5.3 Compliance Certificate. Engage will have delivered to the Purchasers
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at the Closing a certificate signed on its behalf by its Chief Executive Officer
or Chief Financial Officer certifying that the conditions specified in Sections
5.1, 5.2 and 5.7 hereof have been fulfilled.
5.4 Securities Exemptions. The offer and sale of the Engage Shares to the
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Purchasers pursuant to this Agreement will be exempt from the registration
requirements of the Securities Act and the registration and/or qualification
requirements of all applicable state securities laws.
5.5 Proceedings and Documents. All corporate and other proceedings in
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connection with the transactions contemplated at the Closing and all documents
incident thereto will be reasonably satisfactory in form and substance to the
Purchasers and to the Purchasers' legal counsel, and the Purchasers will have
received all such counterpart originals and certified or other copies of such
documents as they may reasonably request. Such documents shall include, but not
be limited to, the following:
(a) Certified Charter Documents. A copy of (i) the Certificate of
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Incorporation and Certificate of Designation of Series A Preferred Stock, each
certified as of a recent date by the Secretary of State of the State of Delaware
as a complete and correct copy thereof; and (ii) the By-laws of Engage (as
amended through the date of the Closing) certified by the Assistant Secretary of
Engage as true and correct copies thereof as of the Closing.
(b) Board Resolutions. A copy, certified by the Assistant Secretary
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of Engage, of the resolutions of the Board of Directors of Engage providing for
the
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approval of this Agreement and the issuance of the Engage Shares and the other
matters contemplated hereby.
(c) Stock Certificates. Stock certificates representing the Engage
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Shares.
5.6 Opinion of Engage Counsel. The Purchasers will have received an
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opinion on behalf of Engage, dated as of the date of the Closing, from Xxxxxx &
Dodge LLP, in substantially the form attached as Exhibit B hereto.
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5.7 No Material Adverse Effect. Between the date hereof and the Closing,
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there shall not have occurred any Material Adverse Effect.
5.8 Satisfaction of Due Diligence. The Purchasers shall have completed to
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their satisfaction a legal and financial review of Engage.
5.9 Merger of Accipiter. Engage shall have consummated the stock-for-
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stock merger of Accipiter with and into Engage and Engage shall be the survivor
of such merger. Evidence of consummation of the merger satisfactory to the
Purchasers shall have been delivered by Engage.
6. CONDITIONS TO ENGAGE'S OBLIGATIONS AT CLOSING. The obligations of
Engage to the Purchasers under Sections 1 and 2 of this Agreement are subject to
the fulfillment or waiver on or before the Closing, of each of the following
conditions:
6.1 Representations and Warranties True. The representations and
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warranties of the Purchasers contained in Section 4 will be true and correct in
all material respects on and as of the date hereof and on and as of the date of
the Closing with the same effect as though such representations and warranties
had been made as of the Closing.
6.2 Performance. The Purchasers will have performed and complied with all
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agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing and
will have obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.
6.3 Payment of Purchase Price. The Purchasers will have delivered to
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Engage the full purchase price of the Engage Shares as specified in Section 1.2.
6.4 Securities Exemptions. The offer and sale of the Engage Shares to the
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Purchasers pursuant to this Agreement will be exempt from the registration
requirements of the Securities Act and the registration
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requirements of the Securities and/or qualification requirements of all
applicable state securities laws.
6.5 Proceedings and Documents. All corporate and other proceedings in
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connection with the transactions contemplated at the Closing and all documents
incident thereto will be reasonably satisfactory in form and substance to Engage
and to Engage's legal counsel, and Engage will have received all such
counterpart originals and certified or other copies of such documents as it may
reasonably request.
7. COVENANTS OF THE PURCHASERS AND ENGAGE.
7.1 Covenants of the Purchasers. As long as a Purchaser holds any of the
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Engage Shares, such Purchaser hereby covenants and agrees as follows:
7.1.1 Right of First Offer Upon Transfer of Engage Shares. If either
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Purchaser intends to sell any of the Engage Shares to any person (other than an
Affiliate of such Purchaser pursuant to Section 7.1.2 below), such Purchaser
shall provide written notice thereof to Engage (the "Purchaser Notice"). The
Purchaser Notice shall specify the number of Engage Shares involved and the
proposed price per share. For a period of 48 hours after the receipt of the
Purchaser Notice by Engage, Engage shall be entitled to elect to purchase all,
but not less than all, of the Engage Shares described in the Purchaser Notice,
at the price per share described in such notice, by delivery of a written notice
(a "Company Purchase Election") to such Purchaser irrevocably electing to
purchase such Shares and shall have twenty (20) business days to consummate said
purchase from such Purchaser. In the event that Engage has not delivered a
Company Purchase Election prior to the expiration of such 48-hour period or has
failed to purchase such Engage Shares within said twenty (20) business day
period, Engage's right to purchase such Engage Shares shall expire, and such
Purchaser shall be entitled to sell the Engage Shares described in the Purchaser
Notice for a period of ninety (90) days following the expiration of such twenty
(20) day period, but only to the proposed purchaser set forth in the Purchaser
Notice and only for a purchase price not less than the purchase price set forth
in the Purchaser Notice. In the event such Purchaser has not sold such Engage
Shares by the end of such ninety (90) day period, the rights of Engage set forth
above in this Section 7.1.1 shall apply to any subsequent sales by such
Purchaser. Each Purchaser further agrees that it will not sell the Engage
Shares privately to an entity engaged in the same business as Engage at the time
of such sale without the prior written consent of Engage, which consent shall
not be unreasonably withheld.
12
7.1.2 Transfers to Affiliates.
-----------------------
(a) Subject to the last sentence of Section 7.1.1, Engage Shares and
the rights granted to a Purchaser under this Agreement relating thereto may be
transferred by such Purchaser to any corporation or other entity which directly
or indirectly controls, is controlled by or is under common control with such
Purchaser, either individually or together with the another Purchaser (an
"Affiliate"), and such Affiliate shall be treated as a Purchaser hereunder,
subject to such Affiliate's compliance with the provisions of this Section
7.1.2. For purposes of this Section 7.1.2, "control" shall mean direct or
indirect control of more than fifty percent (50%), individually or in the
aggregate, of the outstanding voting stock or other ownership interest of a
corporation or entity, or possession, directly or indirectly, of the power to
manage, direct or cause the direction of the management and policies of a
corporation or other entity or possession of the power to elect or appoint fifty
percent (50%) or more of the members of the governing body of the corporation or
other entity.
(b) Any Affiliate (other than any of the Purchasers) to whom Engage
Shares and rights under this Agreement are transferred pursuant to this Section
7.1.2 shall, as a condition to such transfer, deliver to Engage a written
instrument by which the Affiliate identifies itself gives Engage notice of the
transfer of such rights, indicates the Engage Shares owned by it and agrees to
be bound by the obligations imposed upon Purchasers under this Agreement.
Unless and until Engage shall have received such written notice, it shall have
no obligations hereunder to the transferee.
(c) An Affiliate to whom rights are transferred pursuant to this
Section 7.1.2 may not again transfer such rights to any other person or entity,
other than as provided in paragraphs (a) and (b) of this Section 7.1.2.
7.2 Covenants of Engage. As long as the Purchasers hold any of the Engage
-------------------
Shares, Engage hereby covenants and agrees as follows:
7.2.1 Reserve for Conversion Shares. Engage shall at all times reserve
-----------------------------
and keep available out of its authorized but unissued shares of Common Stock,
for the purpose of effecting the conversion of the Engage Shares, such number of
its duly authorized shares of Common Stock as shall be sufficient to effect the
conversion of all the Engage Shares (and any securities convertible into Shares
of Common Stock that may have been issued pursuant to the terms of the Series B
Preferred Stock) from time to time outstanding. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all the then outstanding Engage Shares, Engage will forthwith
take such corporate action as may be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose. Engage shall take all steps
13
reasonably necessary to obtain any authorization, consent, approval, or other
action by or make any filing with any court or administrative body that may be
required in connection with the issuance of shares of Common Stock upon
conversion of the Engage Shares (and any securities convertible into Shares of
Common Stock that may have been issued pursuant to the terms of the Series B
Preferred Stock).
7.2.2 Financial Statements. Engage will maintain books of account in
--------------------
accordance with generally accepted accounting principles applied on a consistent
basis, keep full and complete financial records and furnish to the Purchasers
the following reports:
(a) within 90 days after the end of each fiscal year, a copy of the
balance sheet of Engage as at the end of such year, together with statements of
operations, stockholders' equity and cash flows of Engage for such year prepared
in accordance with generally accepted accounting principles and practices
consistently applied. Such financial statements shall be audited if and to the
extent that Engage has such audited financial statements available. To the
extent audited financial statements become available, at any time, Engage shall
promptly furnish copies thereof to the Purchasers.
(b) within 45 days after the end of each fiscal quarter, a copy of
the balance sheet of Engage as at the end of such quarter, together with
statements of operations, stockholders' equity and cash flows of Engage for such
quarter.
7.2.3 Approval of Series B. Without the prior approval of the holders
--------------------
of at least 51 % of the then outstanding Engage Shares, Engage will not alter,
change or amend the rights, preferences or privileges of the Series B Preferred
Stock (including the Engage Shares) or increase the authorized number of shares
of Series B Preferred Stock or take any action to authorize or effect such
alteration, change, amendment or increase.
7.2.4 Advisory Board Member. If at any time Engage or its Board of
---------------------
Directors forms a business advisory board, the Purchasers shall be entitled to
designate an individual reasonably acceptable to Engage as a member of such
business advisory board.
7.2.5 Preemptive Right.
----------------
(a) Each Purchaser shall be entitled to a right of first refusal to
purchase, on a pro rata basis, all or any part of any Series B Convertible
Preferred Stock issued by Engage after the date hereof (the "New Securities"),
subject to the terms and conditions set forth below. Such Purchaser's pro rata
share shall equal a fraction, the numerator of which is the number of shares of
Series B Preferred Stock then issued and outstanding and held by such Purchaser,
and the denominator of
14
which is the total number of shares of Series B Preferred Stock then issued and
outstanding.
(b) In the event Engage intends to issue New Securities, it shall
give each Purchaser who is then a record holder of Engage Shares (a "Holder")
written notice of such intention, describing the type of New Securities to be
issued, the price thereof and the general terms upon which Engage proposes to
effect such issuance. Each such Holder shall have twenty (20) days from the date
of any such notice to agree to purchase all of its pro rata share of such New
Securities for the price and upon the general terms and conditions specified in
Engage's notice by giving written notice to Engage stating the quantity of New
Securities to be so purchased.
(c) In the event the Holders fail to exercise the foregoing right of
first refusal with respect to any New Securities within such 20-day period,
Engage may within 120 days thereafter sell any or all of such New Securities not
agreed to be purchased by the Holders, at a price and upon general terms no more
favorable to the purchasers thereof than specified in the notice given to each
Holder pursuant to paragraph (b) above. In the event Engage has not so sold
such New Securities within such 120-day period, Engage shall not thereafter
issue or sell any New Securities without first offering such New Securities to
the Holders in the manner provided above.
7.26 Merger. Engage agrees that, notwithstanding the rights, powers,
------
designations and other terms of the Series A Convertible Preferred Stock of
Engage as specified in the Certificate of Designation of such Series A
Convertible Preferred Stock, the merger of Accipiter, with and into Engage as
contemplated in Section 5.9, shall not be deemed a liquidation, dissolution or
winding-up within the meaning of such Certificate of Designation.
8. Registration Rights. Notwithstanding anything to the contrary in this
-------------------
Section 8, Engage shall not be obligated to include in any Registration
Statement (as defined below) any Registrable Shares (as defined below) of a
Purchaser, who could at the time of such request for registration then sell all
of the Registrable Shares which such Purchaser then holds pursuant to Rule
144(k) under the Securities Act.
