Execution Copy
EXHIBIT 10.1
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
Dated as of December 23, 2002
by and between
ADSTAR, INC.
and
TRIBUNE COMPANY
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS AND INTERPRETATION......................................2
1.1. Definitions......................................................2
1.2. Interpretation...................................................8
1.3. Accounting Principles............................................9
ARTICLE II AUTHORIZATION AND SALE OF SERIES B PREFERRED SHARES; CLOSING......10
2.1. Authorization of the Series B Preferred Shares; Filing of
Series B-2 Certificate of Designation...........................10
2.2. Purchase and Sale of the Series B Preferred Shares..............10
2.3. Initial Closing; Delivery of Series B-1 Preferred Shares;
Payment of Purchase Price......................................10
2.4. Subsequent Closing; Delivery of Series B-2 Preferred Shares;
Payment of Purchase Price.......................................11
ARTICLE III CONDITIONS OF THE INVESTOR'S OBLIGATIONS AT THE INITIAL CLOSING..12
3.1. Representations and Warranties..................................12
3.2. Performance.....................................................12
3.3. Governmental Authority..........................................12
3.4. Consents........................................................12
3.5. Initial Closing Deliveries......................................12
3.6. Waiver..........................................................13
ARTICLE IV CONDITIONS OF ADSTAR'S OBLIGATIONS AT THE INITIAL CLOSING.........13
4.1. Representations and Warranties..................................13
4.2. Performance.....................................................14
4.3. Registration Rights Agreement...................................14
4.4. Second Deployment Agreement.....................................14
4.5. Governance Agreement............................................14
4.6. Stockholder Support Agreement...................................14
4.7. Escrow Agreement................................................14
4.8. Payment of Series B-1 Purchase Price............................14
4.9. Series A Consent................................................14
4.10. Waiver.........................................................14
ARTICLE V CONDITIONS OF THE INVESTOR'S OBLIGATIONS AT THE SUBSEQUENT CLOSING.14
5.1. Consummation of the Initial Closing.............................14
5.2. No Material Adverse Effect......................................14
5.3. Stockholder Approval............................................15
5.4. Compliance with Transaction Documents...........................15
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TABLE OF CONTENTS
(continued)
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5.5. Representations and Warranties..................................15
5.6. Performance.....................................................15
5.7. Governmental Authority..........................................15
5.8. Subsequent Closing Deliveries...................................15
5.9. Waiver..........................................................16
ARTICLE VI CONDITIONS OF ADSTAR'S OBLIGATIONS AT THE SUBSEQUENT CLOSING......16
6.1. Representations and Warranties..................................16
6.2. Performance.....................................................16
6.3. Payment of Series B-2 Purchase Price............................16
6.4. Waiver..........................................................16
ARTICLE VII COVENANTS........................................................17
7.1. Reporting Status................................................17
7.2. Reservation of Common Stock.....................................17
7.3. Listing.........................................................17
7.4. Filing of Form 8-K..............................................17
7.5. Stockholder Approval; Put Right.................................17
7.6. Press Release...................................................18
7.7. Expenses........................................................18
7.8. Use of Proceeds.................................................19
7.9. Actions Requiring the Consent of the Investor...................19
7.10. Operating Plan.................................................19
7.11. Service Agreements.............................................20
ARTICLE VIII TRANSFER OF RESTRICTED SECURITIES...............................20
8.1. General Provisions..............................................20