8.1 Whenever Engage proposes to file a Registration Statement, prior to
such filing it shall give 30 days prior written notice to each Purchaser who is
a record holder of Registrable Shares of its intention to do so (which shall
include, to the extent known, the proposed offering price, the number of shares
proposed to be registered, the distribution arrangements and other appropriate
information), and upon the written request of a Purchaser or Purchasers given
within 30 days after Engage provides such notice (which request shall state the
Registrable Shares intended to be disposed of), Engage shall, subject to Section
8.2, use its best efforts to
15
cause all Registrable Shares which Engage has been requested to register by the
Purchasers to be registered under the Securities Act; provided that Engage shall
have the right to postpone or withdraw any such Registration Statement without
obligation to either Purchaser.
8.2 In connection with any offering under Section 8.1 involving an
underwriting, Engage shall not be required to include any Registrable Shares in
such underwriting unless the holders thereof accept the terms of the
underwriting as agreed upon between Engage and the underwriters selected by it.
If in the opinion of the managing underwriter the registration of all, or part
of, the Registrable Shares which the Purchasers have requested to be included
would materially and adversely affect such public offering, then Engage shall be
required to include in the underwriting only that number of Registrable Shares,
if any, which the managing underwriter believes may be sold without causing such
adverse effect. In the event of such a reduction in the number of shares to be
included in the underwriting, all Purchasers of Registrable Shares who have
requested registration shall participate in the underwriting pro rata based upon
their total ownership of Registrable Shares (or in any other proportion as
agreed upon by such Purchasers) and if any such Purchaser would thus be entitled
to include more shares than such Purchaser requested to be registered, the
excess shall be allocated among such other requesting Purchasers pro rata based
on their ownership of Registrable Shares. Notwithstanding the foregoing, with
respect to any registration other than an Initial Public Offering in which
Registrable Shares may be included pursuant to this Section 8, if the number of
Registrable Shares to be included in the offering in accordance with the
foregoing is less than the total number of shares which the holders of
Registrable Shares have requested to be included, then the holders of
Registrable Shares who have requested registration and other holders of
securities entitled to include them in such registration shall participate in
the registration, pro rata based upon their total ownership of shares of Common
Stock (giving effect to the conversion into Common Stock of all securities
convertible thereunto). If any Purchaser would thus be entitled to include more
securities than such Purchaser requested to be registered, the excess shall be
allocated among other requesting holders pro rata in the manner described in the
preceding sentence.
8.3 Registration Procedures.
-----------------------
8.3.1 If and whenever Engage is required by the provisions of this
Agreement to effect the registration of any of the Registrable Shares under the
Securities Act, Engage shall:
(a) file with the Commission a Registration Statement with respect to
such Registrable Shares and use its best efforts to cause that Registration
Statement to become and remain effective;
16
(b) as expeditiously as possible prepare and file with the Commission
any amendments and supplements to the Registration Statement and the prospectus
included in the Registration Statement as may be necessary to keep the
Registration Statement effective for a period of not less than 180 days from the
effective date;
(c) as expeditiously as possible furnish to each selling Purchaser
such reasonable numbers of copies of the prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as the selling Purchaser may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Shares owned
by the selling Purchaser;
(d) as expeditiously as possible use its best efforts to register or
qualify the Registrable Shares covered by the Registration Statement under the
securities or Blue Sky laws of such states as the selling Purchaser shall
reasonably request, and do any and all other acts and things that may be
necessary or desirable to enable the selling Purchaser to consummate the public
sale or other disposition in such jurisdictions of the Registrable Shares owned
by the selling Purchaser; provided, however, that Engage shall not be required
-------- -------
in connection with this paragraph (d) to qualify as a foreign corporation in any
jurisdiction; and
(e) cause all of the Registrable Shares to be listed on or included in
each securities exchange or quotation system on which similar securities issued
by Engage are then listed.
8.3.2 If Engage has delivered preliminary or final prospectuses to the
selling Purchaser and after having done so the prospectus is amended to comply
with the requirements of the Securities Act, Engage shall promptly notify the
selling Purchaser and, if requested, the selling Purchaser shall immediately
cease making offers of Registrable Shares and shall return all prospectuses to
Engage. Engage shall promptly provide the selling Purchaser with revised
prospectuses and, following receipt of the revised prospectuses, the selling
Purchaser shall be free to resume, if and to the extent consistent with the
transaction or transactions registered pursuant to the applicable Registration
Statement, making offers of the Registrable Shares.
8.4 Allocation of Expenses. Engage shall pay all Registration Expenses of
----------------------
such any registration effected pursuant to this Section 8. For purposes of this
Section 8, the term "Registration Expenses" shall mean all expenses incurred by
---------------------
Engage in complying with Section 8 of this Agreement, including, without
limitation, all registration and filing fees, exchange listing fees, printing
expenses, fees and disbursements of counsel for Engage, out-of-pocket expenses
of Engage and the underwriters, state Blue Sky fees and expenses, and the
expense of any special audits incident to or required by any such registration,
but excluding underwriting discount
17
and selling commissions relating to the Registrable Shares. Such underwriting
discounts and selling commissions shall be borne pro rata by the selling
Purchasers in accordance with the number of Registrable Shares included by each
in such registration.
8.5 Indemnification.
---------------
8.5.1 In the event of any registration of any of the Registrable
Shares under the Securities Act pursuant to this Agreement, then to the extent
permitted by law Engage shall indemnify and hold harmless the seller of such
Registrable Shares (including its respective directors, officers, employees and
agents), (and to the extent set forth in any underwriting agreement with respect
to such offering, each underwriter) and each other person, if any, who controls
such seller or underwriter within the meaning of the Securities Act or the
Exchange Act from and against any losses, claims, damages, expenses or
liabilities, joint or several, to which such seller (including its respective
directors, officers, employees and agents), underwriter or controlling person
may become subject under the Securities Act, the Exchange Act, state securities
laws or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any Registration
Statement under which such Registrable Shares were registered under the
Securities Act, any preliminary prospectus or final prospectus contained in the
Registration Statement, or any amendment or supplement to such Registration
Statement, or arise out of or are based upon the omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or any violation by Engage of the Securities
Act, any state securities or Blue Sky laws or any rule or regulation thereunder
in connection with such registration; and Engage shall reimburse such seller,
underwriter and each such controlling person for any legal or any other expenses
reasonably incurred by such seller, underwriter or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action or the payment of any settlement thereof; provided, however,
-------- -------
that Engage shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any untrue
statement or omission made in such Registration Statement, preliminary
prospectus or prospectus, or any such amendment or supplement, in reliance upon
and in conformity with information furnished to Engage, in writing, by or on
behalf of such seller, (and to the extent set forth in any underwriting
agreement with respect to such offering, each underwriter) or controlling person
specifically for use in the preparation thereof.
8.5.2 In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, then to the extent
permitted by law, each seller of Registrable Shares jointly and severally shall
indemnify and hold harmless Engage, each of its directors and officers (and to
the extent set forth in any underwriting agreement with respect to such
offering, each underwriter) and each
18
person, if any, who controls Engage or any such underwriter within the meaning
of the Securities Act or the Exchange Act, from and against any losses, claims,
damages, expenses or liabilities joint or several, to which Engage, such
directors and officers, underwriter or controlling person may become subject
under the Securities Act, Exchange Act, state securities laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise solely out of or are based solely upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement under which such Registrable Shares were registered under the
Securities Act, any preliminary prospectus or final prospectus contained in the
Registration Statement, or any amendment or supplement to the Registration
Statement, or arise solely out of or are solely based upon any omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that the
statement or omission was made in reliance upon and in conformity with
information furnished in writing to Engage by or on behalf of such seller,
specifically for use in connection with the preparation of such Registration
Statement, prospectus, amendment or supplement; and provided, further, that the
-------- -------
obligations of such Purchaser hereunder shall be limited to an amount equal to
the proceeds to each Purchaser of Registrable Shares sold as contemplated
herein.
8.5.3 Indemnification of an underwriter pursuant to this Subsection 8.5
shall not be interpreted as providing relief of such underwriter from any or all
of its due diligence obligations. Further, an underwriter shall not be entitled
to indemnification pursuant to this Subsection 8.5 in the event that it fails to
deliver to any selling Purchaser any preliminary or final or revised prospectus,
as required by the rules and regulations of the Commission. Finally, no
indemnification shall be provided pursuant to this Subsection 8.5 in the event
that any error in a preliminary prospectus of Engage is subsequently corrected
in the final prospectus of Engage for a particular offering, and such final
prospectus is delivered to all purchasers in the offering prior to the date of
purchase of the securities.
8.5.4 Contribution. If the indemnification provided for in Subsections
------------
8.5.1 through 8.5.4 is held by a court of competent jurisdiction to be
unavailable to an Indemnified Party with respect to any losses, claims, damages
or liabilities referred to herein, the Indemnifying Party, in lieu of
indemnifying such Indemnified Party thereunder, shall to the extent permitted by
applicable law contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, claim, damage or liability in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party on the
one hand and of the Indemnified Party on the other in connection with the
violation(s) that resulted in such loss, claim, damage or liability, as well as
any other relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by a court
of law by reference to, among other things, whether the untrue or alleged untrue
statement of material fact or the omission to state a material fact relates to
19
information supplied by the Indemnifying Party or by the Indemnified Party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
8.6 Information by Holder. Each holder of Registrable Shares included in
---------------------
any registration shall furnish to Engage such information regarding such holder
and the distribution proposed by such holder as Engage may request in writing
and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Agreement.
8.7 Rule 144 Requirements. With a view to making available to the
---------------------
Purchasers the benefits of Rule 144 promulgated under the Securities Act and any
other rule or regulation of the Commission that may at any time permit a
Purchaser to sell securities of Engage to the public without registration,
Engage agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act (at any time after
it has become subject to the reporting requirements of the Exchange Act);
(b) file with the Commission in a timely manner all reports and other
documents required of Engage to be filed under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements); and
(c) furnish to any holder of Registrable Shares upon request a
written statement by Engage as to its compliance with the reporting requirements
of said Rule 144, and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of Engage, and such other reports and
documents of Engage as such holder may reasonably request to avail itself of any
similar rule or regulation of the Commission allowing it to sell any such
securities without registration.
8.8 Certain Definitions. As used in this Section 8, the following terms
-------------------
shall have the following respective meanings:
"Initial Public Offering" means the first public distribution of the Common
-----------------------
Stock pursuant to a firm commitment underwriting, following which the Common
Stock shall be listed and traded on a national securities exchange or on the
NASDAQ National Market System.
"Registrable Shares" means the shares of Common Stock issued or issuable
------------------
upon conversion of the Engage Shares and any convertible securities with respect
to the Engage Shares that may have been issued pursuant to the terms of the
Series B Preferred Stock, and any shares of Common Stock issued with respect
thereto as a dividend or other distribution or in connection with any
reorganization,
20
recapitalization or other corporate transaction affecting the Series B Preferred
Stock generally. Wherever reference is made in this Agreement to a request or
consent of holders of a certain percentage of the Registrable Shares (or any
category thereof), or to a number or percentage of Registrable Shares (or any
category thereof) held by a particular Purchaser, such reference shall be
intended to refer to the shares of Common Stock issuable upon conversion of the
shares of Preferred Stock held by it in accordance with the Certificate of
Incorporation of Engage and the Certificate of Designation for such Preferred
Stock, even though such conversion has not yet been effected.
"Registration Statement" means a registration statement filed by Engage
----------------------
with the Commission for a public offering and sale of securities of Engage
(other than a registration statement on Form S-4 or S-8, or their successors, or
any registration statement covering only securities proposed to be issued in
exchange for securities or assets of another corporation).
9. MISCELLANEOUS.
9.1 Successors and Assigns. The terms and conditions of this Agreement
----------------------
will inure to the benefit of and be binding upon the respective successors and
assigns of the parties.
9.2 Governing Law and Dispute Resolution. This Agreement shall be
------------------------------------
governed by and construed in accordance with the laws of the Commonwealth of
Massachusetts (excluding choice of law principles) except with respect to
matters properly governed by the General Corporation Law of the State of
Delaware, which shall be governed thereby, and both parties agree that all
disputes arising between them related to this Agreement in any respect and the
enforcement of this Agreement shall be resolved only and exclusively in the
United States Federal Court in Boston, Massachusetts. Each party hereto hereby
consents to the non-exclusive jurisdiction of the United States Federal Court in
Boston, Massachusetts and the appropriate State and Federal Courts located in
the State of Delaware, with respect to any action, suit or proceeding commenced
in any such court by the other party hereto or its successors or assigns, and
each party hereto waives any defense it may have with respect to such
jurisdiction or with respect to the proper venue of any such action, suit or
proceeding in any such court.
9.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
9.4 Headings. The headings and captions 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
21
schedules will, 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.
9.5 Notices. Any notice required or permitted under this Agreement will
-------
be given in writing, shall be effective when received, and shall in any event be
deemed received and effectively given upon personal delivery to the party to be
notified or three (3) business days after mailing, by registered air mail,
postage prepaid, or one (1) business day after deposit with a nationally
recognized courier service such as Federal Express for next business day
delivery under circumstances in which such service guarantees next business day
delivery, or one (1) business day after facsimile with copy delivered by
registered air mail, postage prepaid and addressed to the party to be notified
at the address as specified at the beginning of this Agreement or at such other
address as the Purchaser or Engage may designate by giving at least ten (10)
days advance written notice pursuant to this Section 9.5.
9.6 No Finder's Fees. Each Purchaser represents that it neither is nor
----------------
will be obligated for any finder's or broker's fee or commission in connection
with the transactions contemplated hereunder (except as a result of the
transactions contemplated under Section 8). The Purchasers will jointly and
severally indemnify and hold harmless Engage from any liability for any
commission or compensation in the nature of a finders' or broker's fee for which
the Purchasers or any of their officers, employees or consultants, or
representatives is responsible. Engage represents that it neither is nor will
be obligated for any finder's or broker's fee or commission in connection with
the transactions contemplated hereunder, except with respect to those owed to
Japan Entry (and except as a result of the transactions contemplated under
Section 8). Engage will indemnify and hold harmless the Purchasers from any
liability for any commission or compensation in the nature of a finder's or
broker's fee for which Engage or any of its officers, employees or consultants
or representatives is responsible.
9.7 Amendments and Waivers. 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 Engage and the Purchasers. Any amendment or waiver effected
in accordance with this Section 9.7 will be binding upon the Purchasers, Engage
and their respective successors and assigns.
9.8 Severability. If any provision of this Agreement is held to be
------------
unenforceable under applicable law, such provision will be excluded from this
Agreement and the balance of the Agreement will be interpreted as if such
provision were so excluded and will be enforceable in accordance with its terms.
22
9.9 Entire Agreement. This Agreement, the Disclosure Letter and all
----------------
exhibits and schedules hereto and thereto constitutes the entire agreement and
understanding of the parties with respect to the subject matter hereof and
supersedes any and all prior negotiations, correspondence, agreements,
understandings duties or obligations between the parties with respect to the
subject matter hereof.
9.10 Further Assurances. From and after the date of this Agreement, upon
------------------
the request of Engage or the Purchasers, Engage and the Purchasers will execute
and deliver such instruments, documents or other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement.
9.11 Meaning of Include and Including. Whenever in this Agreement the
--------------------------------
word "include" or "including" is used, it shall be deemed to mean "include,
without limitation" or "including, without limitation," as the case may be, and
the language following "include" or "including" shall not be deemed to set forth
an exhaustive list.
9.12 Fees Costs and Expenses. All fees, costs and expenses (including
-----------------------
attorneys' fees and expenses) incurred by either party hereto in connection with
the preparation, negotiation and execution of this Agreement and the
consummation of the transactions contemplated hereby (including the costs
associated with any filings with, or compliance with any of the requirements of,
any governmental authorities), shall be the sole and exclusive responsibility of
such party.
9.13 Competition. Nothing set forth herein shall be deemed to preclude,
-----------
limit or restrict Engage's or the Purchaser's ability to compete with the other.
9.14 Survival. The representations and warranties made by Engage are not
--------
limited in any manner by the representations and warranties made by the
Purchasers hereunder. The representations and warranties contained herein made
by Engage and the Purchasers shall survive the execution and delivery of this
Agreement.
9.15 Indemnity. Engage and each Purchaser each agrees to indemnify and
---------
hold each other party hereto harmless against any and all losses, costs and
expenses (including, without limitation, reasonable legal and other expenses)
resulting from, relating to or arising out of (i) any misrepresentation or
breach of any warranty of such party contained in this Agreement, the Disclosure
Letter or any certificate delivered by such party at the Closing, (ii) any
breach of any covenant of such party contained in this Agreement and (iii) any
and all actions, suits, demands, assessments or judgments with respect to any
claim arising out of or relating to the subject matter of this indemnification.
9.16 Indemnification Procedure. Each party entitled to indemnification
-------------------------
under this Agreement (the "Indemnified Party") shall give notice to the party
-----------------
23
required to provide indemnification (the "Indemnifying Party") promptly after
------------------
such Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom; provided, that counsel for
--------
the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld); and, provided, further, that the failure of any
-------- -------
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement. The Indemnified
Party may participate in such defense at such party's expense; provided,
--------
however, that the Indemnifying Party shall pay such expense if representation of
-------
such Indemnified Party by the counsel retained by the Indemnifying Party would
be inappropriate due to actual or potential differing interests between the
Indemnified Party and any other party represented by such counsel in such
proceeding. No Indemnifying Party, in the defense of any such claim or
litigation shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation, and no Indemnified Party shall consent to entry of any judgment or
settle such claim or litigation without the prior written consent of the
Indemnifying Party.
THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
24
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
ENGAGE TECHNOLOGIES, INC.
By: /s/ Xxxx Xxxxxx
---------------------------------
Name: Xxxx Xxxxxx
-------------------------------
Title: CEO
------------------------------
SUMITOMO CORPORATION
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
SUMITOMO CORPORATION OF AMERICA
By: /s/ Xxxxxxxx Xxxxxxx
---------------------------------
Name: Xxxxxxxx Xxxxxxx
-------------------------------
Title: Executive Vice President
------------------------------
25
EXHIBIT A
CERTIFICATE OF DESIGNATION
26
CERTIFICATE OF DESIGNATION OF
SERIES B CONVERTIBLE PREFERRED STOCK
Engage Technologies, Inc., a Delaware corporation (the "Corporation" or the
"Company"), pursuant to authority conferred on the Board of Directors of the
Corporation by the Amended and Restated Certificate of Incorporation of the
Corporation and in accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware, certifies that the Board of Directors
of the Corporation, by unanimous consent dated July 31, 1998, has duly adopted
the following resolution providing for the establishment and issuance of a
series of Preferred Stock to be designated "Series B Convertible Preferred
Stock" and to consist of two hundred thirty-eight thousand five hundred ninety-
seven (238,597) shares as follows:
RESOLVED: That, pursuant to the authority expressly granted and vested in
the Board of Directors of this Corporation in accordance with the
provisions of its Amended and Restated Certificate of Incorporation, a
series of Preferred Stock of the Corporation hereby is established,
consisting of two hundred thirty-eight thousand five hundred ninety-seven
(238,597) shares, to be designated "Series B Convertible Preferred Stock"
(hereafter "Series B Preferred Stock"), the Board of Directors be and
hereby is authorized to issue such shares of Series B Preferred Stock from
time to time and for such consideration and on such terms as the Board of
Directors shall determine; and subject to the limitations provided by law
and by the Corporation's Amended and Restated Certificate of Incorporation,
the powers, designations, preferences and relative, participating, optional
or other special rights, powers or priorities of, and the qualifications,
limitations or restrictions upon, the Series B Preferred Stock shall be as
follows:
1. Designation. This series of Preferred Stock, par value $0.01 per
-----------
share, shall be designated the "Series B Convertible Preferred Stock"
(hereinafter "Series B Preferred Stock").
2. Liquidation, Dissolution or Winding Up.
--------------------------------------
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series A
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to its stockholders, after and
subject to the payment in full of all amounts required to be distributed to the
holders of any other class or series of stock of the Corporation ranking on
liquidation prior and in preference to the Series A Preferred Stock, but before
any payment shall be made to
the holders of Series B Preferred Stock, Common Stock or any other class or
series of stock ranking on liquidation junior to the Series A Preferred Stock,
by reason of their ownership thereof, an amount equal to $10.00 per share
(subject to appropriate adjustment in the event of any stock dividend, stock
split, combination or other similar recapitalization affecting such shares),
plus any accrued but unpaid dividends with respect thereto. If upon any such
liquidation, dissolution or winding up of the Corporation, the remaining assets
of the Corporation available for distribution to its stockholders shall be
insufficient to pay the holders of shares of Series A Preferred Stock the full
amount to which they shall be entitled, the holders of shares of Series A
Preferred Stock and any class or series of stock ranking on liquidation on a
parity with the Series A Preferred Stock shall share ratably in any distribution
of the remaining assets and funds of the Corporation in proportion to the
respective amounts which would otherwise be payable in respect of the shares
held by them upon such distribution if all amounts payable on or with respect to
such shares were paid in full.
(b) After the payment of all preferential amounts required to be paid
to the holders of Series A Preferred Stock and any other class or series of
stock of the Corporation ranking on liquidation senior to the Series B Preferred
Stock, but before any payment shall be made to the holders of Common Stock or
any other class or series of stock ranking on liquidation junior to the Series B
Preferred Stock upon the liquidation, dissolution or winding up of the
Corporation, the holders of shares of Series B Preferred Stock then outstanding
shall be entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders, by reason of their ownership thereof; an
amount equal to $8.3823 per share (subject to appropriate adjustment in the
event of any stock dividend, stock split, combination or other similar
recapitalization affecting such shares). If upon any such liquidation,
dissolution or winding up of the Corporation, the remaining assets of the
Corporation available for distribution to its stockholders shall be insufficient
to pay the holders of shares of Series B Preferred Stock the full amount to
which they shall be entitled, the holders of shares of Series B Preferred Stock
and any class or series of stock ranking on liquidation on a parity with the
Series B Preferred Stock shall share ratably in any distribution of the
remaining assets and funds of the Corporation in proportion to the respective
amounts which would otherwise be payable in respect of the shares held by them
upon such distribution if all amounts payable on or with respect to such shares
were paid in full.
(c) After the payment of all preferential amounts required to be paid
to the holders of Series A Preferred Stock, Series B Preferred Stock and any
other class or series of stock ranking on liquidation senior to the Common
Stock, upon the dissolution, liquidation or winding up of the Corporation, the
holders of shares of Common Stock then outstanding shall be entitled to receive,
on a pro-rata basis, the remaining funds and assets of the Corporation available
for distribution to its stockholders.
2
(d) With respect to the Series B Preferred Stock, a merger or
consolidation of the Corporation into or with another corporation in which the
holders of the outstanding capital stock of the Corporation immediately prior to
such merger or consolidation do not hold a majority of the outstanding capital
stock of the surviving corporation, or the sale of all or substantially all the
assets of the Corporation, shall be deemed to be a liquidation, dissolution or
winding up of the Corporation for purposes of this Section 2 unless the holders
of at least 51 % of the then outstanding shares of Series B Preferred Stock
elect to have such events not deemed to be a liquidation, dissolution or winding
up of the Corporation by giving written notice thereof to the Corporation at
least ten (10) days before the effective date of such event. If such notice is
given, the provisions of Subsection 4(h) below shall apply. Whenever the
distribution provided for herein shall be paid in property other than cash, the
value of such distribution shall be the fair market value of such property as
determined in good faith by the Board of Directors of the Corporation.