8.2. Legend..........................................................20
8.3. Legend Removal..................................................20
ARTICLE IX REPRESENTATIONS AND WARRANTIES OF ADSTAR..........................20
9.1. Organization, Qualifications and Corporate Power................21
9.2. Authorization; No Conflicts.....................................21
9.3. Subsidiaries and Investments....................................22
9.4. Authorized Capital Stock........................................22
9.5. SEC Documents...................................................23
9.6. Listing.........................................................24
9.7. Financial Statements............................................24
9.8. Absence of Undisclosed Liabilities..............................24
9.9. No Material Adverse Change......................................24
9.10. Title to Properties; Leasehold Interests.......................24
9.11. Tax Matters....................................................25
9.12. Intellectual Property Rights...................................25
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TABLE OF CONTENTS
(continued)
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9.13. Compliance with Laws; Litigation...............................26
9.14. Brokers........................................................27
9.15. Governmental Approvals; No Registration........................27
9.16. Insurance......................................................27
9.17. Employees......................................................27
9.18. ERISA..........................................................28
9.19. Environmental Matters..........................................29
9.20. Related-Party Transactions.....................................29
9.21. Disclosure.....................................................29
9.22. No General Solicitation........................................29
9.23. No Integrated Offering.........................................29
9.24. Application of Takeover Protections............................30
ARTICLE X REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.....................30
10.1. Authorization..................................................30
10.2. Brokers........................................................30
10.3. Investment Representations.....................................30
ARTICLE XI MISCELLANEOUS.....................................................31
11.1. Survival of Representations and Warranties.....................31
11.2. Amendments and Waivers.........................................31
11.3. Successors and Assigns.........................................31
11.4. Remedies.......................................................31
11.5. Indemnification................................................31
11.6. Severability...................................................32
11.7. Notices........................................................32
11.8. Governing Law..................................................33
11.9. Submission to Jurisdiction; Waiver of Jury Trial...............33
11.10. Attorneys' Fees...............................................33
11.11. Execution in Counterparts.....................................34
11.12. Delivery by Facsimile.........................................34
11.13. Entire Agreement..............................................34
11.14. Third Party Beneficiaries.....................................34
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EXHIBITS
Exhibit A Series B-1 Preferred Stock Certificate of Designation
Exhibit B Series B-2 Preferred Stock Certificate of Designation
Exhibit C Form of Amended and Restated Registration Rights Agreement
Exhibit D Form of Second Deployment Agreement
Exhibit E Form of Amended and Restated Governance Agreement
Exhibit F Form of Stockholder Support Agreement
Exhibit G Form of Legal Opinion of Counsel to AdStar
Exhibit H Operating Plan
Exhibit I Series A Consent
SCHEDULES
2.2 Schedule of Investor Information
9.1(a) Foreign Qualifications
9.3 Subsidiaries and Investments
9.4 Capital Structure
9.6 Nasdaq continuing listing requirements
9.12 Intellectual Property Rights
9.13 Litigation
9.16 Insurance
9.18 ERISA
9.20 Related Party Transactions
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SERIES B PREFERRED STOCK PURCHASE AGREEMENT
This SERIES B PREFERRED STOCK PURCHASE AGREEMENT is made as of
December 23, 2002 (this "Agreement"), by and between AdStar, Inc., a Delaware
corporation ("AdStar") and Tribune Company, a Delaware corporation (the
"Investor").