3. Voting Power. Except as otherwise expressly provided herein or as
------------
required by law, each holder of Series B Preferred Stock shall be entitled to
vote on all matters and shall be entitled to that number of votes equal to the
largest number of whole shares of Common Stock into which such holder's shares
of Series B Preferred Stock could be converted, pursuant to the provisions of
Section 4 hereof (taking into account all declared but unpaid dividends, if any,
with respect to such Series B Preferred Stock), at the record date for the
determination of stockholders entitled to vote on such matter or, if no such
record date is established, at the date such vote is taken or any written
consent of stockholders is solicited. Except as otherwise expressly provided
herein or as required by law, the holders of shares of Series A Preferred Stock,
Series B Preferred Stock and of Common Stock shall be entitled to vote together
as a class on all matters.
4. Conversion Rights. The holders of the Series B Preferred Stock shall
-----------------
have the following conversion rights:
(a) General. Subject to and in compliance with the provisions of
-------
this Section 4, any shares of the Series B Preferred Stock, may, at the option
of the holder, be converted at any time or from time to time into fully-paid and
non-assessable shares (calculated as to each conversion to the largest whole
share) of Common Stock. The number of shares of Common Stock to which a holder
of Series B Preferred Stock shall be entitled upon conversion shall be the
product obtained by multiplying the Applicable Conversion Rate (determined as
provided in Section 4(c)) by the number of shares of Series B Preferred Stock
being converted. Upon conversion of their shares of Series B Preferred Stock
into shares of Common Stock, holders of shares of Series B Preferred Stock shall
also have the option to have all declared but unpaid dividends on such shares of
Series B Preferred Stock converted into shares of Common Stock. The number of
shares of Common Stock to be received upon the conversion of such declared but
unpaid dividends shall be computed by multiplying
3
the number of shares of Series B Preferred Stock which could have been purchased
with such declared but unpaid dividends, assuming a Series B Preferred Stock
purchase price of $8.3823 per share, by the Applicable Conversion Rate in effect
at the time of such conversion.
(b) Conversion Following Underwritten Public Offering.
-------------------------------------------------
(i) All outstanding shares of Series B Preferred Stock shall,
upon the closing of an underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offering and sale of Common Stock for the account of the Company in which
the Common Stock is sold at a price to the public of not less than the amount
per share which would be equal to $10.70 per share (such amount to be equitably
adjusted whenever there shall occur a stock split, combination, reclassification
or other similar event affecting the Common Stock) and in which the aggregate
gross proceeds (before deduction of any underwriting discounts, commissions or
expenses) received by the Company from such public offering, shall equal or
exceed Fifteen Million Dollars ($15,000,000), be converted automatically into
the number of shares of Common Stock to which a holder of Series B Preferred
Stock shall be entitled upon conversion pursuant to Section 4(a) hereof without
any further action by such holders and whether or not the certificates
representing such shares are surrendered to the Company or its transfer agent
for the Common Stock.
(ii) Upon the occurrence of the conversion specified in Section
4(b)(i), the holders of such Series B Preferred Stock shall surrender the
certificates representing such shares at the office of the Company or of its
transfer agent for the Common Stock. Thereupon, there shall be issued and
delivered to each such holder a certificate or certificates for the number of
shares of Common Stock into which the shares of the Series B Preferred Stock
surrendered were convertible on the date on which such conversion occurred. The
Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon such conversion unless certificates evidencing such
shares of the Series B Preferred Stock being converted are either delivered to
the Company or any such transfer agent or the holder notifies the Company or any
such transfer agent that such certificates have been lost, stolen or destroyed
and executes an agreement satisfactory to the Company to indemnify the Company
from any loss incurred by it in connection therewith. In addition, the Company
may, if the Board of Directors deems it reasonably necessary, require the holder
to post a bond in connection with such indemnity agreement.
(c) Applicable Conversion Rate. The conversion rate in effect at any
--------------------------
time (the "Applicable Conversion Rate") shall be the quotient obtained by
dividing (i) $8.3823 by (ii) the Applicable Conversion Value, calculated as
provided in Section 4(d).
4
(d) Applicable Conversion Value. The Applicable Conversion Value in
---------------------------
effect from time to time, except as adjusted in accordance with Section 4(e)
hereof; shall be $8.3823 as of the date of this Certificate of Series B
Convertible Preferred Stock.
(e) Adjustments to Applicable Conversion Value.
------------------------------------------
(i) Upon Sales of Common Stock. If the Company shall, while there
--------------------------
are any shares of Series B Preferred Stock outstanding, issue or sell shares of
its Common Stock without consideration or at a price per share less than the
Applicable Conversion Value in effect immediately prior to such issuance or
sale, then in each such case such Applicable Conversion Value upon each such
issuance or sale, except as hereinafter provided, shall be adjusted to an amount
equal to a fraction:
(A) the numerator of which shall be (a) the Applicable
Conversion Value prior to the issuance multiplied by the number of shares of
Common Stock outstanding immediately prior to the issuance of such additional
shares of Common Stock, calculated on a fully diluted basis assuming exercise or
conversion of all securities exercisable for or convertible into Common Stock,
whether or not such exercise or conversion is unvested or otherwise conditional,
plus (b) the price per share of such additional shares of Common Stock
multiplied by number of such additional shares of Common Stock so issued or
deemed issued, and
(B) the denominator of which shall be (a) the number of
shares of Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock, calculated on a fully diluted basis assuming
exercise or conversion of all securities exercisable for or convertible into
Common Stock, whether or not such exercise or conversion is unvested or
otherwise conditional, plus (b) the number of such additional shares of Common
Stock so issued or deemed issued.
The Corporation's issuance of shares of Common Stock, or options exercisable
therefor, pursuant to any stock purchase or stock option plan or other
individual or group incentive program of any kind approved by the Board of
Directors to the Corporation's officers, directors, employees or consultants
shall not be deemed an issuance of additional shares of Common Stock and shall
have no effect on the calculations contemplated by this Section 4(e).
For the purposes of this Section 4(e), the issuance of any warrants,
options, subscriptions or purchase rights with respect to shares of Common Stock
and the
5
issuance of any securities convertible into or exchangeable for shares
of Common Stock (or the issuance of any warrants, options or any rights with
respect to such convertible or exchangeable securities) whether or not such
conversion or exchange is conditional, shall be deemed an issuance at such time
of such Common Stock if the Net Consideration Per Share (as hereinafter
determined) which may be received by the Company for such Common Stock shall be
less than the Applicable Conversion Value at the time of such issuance. Any
obligation, agreement or undertaking to issue warrants, options, subscriptions
or purchase rights at any time in the future shall be deemed to be an issuance
at any time such obligation, agreement or undertaking is made or arises. No
adjustment of the Applicable Conversion Value shall be made under this Section
4(e) upon the issuance of any shares of Common Stock which are issued pursuant
to the exercise of any warrants, options, subscriptions or purchase rights or
pursuant to the exercise of any conversion or exchange rights in any convertible
securities if any adjustment shall previously have been made upon the issuance
of any such warrants, options or subscriptions or purchase rights or upon the
issuance of any convertible securities (or upon the issuance of any warrants,
options or any rights therefor) as above provided. Any adjustment of the
Applicable Conversion Value with respect to this paragraph which relates to
warrants, options, subscriptions or purchase rights with respect to shares of
Common Stock shall be disregarded if, as, and when all of such warrants,
options, subscriptions or purchase rights expire or are canceled without being
exercised, so that the Applicable Conversion Value effective immediately upon
such cancellation or expiration shall be equal to the Applicable Conversion
Value in effect at the time of the issuance of the expired or canceled warrants,
options, subscriptions or purchase rights, with such additional adjustments as
would have been made to that Applicable Conversion Value had the expired or
canceled warrants, options, subscriptions or purchase rights not been issued.
For purposes of this paragraph, the "Net Consideration Per Share" which may be
received by the Company shall be determined as follows:
(A) The "Net Consideration Per Share" shall mean the amount
equal to the total amount of consideration, if any, received by the Company for
the issuance of such warrants, options, subscriptions or other purchase rights
or convertible or exchangeable securities, plus the minimum amount of
consideration, if any, payable to the Company upon exercise, conversion or
exchange thereof, divided by the aggregate number of shares of Common Stock that
would be issued if all such warrants, options, subscriptions or other purchase
rights or convertible or exchangeable securities were exercised, exchanged or
converted.
(B) The "Net Consideration Per Share" which may be received
by the Company shall be determined in each instance as
6
of the date of issuance of warrants, options, subscriptions or other purchase
rights or convertible or exchangeable securities without giving effect to any
possible future price adjustments or rate adjustments which may be applicable
with respect to such warrants, options, subscriptions or other purchase rights
or convertible or exchangeable securities.
For purposes of this Section 4(e), if a part or all of the consideration
received by the Company in connection with the issuance of shares of the Common
Stock or the issuance of any of the securities described in this Section 4(e)
consists of property other than cash, the Company at its expense will promptly
cause independent public accountants of recognized standing selected by the
Company to value such property, whereupon such value shall be given to such
consideration and shall be recorded on the books of the Company with respect to
receipt of such property.
This Section 4(e)(i) shall not apply under any of the circumstances which
would constitute an Extraordinary Common Stock Event (as hereinafter defined in
Section 4(e)(ii)).
(ii) Upon an Extraordinary Common Stock Event. Upon the
----------------------------------------
happening of an Extraordinary Common Stock Event (as hereinafter defined), the
Applicable Conversion Value shall, simultaneously with the happening of such
Extraordinary Common Stock Event, be adjusted by multiplying the then effective
Applicable Conversion Value by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such
Extraordinary Common Stock Event and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such
Extraordinary Common Stock event, and the product so obtained shall thereafter
be the Applicable Conversion Value. The Applicable Conversion Value, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive Extraordinary Common Stock Event or Events.
"Extraordinary Common Stock Event" shall mean (i) the issue of additional
shares of Common Stock as a dividend or other distribution on outstanding shares
of Common Stock, (ii) the subdivision of outstanding shares of Common Stock into
a greater number of shares of Common Stock, or (iii) the combination of
outstanding shares of the Common Stock into a smaller number of shares of Common
Stock.
(f) Dividends. In the event the Company shall make or issue, or
---------
fix a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the Company
other than shares of Common Stock or in assets (excluding cash dividends or
distributions), then and in each such event provisions shall be made so that the
holders of Series B Preferred Stock shall receive upon conversion thereof in
addition to the number of shares of
7
Common Stock receivable thereupon, the number of securities or such other assets
of the Company which they would have received had their Series B Preferred Stock
been converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including the
Conversion Date (as that term is hereafter defined in Section 4(j)), retained
such securities or such other assets receivable by them as aforesaid during such
period, giving application to all adjustments called for during such period
under this Section 4 with respect to the rights of the holders of the Series B
Preferred Stock.
(g) Recapitalization or Reclassification. If the Common Stock
------------------------------------
issuable upon the conversion of the Series B Preferred Stock shall be changed
into the same or a different number of shares of any class or classes of stock
of the Corporation, whether by recapitalization, reclassification or otherwise
(other than a subdivision or combination of shares or stock dividend provided
for elsewhere in this Section 4, or a reorganization, merger, consolidation or
sale of assets provided for elsewhere in this Section 4), then and in each such
event the holder of each share of Series B Preferred Stock shall have the right
thereafter to convert such share into the kind and amount of shares of stock and
other securities and property receivable upon such reorganization,
reclassification or other change by holders of the number of shares of Common
Stock into which such share of Series B Preferred Stock might have been
converted (taking into account all declared and unpaid dividends and interest
with respect to such Series B Preferred Stock) immediately prior to such
reorganization, reclassification or change, all subject to further adjustment as
provided herein.
(h) Capital Reorganization, Merger or Sale of Assets. If at any time
------------------------------------------------
or from time to time there shall be a capital reorganization of the Common Stock
(other than a subdivision, combination, reclassification or exchange of shares
provided for elsewhere in this Section 4) or a merger or consolidation of the
Company with or into another corporation or entity, or the sale of all or
substantially all of the Company's properties and assets to any other person or
persons, then, as a part of such reorganization, merger, consolidation or sale,
provision shall be made so that the holders of the Series B Preferred Stock
shall thereafter be entitled to receive upon conversion of the Series B
Preferred Stock, the number of shares of stock or other securities or property
of the Company, or of the successor corporation or entity resulting from such
merger, consolidation or sale, to which such holders would be entitled if they
were holders of the number of shares of Common Stock they were entitled to
receive on conversion of the Series B Preferred Stock held by them immediately
prior to such capital reorganization, merger, consolidation, or sale. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of the
Series B Preferred Stock after the reorganization, merger, consolidation or sale
to the end that the provisions of this Section 4 (including adjustment of the
Applicable Conversion Value then in effect and the number of shares purchasable
upon conversion of the
8
Series B Preferred Stock) shall be applicable after that event in as nearly
equivalent a manner as may be practicable.
Each holder of Series B Preferred Stock upon the occurrence of a capital
reorganization, merger or consolidation of the Company, or the sale of all or
substantially all its assets and properties as such events are more fully set
forth in the first paragraph of this Section 4(h), shall have the option of
electing treatment of his shares of Series B Preferred Stock under either this
Section 4(h) or Section 2(d) hereof, notice of which election shall be submitted
in writing to the Company at its principal offices no later than five (5) days
before the effective date of such event.
(i) Accountant's Certificate as to Adjustments. In each case
------------------------------------------
of an adjustment or readjustment of the Applicable Conversion Rate, the Company
will furnish each holder of Series B Preferred Stock with a certificate,
prepared by its chief financial officer showing such adjustment or readjustment,
and stating in detail the facts upon which such adjustment or readjustment is
based. Upon the request of any holder, the Company will cause its independent
public accountants to confirm the accuracy of such adjustment or readjustment.
(j) Exercise of Conversion Privilege. To exercise his conversion
--------------------------------
privilege, a holder of Series B Preferred Stock shall surrender the certificate
or certificates representing the shares being converted to the Company at its
principal office, and shall give written notice to the Company at that office
that such holder elects to convert such shares. Such notice shall also state
the name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock issuable upon such conversion shall be
issued. The certificate or certificates for shares of Series B Preferred Stock
surrendered for conversion shall be accompanied by proper assignment thereof to
the Company or in blank. The date when such written notice is received by the
Company, together with the certificate or certificates representing the shares
of Series B Preferred Stock being converted, shall be the "Conversion Date". As
promptly as practicable after the Conversion Date, the Company shall issue and
shall deliver to the holder of the shares of Series B Preferred Stock being
converted, or on its written order, such certificate or certificates as it may
request for the number of whole shares of Common Stock issuable upon the
conversion of such shares of Series B Preferred Stock in accordance with the
provisions of this Section 4, cash in the amount of all unpaid dividends on such
shares of Series B Preferred Stock, up to and including the Conversion Date,
unless conversion of such unpaid dividends into Common Stock has been elected,
and cash, as provided in Section 4(k), in respect of any fraction of a share of
Common Stock issuable upon such conversion. Such conversion shall be deemed to
have been effected immediately prior to the close of business on the Conversion
Date, and at such time the rights of the holder as holder of the converted
shares of Series B Preferred Stock shall cease and the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon such
9
conversion shall be deemed to have become the holder or holders of record of the
shares of Common Stock represented thereby.
(k) Cash in Lieu of Fractional Shares. No fractional shares of
---------------------------------
Common Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Series B Preferred Stock. Instead of any fractional
shares of Common Stock which would otherwise be issuable upon conversion of
Series B Preferred Stock, the Company shall pay to the holder of the shares of
Series B Preferred Stock which were converted a cash adjustment in respect of
such fractional shares in an amount equal to the same fraction of the market
price per share of the Common Stock (as determined in a reasonable manner
prescribed by the Board of Directors) at the close of business on the Conversion
Date. The determination as to whether or not any fractional shares are issuable
shall be based upon the total number of shares of Series B Preferred Stock being
converted at any one time by any holder thereof, not upon each share of Series B
Preferred Stock being converted.
(l) Partial Conversion. In the event some but not all of the shares
------------------
of Series B Preferred Stock represented by a certificate or certificates
surrendered by a holder are converted, the Company shall execute and deliver to
or on the order of the holder, at the expense of the Company, a new certificate
representing the number of shares of Series B Preferred Stock which were not
converted.
(m) Reservation of Common Stock. The Company shall at all times
---------------------------
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares of the
Series B Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Series B Preferred Stock and all unpaid dividends thereon, and if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding shares of the
Series B Preferred Stock and all unpaid dividends thereon, the Company shall
take such corporate action as may be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose.
5. No Reissuance of Series 13 Preferred Stock. No share or shares of
------------------------------------------
Series B Preferred Stock acquired by the Company by reason of purchase or
conversion shall be reissued, and all such shares shall be canceled, retired and
eliminated from the shares which the Company shall be authorized to issue. The
Company may from time to time take such appropriate corporate action as may be
necessary to reduce the authorized number of shares of the Series B Preferred
Stock accordingly; provided, that this provision shall not be construed to
permit the amendment of this Certificate of Designation with respect to any
matter other than the number of shares of Series B Stock authorized for
issuance, except with the
10
consent of the holders of a majority in interest of the issued and outstanding
Series B Preferred Stock.
6. No Dilution or Impairment. The Company will not, by amendment of its
-------------------------
Amended and Restated Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of the Series B Preferred Stock set forth
herein, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate in order to protect the rights of the holders of the Series B
Preferred Stock against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not increase the par value of
any shares of stock receivable on the conversion of the Series B Preferred Stock
above the amount payable therefor on such conversion, (b) will take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and non-assessable shares of stock on the
conversion of all Series B Preferred Stock from time to time outstanding and all
accrued and unpaid dividends thereon, and (c) will not transfer all or
substantially all of its properties and assets to any other person (corporate or
otherwise), or consolidate with or merge into any other person or permit any
such person to consolidate with or merge into the Company (if the Company is not
the surviving person), unless such other person shall expressly assume in
writing and will be bound by all the terms of the Series B Preferred Stock set
forth herein.
7. Notices of Record Date. In the event of
----------------------
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company, any merger or
consolidation of the Company, or any transfer of all or substantially all of the
assets of the Company to any other corporation, or any other entity or person,
or
(c) any voluntary or involuntary dissolution, liquidation or winding
up of the Company, then and in each such event the Company shall mail or cause
to be mailed to each holder of Series B Preferred Stock a notice specifying (i)
the date on which any such record is to be taken for the purpose of such
dividend, distribution or right and a description of such dividend, distribution
or right, (ii) the date on which any such
11
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective,
(iii) the time, if any, that is to be fixed, as to when the holders of record of
Common Stock (or other securities) shall be entitled to exchange their shares of
Common Stock (or other securities) for securities or other property deliverable
upon such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up. Such notice shall
be mailed at least twenty (20) days prior to the date specified in such notice
on which such action is to be taken.
This Certificate of Designation was duly adopted in accordance with the
applicable provisions of Section 151 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, Engage Technologies, Inc., has caused its corporation
seal to be affixed hereto and this Certificate to be signed by Xxxx X. Xxxxxx,
its President, and attested by Xxxxxxx Xxxxxxxx II, its Assistant Secretary,
this 1st day of August, 1998.
ENGAGE TECHNOLOGIES, INC.
By:
Xxxx X. Xxxxxx, President
ATTEST
By:______________________________________
Xxxxxxx Xxxxxxxx II, Assistant Secretary
[Corporate Seal]
12
EXHIBIT B
FORM OF OPINION
13
Engage Technologies, Inc.
000 Xxxxxxxxxx Xxxxxx, Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
July 31, 1998
Disclosure Letter to
Series B Convertible Preferred Stock Purchase Agreement dated August 31, 1998
Capitalized terms used herein and not otherwise defined herein shall have the
meaning ascribed to them in the Series B Convertible Preferred Stock Purchase
Agreement dated August 31, 1998 by and among Engage Technologies, Inc. (the
"Company"), Sumitomo Corporation and Sumitomo Corporation of America.
Section 3.2
-----------
Redemption Rights: the Restated Certificate of Incorporation of the
Company, as amended (a copy of which is attached as an exhibit hereto), provides
for certain redemption rights of the holders of Series A Convertible Preferred
Stock.
Section 3.5
-----------
Subsidiaries: As a consequence of the merger of Accipiter, Inc. with and
into the Company prior to the Closing, the Company shall hold 100% of the
capital stock of Accipiter Ltd., a company organized under the laws of the
United Kingdom.
Joint Ventures: Pursuant to a Shareholders Agreement between the Company
and Sumitomo Corporation relating to Engage Technologies Japan, Inc. (the
"JV"), the Company has subscribed for a 49% equity interest in the JV.
Equity Interests: The Company holds 238,160 shares of the capital stock of
Red Brick Systems, Inc. (the "Red Brick Shares"). The Red Brick Shares are
subject to certain restrictions on transfer.
Section 3.11
------------
Absence of Certain Changes: The Red Brick Shares were valued at
$1,199,997.74 ($5.04 per share) on the Company's June 1998 balance sheet. The
Company may have to "write down" the Red Brick Shares based on a current (July
29, 1998) market value of $595,400.00 ($2.50 per share).
The Company recently underwent a reorganization in which 8,000,000 shares
of Common Stock and $8,000,000 in principal amount of intercompany debt were
changed into 800,000 shares of Series A Convertible Preferred Stock.
1
On or about the date hereof, Accipiter, Inc. shall have been merged with
and into the Company in a stock-for-stock merger in which 700,000 shares of the
Company's Series A Convertible Preferred Stock was issued as consideration.
Attested to as of the date first set forth above
/s/ Xxxx X. Xxxxxx
-------------------------------
Xxxx X. Xxxxxx, President
2
EXHIBITS
Charter Documents
Amended and Restated Certificate of Incorporation of Engage Technologies,
Inc. Certificate of Designation of Series A Preferred Stock
3
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ENGAGE TECHNOLOGIES, INC.
ENGAGE TECHNOLOGIES, INC. (the "Corporation" or the "Company"), a
corporation organized and existing under and by virtue of the Delaware General
Corporation Law, does hereby certify that the board of Directors of the
Corporation, by unanimous written consent of all of the Directors of the
Corporation dated April 3, 1998, approved and adopted, pursuant to Section 242
of the Delaware General Corporation Law, this Amended and Restated Certificate
of Incorporation, which restates, integrates and amends the Certificate of
Incorporation of the Corporation in its entirety pursuant to Section 245 of the
Delaware General Corporation Law. The Corporation further certifies that the
stockholders of the Corporation, by written consent dated April 3, 1998,
approved and adopted this Amended and Restated Certificate of Incorporation,
pursuant to Sections 242 and 245 of the Delaware General Corporation Law.
Written notice of the adoption of this Amended and Restated Certificate of
Incorporation has been given as provided by Section 228 of the General
Corporation Law of the State of Delaware to every stockholder entitled to such
notice. The Certificate of Incorporation of the Corporation, as amended to
date, was originally filed with the Secretary of State of Delaware on July 18,
1995 under the name CMG Direct Interactive, Inc. The full text of the Amended
and Restated Certificate of Incorporation is set forth below:
FIRST: The name of the Corporation is Engage Technologies, Inc.
-----
SECOND: The address of the Corporation's registered office in the State of
------
Delaware is 0000 Xxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx 00000, County of New Castle,
State of Delaware. The name of its registered agent at such address is The
Xxxxxxxx-Xxxx Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
-----
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The aggregate number of shares of all classes of stock which the
------
Corporation is authorized to issue is twenty five million (25,000,000) shares,
of which five million ($5,000,000) shall be shares of Preferred Stock, par value
$0.01 per share (the "Preferred Stock"), and twenty million (20,000,000) shall
be shares of Common Stock, par value $0.01 per share (the "Common Stock").