RECITALS
WHEREAS, AdStar desires to issue and sell to the Investor and the
Investor desires to purchase from AdStar, 1,200,000 shares of the authorized and
unissued shares of Series B-1 Convertible Preferred Stock, $0.0001 par value of
AdStar (the "Series B-1 Preferred Stock"), which shares of Series B-1 Preferred
Stock are convertible into shares of Common Stock, $0.0001 par value of AdStar
(the "Common Stock"), with the shares of Series B-1 Preferred Stock and the
shares of Common Stock into which they are convertible to have the respective
rights, preferences and privileges specified in the Series B-1 Preferred
Certificate of Designation (the "Series B-1 Certificate of Designation"), a copy
of which is attached as Exhibit A hereto, and the Certificate of Incorporation
of AdStar, all on the terms and subject to the conditions set forth herein;
WHEREAS, AdStar desires to issue and sell to the Investor and the
Investor desires to purchase from AdStar, the number of shares of Series B-2
Convertible Preferred Stock, $0.0001 par value of AdStar (the "Series B-2
Preferred Stock") as is provided herein, which shares of Series B-2 Preferred
Stock are convertible into shares of Common Stock, with the shares of Series B-2
Preferred Stock having the rights, preferences and privileges specified in the
Series B-2 Preferred Certificate of Designation (the "Series B-2 Certificate of
Designation"), a copy of which is attached as Exhibit B hereto, all on the terms
and subject to the conditions set forth herein;
WHEREAS, the Investor has required, as a condition to its
willingness to enter into this Agreement, that AdStar enter into an Amended and
Restated Registration Rights Agreement in the form of Exhibit C hereto, a Second
Deployment Agreement in the form of Exhibit D hereto, an Amended and Restated
Governance Agreement together with the Founders in the form of Exhibit E hereto
and a Stockholder Support Agreement together with each Founder in the form of
Exhibit F hereto; and
WHEREAS, it is contemplated that the Investor may transfer a portion
of its Series B Preferred Stock to Knight Ridder Digital, Inc., a Delaware
corporation ("Knight Ridder"), and Gannett Co., Inc., a Delaware corporation
("Gannett"), in which case Knight Ridder and Gannett shall be entitled to all
the rights and benefits to which the Investor is entitled under this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1. Definitions. For the purposes of this Agreement, the following
terms have the meanings specified or referred to in this Section 1.1:
"Affiliate" means, with respect to any particular Person, any other
Person that directly or indirectly controls, is controlled by or is under common
control with such particular Person. For the purpose of this definition,
"control" means the possession, directly or indirectly, of the power to direct
the management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" has the meaning set forth in the first paragraph of this
Agreement.
"Board of Directors" means the Board of Directors of AdStar.
"Business Day" means any day except a Saturday, Sunday or other day
on which banks in Chicago, Illinois are authorized or obligated by law or
executive order to close.
"By-laws" means the By-laws of AdStar, as they may be amended from
time to time.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss. 9601 et seq., and the rules and
regulations promulgated thereunder.
"Certificate of Incorporation" means the Certificate of
Incorporation of AdStar, as it may be amended from time to time.
"Code" means the Internal Revenue Code of 1986, as amended, and any
reference to any particular Code section shall be interpreted to include any
revision of or successor to that section regardless of how numbered or
classified.
"Common Stock" has the meaning set forth in the first recital above.
"Contract" means all contracts, agreements, commitments,
understandings and arrangements, whether written or oral.
"Conversion Common Shares" means the Common Stock issued or issuable
upon conversion of the Series B Preferred Shares.
"Court Order" means any judgment, order, award or decree of any
foreign, Federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"Current Market Price" shall mean, as of any specified date, the
average of the Daily Market Price of one share of Common Stock for the 10
consecutive Business Days immediately preceding such date.
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"Daily Market Price" shall mean, with respect to one share of Common
Stock and for any Business Day: (i) if the Common Stock is then listed on a
national securities exchange or is authorized for quotation on NASDAQ and is
designated as a National Market System security, the last sale price of one
share of Common Stock, regular way, on such day on the principal stock exchange
or market system on which such Common Stock is then listed or authorized for
quotation as set forth in the "Close" column of the "Historical Quotations"
table on Yahoo! Finance for AdStar's stock price (or, if Yahoo! Finance is no
longer available, as set forth in the Wall Street Journal), or, if no such sale
takes place on such Business Day, the last sale price for one share of Common
Stock on the prior Business Day as reported in such column or (ii) if the Common
Stock is not then listed or authorized for quotation on any national securities
exchange or designated as a National Market System security on NASDAQ but is
traded over-the-counter, the closing price for one share of Common Stock as
reported on NASDAQ or the Electronic Bulletin Board or in the National Daily
Quotation Sheets, as applicable.
"Environmental Laws" means all Requirements of Laws derived from or
relating to all Federal, state and local laws or regulations relating to or
addressing the environment, health or safety, including CERCLA, OSHA and RCRA
and any state equivalent thereof.
"ERISA" has the meaning set forth in Section 9.17.