Any and all such shares issued for which the full consideration has been
paid or delivered shall be deemed fully paid stock and the holder of such shares
shall not be liable for any further call or assessments or any other payment
thereon.
No holder of any of the shares of any class of stock of the Corporation,
whether now or hereafter authorized or issued, shall be entitled as of right to
purchase or subscribe for (i) any unissued stock of any class whatsoever of
stock of the Corporation to be issued by reason of any increase of the
authorized stock of the Corporation, or of any class of such stock, or (iii)
bonds, certificates of indebtedness, debentures or other securities convertible
into stock of any class of the Corporation or carrying any right to purchase
stock of any class of the Corporation, but any such unissued stock, or
additionally authorized issue of any stock, or other securities convertible into
stock of the Corporation may be issued and disposed of pursuant to a resolution
or resolutions of the Board of Directors to such persons, firms, corporations,
associations or other entities and upon such terms as may be deemed advisable by
the Board of Directors in the exercise of its sole discretion.
Section 1. Common Stock.
------------
The powers, preferences, rights, qualifications, limitations and
restrictions relating to the Common Stock are as follows:
(a) The Common Stock is junior to the Preferred Stock and is subject to
all the powers, rights, privileges, preferences and priorities of the Preferred
Stock designated herein or in any resolution or resolutions adopted by the Board
of Directors pursuant to authority expressly vested in it by the provisions of
Section 2 of this Article FOURTH.
(b) The Common Stock shall have voting rights for the election of
directors and for all other purposes (subject to the powers, rights, privileges,
preferences and priorities of the Preferred Stock as provided above), each
holder of Common Stock being entitled to one vote for each share thereof held by
such holder, except as otherwise required by law.
Section 2. Preferred Stock.
---------------
The Board of Directors is expressly authorized to provide for the issuance
of all or any part of the shares of the Preferred Stock in one or more classes
or series, and to fix for each such class or series such voting powers, full or
limited or fractional, or no voting powers, and such distinctive designations,
preferences and relative, participating, optional or other special rights, and
such qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions adopted by the Board of Directors in
its sole discretion providing for the issuance of such class or series and as
may be permitted by the Delaware General Corporation Law, including, without
limitation, the authority to determine with respect to the shares of any such
class or series (i) whether such shares shall be redeemable, and, if so, the
terms and conditions of such redemption, whether for cash, property or rights,
including securities of any other corporation, and whether at
2
the option of either the Corporation or the holder or both, including the date
or dates or the event or events upon or after which they shall be redeemable,
and the amount per share payable in cash of redemption, which amount may vary
under different conditions and at different redemption dates; (ii) whether such
shares shall be entitled to receive dividends (which may be cumulative or
noncumulative) at such rates, on such conditions, and at such times, and payable
in preference to, or in such relation to, the dividends payable on any other
class or classes or any other series; (iii) the rights of such shares in the
event of voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of such
shares; (iv) whether such shares shall be convertible into, or exchangeable for,
shares of any other class or classes of stock, or of any other series of the
same or any other class or classes of stock, whether at the option either of the
Corporation or the holder or both, and, if so, the terms and conditions of such
conversion, including provision for adjustment of the conversion rate in such
events as the Board of Directors shall determine; (v) whether the class or
series shall have a sinking fund for the redemption or purchase of such shares,
and, if so, the terms and amount of each sinking fund; (vi) provisions as to any
other voting, optional, and/or special or relative rights, powers, priorities,
preferences, limitations, or restrictions; and (vii) the number of shares and
designation of such class or series.
FIFTH: The Corporation is to have perpetual existence.
-----
SIXTH: Election of Directors need not be by written ballot unless the by-
-----
laws of the Corporation so provide.
SEVENTH: The Board of Directors of the Corporation is expressly authorized
-------
to adopt, amend or repeal the by-laws of the Corporation.
EIGHTH: A director shall not be personally liable to the Corporation or
------
its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent that the elimination or limitation of liability
is not permitted under the Delaware General Corporation Law as in effect when
such liability is determined. No amendment or repeal of this provision shall
deprive a director of the benefits hereof with respect to any act or omission
occurring prior to such amendment or repeal.
NINTH: The Corporation reserves the right to amend, alter, change or
-----
repeal any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
This Amended and Restated Certificate of Incorporation was duly adopted in
accordance with the applicable provisions of Sections 242, 245 and 228 of the
Delaware General Corporation Law.
3
IN WITNESS WHEREOF, Engage Technologies, Inc. has caused its corporation
seal to be affixed hereto and this Certificate to be signed by Xxxx X. Xxxxxx,
its President, and attested by Xxxxxxx Xxxxxxxx II, its Assistant Secretary,
this 3rd day of April, 1998.
ENGAGE TECHNOLOGIES, INC.
By: /s/ Xxxx X. Xxxxxx
---------------------
Xxxx X. Xxxxxx
President
ATTEST
By: /s/ Xxxxxxx Xxxxxxxx
------------------------------
Xxxxxxx Xxxxxxxx II
Assistant Secretary
[Corporate Seal]
4
CERTIFICATE OF DESIGNATION OF
SERIES A CONVERTIBLE PREFERRED STOCK
Engage Technologies, Inc., a Delaware corporation (the "Corporation" or the
"Company"), pursuant to authority conferred on the Board of Directors of the
Corporation by the Amended and Restated Certificate of Incorporation of the
Corporation and in accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware, certifies that the Board of Directors
of the Corporation, by unanimous consent dated April 3, 1998, has duly adopted
the following resolution providing for the establishment and issuance of a
series of Preferred Stock to be designated "Series A Convertible Preferred
Stock" and to consist of eight hundred thousand (800,000) shares as follows:
RESOLVED: That, pursuant to the authority expressly granted and vested
in the Board of Directors of this Corporation in accordance with the
provisions of its Amended and Restated Certificate of Incorporation, a
series of Preferred Stock of the Corporation hereby is established,
consisting of eight hundred thousand (800,000) shares, to be designated
"Series A Convertible Preferred Stock", (hereafter "Series A Preferred
Stock"), the Board of Directors, be and hereby is authorized to issue such
shares of Series A Preferred Stock from time to time and for such
consideration and on such terms as the Board of Directors shall determine;
and subject to the limitations provided by law and by the Corporation's
Amended and Restated Certificate of Incorporation, the powers,
designations, preferences and relative, participating, optional or other
special rights, powers or priorities of, and the qualifications,
limitations or restrictions upon, the Series A Preferred Stock shall be as
follows:
1. Designation. This series of Preferred Stock, par value $0.01 per
-----------
share, shall be designated the "Series A Convertible Preferred Stock"
(hereinafter "Series A Preferred Stock").
2. Dividends.
---------
(a) The holders of shares of Series A Preferred Stock shall be
entitled to receive, out of funds legally available therefor, dividends computed
at a rate of 7% or $0.70 per share per annum (or a proportional part thereof for
a portion of a year and all subject to appropriate adjustment in the event of
any stock dividend, stock split, combination or other similar recapitalization
affecting such shares) commencing as of February 1, 1998, payable when, as and
if declared by the Board of Directors of the Corporation. The right to receive
dividends on Series A Preferred Stock shall be noncumulative, and no right to
receive dividends shall
accrue by reason of the fact that no dividends have been declared on the Series
A Preferred Stock in any or every prior year.
(b) The Corporation shall not declare or pay any distributions on
shares of Common Stock until the holders of shares of Series A Preferred Stock
then outstanding shall have first received a distribution at the rate specified
in paragraph (a) of this Section 2 calculated on a cumulative basis from the
date of issuance of said stock compounded annually as of any anniversary of the
date of issuance of such shares.
(c) For purposes of this Section 2, unless the context requires
otherwise, "distribution" shall mean the transfer of cash or property without
consideration, whether by way of dividend or otherwise, payable other than in
Common Stock or other securities of the Corporation, or the purchase or
redemption of shares of the Corporation (other than repurchases of Common Stock
held by employees or directors of, or consultants to, the Corporation pursuant
to agreements providing for such repurchase and other than redemptions in
liquidation or dissolution of the Corporation) for cash or property, including
any such transfer, purchase or redemption by a subsidiary of the Corporation.
3. Liquidation, Dissolution or Winding-Up.
--------------------------------------
(a) In the event of any liquidation, dissolution or winding up of the
Company, and provided that the amount available for distribution to holders of
the Series A Preferred Stock pursuant to this Section 3 is less than $10.00 per
share plus a dividend computed at a rate of 7% or $0.70 per share per annum,
compounded annually as of February 1, 1998 (such amount to he equitably adjusted
whenever there shall occur a stock split, combination, reclassification or other
similar event as provided in Section 5(e)(ii) hereof), whether voluntary or
involuntary, the entire assets of the Company available for such distribution
shall be distributed ratably among the holders of the Series A Preferred Stock.
(b) In the event of any liquidation, dissolution or winding up of the
Company, and provided that the amount available for distribution to holders of
the Series A Preferred Stock pursuant to this Section 3 is at least $10.00 per
share plus a dividend computed at a rate of 7% or $0.70 per share per annum,
compounded annually as of February 1, 1998 (such amount to be equitably adjusted
whenever there shall occur a stock split, combination, reclassification or other
similar event as provided in Section 5(e)(ii) hereof), whether voluntary or
involuntary, holders of each share of Series A Preferred Stock shall be entitled
to be paid first out of the assets of the Company available for distribution to
holders of the Company's capital stock of all classes, whether such assets are
capital, surplus, or earnings, before any sums shall be paid or any assets
distributed among the holders of any other class of capital stock, an amount
equal to $10.00 per share of Series A Preferred Stock plus a
2
dividend computed at a rate of 7% or $0.70 per share per annum, compounded
annually as of February 1, 1998. After the payment of the preferential amount
required to be paid to the holders of the Series A Preferred Stock, upon the
liquidation, dissolution or winding up of the Corporation, the holders of shares
of the Corporation's Common Stock shall be entitled to receive the remaining
assets and funds of the Corporation available for distribution to its
stockholders.
(c) A consolidation or merger of the Company or a sale of all or
substantially all of the assets of the Company shall be regarded as a
liquidation, dissolution or winding up of the affairs of the Company within the
meaning of this Section 3; provided, however, that each holder of Series A
Preferred Stock shall have the right to elect the benefits of the provisions of
Section 5(h) hereof in lieu of receiving payment in liquidation, dissolution or
winding up of the Company pursuant to this Section 3. Each holder of Series A
Preferred Stock shall notify the Company in advance of its election to obtain
the benefits of this Section 3(c) or of Section 5(h), which notification shall
be given not later than a date specified in writing to each holder by the
Company to be at least five (5) days prior to the effective date of such
consolidation, merger or sale. If a holder fails to make any election, he shall
be deemed to have elected the benefits of this Section 3(c).
(d) Whenever the distribution provided for herein shall be paid in
property other than cash, the value of such distribution shall be the fair
market value of such property as determined in good faith by the Board of
Directors of the Company.
4. Voting Power. Except as otherwise expressly provided in Section 8
------------
hereof, or as required by law, each holder of Series A Preferred Stock shall be
entitled to vote on all matters and shall be entitled to that number of votes
equal to the largest number of whole shares of Common Stock into which such
holder's shares of Series A Preferred Stock could be converted, pursuant to the
provisions of Section 5 hereof (taking into account all accrued and unpaid
dividends, if any, with respect to such Series A Preferred Stock), at the record
date for the determination of shareholders entitled to vote on such matter or,
if no such record date is established, at the date such vote is taken or any
written consent of shareholders is solicited. Except as otherwise expressly
provided herein or as required by law, the holders of shares of Series A
Preferred Stock and of Common Stock shall be entitled to vote together as a
class on all matters.