"Escrow Amendment" means the Amendment to Escrow Agreement, dated as
of the date hereof, among AdStar, the Investor and DSI Technology Services,
Inc., as Escrow Agent.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar Federal law then in force, and the rules and regulations
promulgated thereunder.
"Founders" means Xxxxxx Xxxxxxxx and Xxx Xxxxxx.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"Governance Agreement" means the Amended and Restated Governance
Agreement, dated as of the date hereof, between AdStar and the Investor, the
form of which is attached as Exhibit E hereto.
"Governmental Authority" means any foreign, Federal, state, local or
other government, governmental, statutory or administrative authority or
regulatory body or any court, tribunal or judicial or arbitral body.
"Indemnified Liabilities" has the meaning set forth in Section 11.5.
"Indemnitees" has the meaning set forth in Section 11.5.
"Initial Closing" has the meaning set forth in Section 2.3(a).
"Initial Closing Date" has the meaning set forth in Section 2.3(a).
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"Intellectual Property Rights" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service marks,
trade dress, trade names, URL's, logos and corporate names and registrations and
applications for registration thereof, together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof,
(iv) mask works and registrations and applications for registration thereof, (v)
computer software, data, data bases and documentation thereof, (vi) trade
secrets and other confidential information (including ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial and
marketing plans and customer and supplier lists and information), (vii) other
intellectual property rights and (viii) copies and tangible embodiments thereof
(in whatever form or medium).
"Investment" as applied to any Person means (i) any direct or
indirect purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests, membership interests and joint venture interests) of any other
Person, and (ii) any capital contribution by such Person to any other Person.
"Investor" has the meaning set forth in the first paragraph of this
Agreement.
"IRS" means the United States Internal Revenue Service.
"Knowledge" or "aware" means (i) the actual knowledge or awareness
of any officer, manager or division head of AdStar or any of its Subsidiaries
and (ii) the knowledge that such persons should reasonably be expected to have
in the performance of their respective duties.
"Liens" means any mortgage, pledge, security interest, encumbrance,
lien, claim or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof), any sale of receivables
with recourse against AdStar or any Affiliate, any filing or agreement to file a
financing statement as debtor under the Uniform Commercial Code or any similar
statute other than to reflect ownership by a third party of property leased to
AdStar under a lease that is not in the nature of a conditional sale or title
retention agreement, or any subordination arrangement in favor of another Person
(other than any subordination arising in the ordinary course of business).
"Material Adverse Effect" means a material adverse effect on the
condition (financial or otherwise), operating results, business, prospects,
assets, operations, employee relations or customer or supplier relations of
AdStar.
"NASD" means the National Association of Securities Dealers, Inc.
"NASDAQ" means the Nasdaq National Market or the Nasdaq SmallCap
Market.
"Operating Plan" has the meaning set forth in Section 7.10.
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"OSHA" means the Occupational Safety and Health Act, 29 U.S.C. ss.
651 et seq., and the rules and regulations promulgated thereunder.
"Party" means each of AdStar and the Investor.
"Permitted Liens" means (i) liens with respect to Taxes not yet due
and payable or which are being contested in good faith by appropriate
proceedings and for which appropriate reserves have been established in
accordance with GAAP, (ii) mechanics', materialmen's or contractors' liens or
encumbrances or any similar lien or restriction and (iii) easements,
rights-of-way, restrictions and other similar charges and encumbrances not
interfering with the ordinary conduct of the business of AdStar.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof or any other entity.
"Put Right" has the meaning set forth in Section 7.5(b).
"Put Right Closing Date" has the meaning set forth in Section
7.5(b).
"Put Right Purchase Price" has the meaning set forth in Section
7.5(b).
"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C.
ss. 6901 et seq., and the rules and regulations promulgated thereunder.
"Registration Rights Agreement" means the Amended and Restated
Registration Rights Agreement, dated as of the date hereof, between AdStar and
the Investor, the form of which is attached hereto as Exhibit C.
"Related Party" means any Subsidiaries, officers, directors (or
persons who were officers or directors during the two year period to the date
hereof), or stockholders of AdStar who beneficially own 5% or more of the Common
Stock, or their Affiliates, or any individual related by blood, marriage, or
adoption to any such individual, or any entity in which any such entity or
individual owns a 5% or more beneficial interest.
"Requirements of Laws" means any foreign, Federal, state and local
laws, statutes, regulations, rules, codes, ordinances, orders or requirements
enacted, adopted, issued or promulgated by any Governmental Authority (including
those pertaining to electrical, building, zoning, subdivision, land use,
environmental and occupational safety and health requirements) or common law.
"Restricted Securities" means (i) the Series B Preferred Shares
issued hereunder, (ii) the Common Stock issued upon conversion of Series B
Preferred Stock and (iii) any securities issued with respect to the securities
referred to in clauses (i) and (ii) above by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reincorporation. As to any particular Restricted
Securities, such securities shall cease to be Restricted Securities when they
have (a) been effectively registered
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under the Securities Act and disposed of in accordance with the registration
statement covering them, (b) been distributed to the public through a broker,
dealer or market maker pursuant to Rule 144 (or any similar provision then in
force) under the Securities Act or become eligible for sale pursuant to Rule
144(k) (or any similar provision then in force) under the Securities Act, or (c)
been otherwise transferred and new certificates for them not bearing the
Securities Act legend set forth in Section 8.2 have been delivered by AdStar in
accordance with Section 8.3. Whenever any particular securities cease to be
Restricted Securities, the holder thereof shall be entitled to receive from
AdStar, without expense, new securities of like tenor not bearing a Securities
Act legend of the character set forth in Section 8.2.
"Restricted Transaction" means either (i) the sale, lease, transfer,
conveyance or other disposition, in one or a series of related transactions, of
all or substantially all of the assets of AdStar, taken as a whole, to or (ii) a
transaction or series of transactions (including by way of merger,
consolidation, or sale of stock) the result of which is that the holders of
AdStar's outstanding voting stock immediately prior to such transaction are
after giving effect to such transaction no longer, in the aggregate, the
"beneficial owners" (as that term is defined in Rule 13d-3 and Rule 13d-5
promulgated under the Securities Exchange Act), directly or indirectly through
one of more intermediaries, of more than 50% of the voting power of the
outstanding voting stock of AdStar (or the surviving entity) with: (x) any third
party that in the reasonable good faith determination of the Investor competes
with CareerBuilder and such transaction is consummated on or prior to March 18,
2007, or (y) any third party that the Investor reasonably believes in its good
faith determination cannot or will not honor the obligations of AdStar in the
Second Deployment Agreement.
"Schedule" means any schedule attached to this Agreement.
"Second Deployment Agreement" means the Second Software Development
and Deployment Agreement, dated as of the date hereof, between AdStar and the
Investor, the form of which is attached as Exhibit D hereto.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar Federal law then in force, and the rules and regulations promulgated
thereunder.
"SEC" means the Securities and Exchange Commission, including any
governmental authority or agency succeeding to the functions thereof.
"Series A Consent" means the Stockholder Consent dated as of the
date hereof, by the Investor as the sole holder of the Series A Preferred Stock,
the form of which is attached as Exhibit I hereto.
"Series A Preferred Stock" means the Series A Convertible Preferred
Stock, $0.0001 par value, of AdStar.
"SEC Documents" has the meaning set forth in Section 9.5.
"Series B Preferred Shares" has the meaning set forth in Section
2.1.
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"Series B-1 Certificate of Designation" has the meaning set forth in
the first recital above.
"Series B-1 Preferred Shares" has the meaning set forth in Section
2.1.
"Series B-1 Preferred Stock" has the meaning set forth in the first
recital above.
"Series B-1 Purchase Price" has the meaning set forth in Section
2.3(c).
"Series B-2 Certificate of Designation" has the meaning set forth in
the second recital above.
"Series B-2 