5. Conversion Rights. The holders of the Series A Preferred Stock shall
-----------------
have the following conversion rights:
(a) General. Subject to and in compliance with the provisions of
-------
this Section 5, any shares of the Series A Preferred Stock, may, at the option
of the holder, be converted at any time or from time to time into fully-paid and
non-assessable
3
shares (calculated as to each conversion to the largest whole share) of Common
Stock. The number of shares of Common Stock to which a holder of Series A
Preferred Stock shall be entitled upon conversion shall be the product obtained
by multiplying the Applicable Conversion Rate (determined as provided in Section
5(c)) by the number of shares of Series A Preferred Stock being converted. Upon
conversion of their shares of Series A Preferred Stock into shares of Common
Stock, holders of shares of Series A Preferred Stock shall also have the option
to have all declared but unpaid dividends on such shares of Series A Preferred
Stock converted into shares of Common Stock. The number of shares of Common
Stock to be received upon the conversion of such declared but unpaid dividends
shall be computed by multiplying the number of shares of Series A Preferred
Stock which could have been purchased with such declared but unpaid dividends,
assuming a Series A Preferred Stock purchase price of $10.00 per share, by the
Applicable Conversion Rate in effect at the time of such conversion.
(b) Conversion Following Underwritten Public Offering.
-------------------------------------------------
(i) All outstanding shares of Series A Preferred Stock shall,
upon the closing of an underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offering and sale of Common Stock for the account of the Company in which
the Common Stock is sold at a price to the public of not less than the amount
per share which would be equal to $10.00 per share plus a dividend computed at a
rate of 7% or $0.70 per share per annum, compounded annually as of February 1,
1998 (such amount to be equitably adjusted whenever there shall occur a stock
split, combination, reclassification or other similar event affecting the Common
Stock) and in which the aggregate gross proceeds (before deduction of any
underwriting discounts, commissions or expenses) received by the Company from
such public offering, shall equal or exceed Fifteen Million Dollars
($15,000,000), be converted automatically into the number of shares of Common
Stock to which a holder of Series A Preferred Stock shall be entitled upon
conversion pursuant to Section 5(a) hereof without any further action by such
holders and whether or not the certificates representing such shares are
surrendered to the Company or its transfer agent for the Common Stock.
(ii) Upon the occurrence of the conversion specified in Section
5(b)(i), the holders of such Series A Preferred Stock shall surrender the
certificates representing such shares at the office of the Company or of its
transfer agent for the Common Stock. Thereupon, there shall be issued and
delivered to each such holder a certificate or certificates for the number of
shares of Common Stock into which the shares of the Series A Preferred Stock
surrendered were convertible on the date on which such conversion occurred. The
Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon such conversion unless certificates evidencing such
shares of the Series A Preferred Stock
4
being converted are either delivered to the Company or any such transfer agent
or the holder notifies the Company or any such transfer agent that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection therewith. In addition, the Company may, if the Board of
Directors deems it reasonably necessary, require the holder to post a bond in
connection with such indemnity agreement.
(c) Applicable Conversion Rate. The conversion rate in effect at any
--------------------------
time (the "Applicable Conversion Rate") shall be the quotient obtained by
dividing (i) $10.00 by (ii) the Applicable Conversion Value, calculated as
provided in Section 5(d).
(d) Applicable Conversion Value. The Applicable Conversion Value in
---------------------------
effect from time to time, except as adjusted in accordance with Section 5(e)
hereof, shall be $1.00 as of the date of this Certificate of Series A
Convertible Preferred Stock.
(e) Adjustments to Applicable Conversion Value.
------------------------------------------
(i) Upon Sales of Common Stock. If the Company shall, while
--------------------------
there are any shares of Series A Preferred Stock outstanding, issue or sell
shares of its Common Stock without consideration or at a price per share less
than the Applicable Conversion Value in effect immediately prior to such
issuance or sale, then in each such case such Applicable Conversion Value upon
each such issuance or sale, except as hereinafter provided, shall be adjusted to
an amount determined by multiplying such Applicable Conversion Value by a
fraction:
(A) the numerator of which shall be (a) the number of shares of
Common Stock outstanding immediately prior to the issuance of such additional
shares of Common Stock, calculated on a fully diluted basis assuming exercise or
conversion of all securities exercisable for or convertible into Common Stock,
whether or not such exercise or conversion is unvested or otherwise conditional,
plus (b) the number of shares of Common Stock which the net aggregate
consideration received by the Corporation for the total number of such
additional shares of Common Stock so issued would purchase at the Applicable
Conversion Value, and
(B) the denominator of which shall be (a) the number of shares
of Common Stock outstanding immediately prior to the issuance of such additional
shares of Common Stock, calculated on a fully diluted basis assuming exercise or
conversion of all securities exercisable for or convertible into Common Stock,
whether or not such exercise or conversion is unvested or otherwise conditional,
plus (b) the number of such additional shares of Common Stock so issued or
deemed issued.
5
The Corporation's issuance of up to an aggregate of two million (2,000,000)
shares of Common Stock (such amount to be equitably adjusted whenever there
shall occur a stock split, combination, reclassification or other similar event
affecting the Common Stock), or options exercisable therefor, pursuant to any
stock purchase or stock option plan or other individual or group incentive
program of any kind approved by the Board of Directors to the Corporation's
officers, directors, employees or consultants shall not be deemed an issuance of
additional shares of Common Stock and shall have no effect on the calculations
contemplated by this Section 5(e).
For the purposes of this Section 5(e), the issuance of any warrants,
options, subscriptions or purchase rights with respect to shares of Common Stock
and the issuance of any securities convertible into or exchangeable for shares
of Common Stock (or the issuance of any warrants, options or any rights with
respect to such convertible or exchangeable securities) whether or not such
conversion or exchange is conditional, shall be deemed an issuance at such time
of such Common Stock if the Net Consideration Per Share (as hereinafter
determined) which may be received by the Company for such Common Stock shall be
less than the Applicable Conversion Value at the time of such issuance. Any
obligation, agreement or undertaking to issue warrants, options, subscriptions
or purchase rights at any time in the future shall be deemed to be an issuance
at any time such obligation, agreement or undertaking is made or arises. No
adjustment of the Applicable Conversion Value shall be made under this Section
5(e) upon the issuance of any shares of Common Stock which are issued pursuant
to the exercise of any warrants, options, subscriptions or purchase rights or
pursuant to the exercise of any conversion or exchange rights in any convertible
securities if any adjustment shall previously have been made upon the issuance
of any such warrants, options or subscriptions or purchase rights or upon the
issuance of any convertible securities (or upon the issuance of any warrants,
options or any rights therefor) as above provided. Any adjustment of the
Applicable Conversion Value with respect to this paragraph which relates to
warrants, options, subscriptions or purchase rights with respect to shares of
Common Stock shall be disregarded if, as, and when all of such warrants,
options, subscriptions or purchase rights expire or are canceled without being
exercised, so that the Applicable Conversion Value effective immediately upon
such cancellation or expiration shall be equal to the Applicable Conversion
Value in effect at the time of the issuance of the expired or canceled warrants,
options, subscriptions or purchase rights, with such additional adjustments as
would have been made to that Applicable Conversion Value had the expired or
canceled warrants, options, subscriptions or purchase rights not been issued.
For purposes of this paragraph, the "Net Consideration Per Share" which may be
received by the Company shall be determined as follows:
(A) The "Net Consideration Per Share" shall mean the amount equal
to the total amount of consideration, if any, received by the Company for the
issuance of such warrants, options,
6
subscriptions or other purchase rights or convertible or exchangeable
securities, plus the minimum amount of consideration, if any, payable to the
Company upon exercise, conversion or exchange thereof, divided by the aggregate
number of shares of Common Stock that would be issued if all such warrants,
options, subscriptions or other purchase rights or convertible or exchangeable
securities were exercised, exchanged or converted.
(B) The "Net Consideration Per Share" which may be received by
the Company shall be determined in each instance as of the date of issuance of
warrants, options, subscriptions or other purchase rights or convertible or
exchangeable securities without giving effect to any possible future price
adjustments or rate adjustments which may be applicable with respect to such
warrants, options, subscriptions or other purchase rights or convertible or
exchangeable securities.
For purposes of this Section 5(e), if a part or all of the consideration
received by the Company in connection with the issuance of shares of the Common
Stock or the issuance of any of the securities described in this Section 5(e)
consists of property other than cash, the Company at its expense will promptly
cause independent public accountants of recognized standing selected by the
Company to value such property, whereupon such value shall be given to such
consideration and shall be recorded on the books of the Company with respect to
receipt of such Property.
This Section 5(e)(i) shall not apply under any of the circumstances which
would constitute an Extraordinary Common Stock Event (as hereinafter defined in
Section 5(e)(ii)).
(ii) Upon an Extraordinary Common Stock Event. Upon the
----------------------------------------
happening of an Extraordinary Common Stock Event (as hereinafter defined), the
Applicable Conversion Value shall, simultaneously with the happening of such
Extraordinary Common Stock Event, be adjusted by multiplying the then effective
Applicable Conversion Value by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such
Extraordinary Common Stock Event and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such
Extraordinary Common Stock event, and the product so obtained shall (hereafter
be the Applicable Conversion Value. The Applicable Conversion Value, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive Extraordinary Common Stock Event or Events.
7
"Extraordinary Common Stock Event" shall mean (i) the issue of additional
shares of Common Stock as a dividend or other distribution on outstanding shares
of Common Stock, (ii) the subdivision of outstanding shares of Common Stock into
a greater number of shares of Common Stock, or (iii) the combination of
outstanding shares of the Common Stock into a smaller number of shares of Common
Stock.
(f) Dividends. In the even (the Company shall make or issue, or
---------
fix a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the Company
other than shares of Common Stock or in assets (excluding cash dividends or
distributions), then and in each such event provisions shall be made so that the
holders of Series A Preferred Stock shall receive upon conversion thereof in
addition to the number of shares of Common Stock receivable thereupon, the
number of securities or such other assets of the Company which they would have
received had their Series A Preferred Stock been converted into Common Stock on
the date of such event and had they thereafter, during the period from the date
of such event to and including the Conversion Date (as that term is hereafter
defined in Section 5(j)), retained such securities or such other assets
receivable by them as aforesaid during such period, giving application to all
adjustments called for during such period under this Section 5 with respect to
the rights of the holders of the Series A Preferred Stock.
(g) Recapitalization or Reclassification. If the Common Stock
------------------------------------
issuable upon the conversion of the Series A Preferred Stock shall be changed
into the same or a different number of shares of any class or classes of stock
of the Corporation, whether by recapitalization, reclassification or otherwise
(other than a subdivision or combination of shares or stock dividend provided
for elsewhere in this Section 5, or a reorganization, merger, consolidation or
sale of assets provided for elsewhere in this Section 5), then and in each such
event the holder of each share of Series A Preferred Stock shall have the right
thereafter to convert such share into the kind and amount of shares of stock and
other securities and property receivable upon such reorganization,
reclassification or other change by holders of the number of shares of Common
Stock into which such share of Series A Preferred Stock might have been
converted (taking into account all accrued and unpaid dividends and interest
with respect to such Series A Preferred Stock) immediately prior to such
reorganization, reclassification or change, all subject to further adjustment as
provided herein.
(h) Capital Reorganization, Merger or Sale of Assets. If at any time
------------------------------------------------
or from time to time there shall be a capital reorganization of the Common Stock
(other than a subdivision, combination, reclassification or exchange of shares
provided for elsewhere in this Section 5) or a merger or consolidation of the
Company with or into another corporation or entity, or the sale of all or
substantially all of the Company's properties and assets to any other person or
persons, then, as a pan of such reorganization, merger, consolidation or sale,
provision shall be made so
8
that the holders of the Series A Preferred Stock shall thereafter be entitled to
receive upon conversion of the Series A Preferred Stock, the number of shares of
stock or other securities or property of the Company, or of the successor
corporation or entity resulting from such merger, consolidation or sale, to
which a holder of Common Stock issuable upon conversion would have been entitled
on such capital reorganization, merger, consolidation, or sale. In any such
case, appropriate adjustment shall be made in the application of the provisions
of this Section 5 with respect to the rights of the holders of the Series A
Preferred Stock after the reorganization, merger, consolidation or sale to the
end that the provisions of this Section 5 (including adjustment of the
Applicable Conversion Value then in effect and the number of shares purchasable
upon conversion of the Series A Preferred Stock) shall be applicable after that
event in as nearly equivalent a manner as may be practicable.
Each holder of Series A Preferred Stock upon the occurrence of a capital
reorganization, merger or consolidation of the Company, or the sale of all or
substantially all its assets and properties as such events are more fully set
forth in the first paragraph of this Section 5(h), shall have the option of
electing treatment of his shares of Series A Preferred Stock under either this
Section 5(h) or Section 3(b) hereof, notice of which election shall be submitted
in writing to the Company at its principal offices no later than five (5) days
before the effective date of such event.
(i) Accountant's Certificate as to Adjustments. In each case of
------------------------------------------
an adjustment or readjustment of the Applicable Conversion Rate, the Company
will furnish each holder of Series A Preferred Stock with a certificate,
prepared by its chief financial officer showing such adjustment or readjustment,
and stating in detail the facts upon which such adjustment or readjustment is
based. Upon the request of any holder, the Company will cause its independent
public accountants to confirm the accuracy of such adjustment or readjustment.
(j) Exercise of Conversion Privilege. To exercise his conversion
--------------------------------
privilege, a holder of Series A Preferred Stock shall surrender the certificate
or certificates representing the shares being converted to the Company at its
principal office, and shall give written notice to the Company at that office
that such holder elects to convert such shares. Such notice shall also state
the name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock issuable upon such conversion shall be
issued. The certificate or certificates for shares of Series A Preferred Stock
surrendered for conversion shall be accompanied by proper assignment thereof to
the Company or in blank. The date when such written notice is received by the
Company, together with the certificate or certificates representing the shares
of Series A Preferred Stock being converted, shall be the "Conversion Date". As
promptly as practicable after the Conversion Date, the Company shall issue and
shall deliver to the holder of the shares of Series A Preferred Stock being
converted, or on its written order, such certificate or certificates
9
as it may request for the number of whole shares of Common Stock issuable upon
the conversion of such shares of Series A Preferred Stock in accordance with the
provisions of this Section 5, cash in the amount of all unpaid dividends on such
shares of Series A Preferred Stock, up to and including the Conversion Date,
unless conversion of such unpaid dividends into Common Stock has been elected,
and cash, as provided in Section 5(k), in respect of any fraction of a share of
Common Stock issuable upon such conversion. Such conversion shall be deemed to
have been effected immediately prior to the close of business on the Conversion
Date, and at such time the rights of the holder as holder of the converted
shares of Series A Preferred Stock shall cease and the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have become the holder
or holders of record of the shares of Common Stock represented thereby.
(k) Cash in Lieu of Fractional Shares. No fractional shares of
---------------------------------
Common Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Series A Preferred Stock. Instead of any fractional
shares of Common Stock which would otherwise be issuable upon conversion of
Series A Preferred Stock, the Company shall pay to the holder of the shares of
Series A Preferred Stock which were converted a cash adjustment in respect of
such fractional shares in an amount equal to the same fraction of the market
price per share of the Common Stock (as determined in a reasonable manner
prescribed by the Board of Directors) at the close of business on the Conversion
Date. The determination as to whether or not any fractional shares are issuable
shall be based upon the total number of shares of Series A Preferred Stock being
converted at any one time by any holder thereof, not upon each share of Series A
Preferred Stock being converted.
(l) Partial Conversion. In the event some but not all of the shares
------------------
of Series A Preferred Stock represented by a certificate or certificates
surrendered by a holder are converted, the Company shall execute and deliver to
or on the order of the holder, at the expense of the Company, a new certificate
representing the number of shares of Series A Preferred Stock which were not
converted.
(m) Reservation of Common Stock. The Company shall at all times
---------------------------
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares of the
Series A Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Series A Preferred Stock and all unpaid dividends thereon, and if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding shares of the
Series A Preferred Stock and all unpaid dividends thereon, the Company shall
take such corporate action as may be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose.
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6. Redemption.
----------
(a) At the written election of a majority in interest of the holders
of Series A Preferred Stock on or before March 1, 2005, beginning on August 1,
2005 and on the first day of July in each year thereafter (the "Redemption
Date"), the Company shall redeem twenty-five percent (25 %) of all of the
outstanding shares of Series A Preferred Stock; provided, however, that the
Company's redemption option shall be reduced by the number of shares of Series A
Preferred Stock that have been converted prior to any such Redemption Date, and
such reduction shall apply first to the Redemption Date immediately following
such conversion and thereafter any balance shall apply to any Subsequent
Redemption Dates. The redemption price for each share of Series A Preferred
Stock redeemed pursuant w this Section 6 shall be $10.00 per share plus a
dividend computed at a rate of 7% or $0.70 per share per annum, compounded
annually as of February 1, 1998 (the "Redemption Price"). Each redemption of
Series A Preferred Stock shall be made so that the number of shares of Series A
Preferred Stock held by each holder whose shares are being redeemed shall be
reduced in an amount which shall bear the same ratio to the total number of
shares of Series A Preferred Stock being redeemed as all such shares then held
by such registered owner bears to the aggregate number of shares of Series A
Preferred Stock then outstanding and held by all registered owners whose shares
are being redeemed.
(b) The Redemption Price set forth in this Section 6 shall be subject
to equitable adjustment whenever there shall occur a stock split, combination,
reclassification or other similar event involving the Series A Preferred Stock.
(c) At least thirty (30) days before any Redemption Date pursuant to
Section 6(a), written notice (hereinafter referred to as the "Redemption
Notice") shall be mailed, postage prepaid, to each holder of record of the
Series A Preferred Stock which is to be redeemed, at its address shown on the
records of the Company; provided, however, that the giving of such Redemption
Notice shall not affect the conversion rights of such holder pursuant to Section
5 hereof; provided, further, that the Company's failure to give such Redemption
Notice shall in no way affect its obligation to redeem the shares of Series A
Preferred Stock as provided in Section 6(a) hereof. The Redemption Notice shall
contain the following information:
(i) The number of shares of Series A Preferred Stock held by the
holder which shall be redeemed by the Company and the total number of shares of
Series A Preferred Stock held by all holders to be so redeemed.
(ii) The Redemption Date and the applicable Redemption Price, and
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(iii) That the holder is to surrender to the Company, at the
place designated therein, its certificate or certificates representing the
shares of Series A Preferred Stock to be redeemed.
(d) Each holder of shares of Series A Preferred Stock to be redeemed
shall surrender the certificate or certificates representing such shares to the
Company at the place designated in the Redemption Notice, and thereupon the
applicable Redemption Price for such shares as set forth in this Section 6 shall
be paid to the order of the person whose name appears on such certificate or
certificates and each surrendered certificate shalt be canceled and retired.
(e) If any shares of Series A Preferred Stock are not redeemed solely
because a holder fails to surrender the certificate or certificates representing
such shares pursuant to Section 6(d) hereof, then, from and after the Redemption
Date, such shares of Series A Preferred Stock thereupon subject to redemption
shall not be entitled to any further accrual of any dividends pursuant to
Section 2 hereof or to the conversion provisions set forth in Section 5 hereof,
unless the Company otherwise specifically agrees in writing.
7. No Reissuance of Series A Preferred Stock. No share or shares of
-----------------------------------------
Series A Preferred Stock acquired by the Company by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares shall
be canceled, retired and eliminated from the shares which the Company shall be
authorized to issue. The Company may from time to time take such appropriate
corporate action as may be necessary to reduce the authorized number of shares
of the Series A Preferred Stock accordingly.
8. Restrictions and Limitations.
----------------------------
(a) Except as expressly provided herein or as required by law,
neither the Company nor any subsidiary of the Company (which shall mean any
corporation or trust of which the Company directly or indirectly owns at the
time all of the outstanding shares of every class of such corporation or trust
other than directors' qualifying shares) shall, without the vote or written
consent by the holders of at least a majority of the then outstanding shares of
the Series A Preferred Stock voting together each share of Series A Preferred
Stock to be entitled to one vote in each instance for each share of Common Stock
into which such Preferred Stock is then convertible:
(i) Redeem, purchase or otherwise acquire for value or (pay in,
to or set aside for a sinking fund for such purpose), any share or shares of
Series A Preferred Stock other than pursuant to the redemption provisions
contained elsewhere herein;
12
(ii) Authorize or issue, or obligate itself to authorize or
issue, any other equity security senior to or on a parity with the Series A
Preferred Stock as to liquidation preferences, conversion rights, redemption
rights, dividend rights, voting rights or otherwise;
(iii) Effect any sale, lease, assignment, transfer or other
conveyance of all or substantially all of the assets of the Company or any
subsidiary thereof, or any consolidation or merger involving the Company or any
subsidiary thereof, or any reclassification or other change of stock, or any
recapitalization or any dissolution, liquidation or winding up of the Company;
(iv) Effect any bank borrowings in excess of an aggregate
amount of Two Hundred Fifty Thousand Dollars ($250,000) U.S.;
(v) Effect any merger by the Company with or into any business
entity or any acquisition by the Company of any assets or business having a fair
market value in excess of One Million Dollars ($1,000,000) U.S.; or
(vi) Amend its Amended and Restated Certificate of
Incorporation, if such amendment would change any of the rights, preferences,
privileges of or limitations provided for herein for the benefit of any shares
of Series A Preferred Stock.
9. No Dilution or Impairment. Except as provided in Section 8 above, the
-------------------------
Company will not, by amendment of its Amended and Restated Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of the Series A Preferred Stock set forth herein, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
holders of the Series A Preferred Stock against dilution or other impairment.
Without limiting the generality of the foregoing, the Company (a) will not
increase the par value of any shares of stock receivable on the conversion of
the Series A Preferred Stock above the amount payable therefor on such
conversion, (b) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and non-
assessable shares of stock on the conversion of all Series A Preferred Stock
from time to time outstanding and all accrued and unpaid dividends thereon, and
(c) will not transfer all or substantially all of its properties and assets to
any other person (corporate or otherwise), or consolidate with or merge into the
Company (if the Company is not the surviving person), unless such other person
shall expressly assume in writing and will be bound by all the terms of the
Series A Preferred Stock set forth herein.
13
10. Notices of Record Date. In the event of
----------------------
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company, any merger or
consolidation of the Company, or any transfer of all or substantially all of the
assets of the Company to any other corporation, or any other entity or person,
or
(c) any voluntary or involuntary dissolution, liquidation or winding
up of the Company, then and in each such event the Company shall mail or cause
to be mailed to each holder of Series A Preferred Stock a notice specifying (i)
the date on which any such record is to be taken for the purpose of such
dividend, distribution or right and a description of such dividend, distribution
or right, (ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding up is expected to become effective, (iii) the time, if any, that is to
be fixed, as to when the holders of record of Common Stock (or other securities)
shall be entitled to exchange their shares of Common Stock (or other securities)
for securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding up. Such notice shall be mailed at least
twenty (20) days prior to the date specified in such notice on which such action
is to be taken.
This Certificate of Designation was duly adopted in accordance with the
applicable provisions of Section 151 of the Delaware General Corporation law.
IN WITNESS WHEREOF, Engage Technologies, Inc., has caused its corporation
seal to be affixed hereto and this Certificate to be signed by Xxxx X. Xxxxxx,
its President, and attested by Xxxxxxx Xxxxxxxx II, its Assistant Secretary,
this 3rd day of April, 1998.
ENGAGE TECHNOLOGIES, INC.
By: /s/ Xxxx X. Xxxxxx
---------------------
Xxxx X. Xxxxxx, President
14
ATTEST
By: /s/ Xxxxxxx Xxxxxxxx
-----------------------------------------
Xxxxxxx Xxxxxxxx II, Assistant Secretary
[Corporate Seal]
15
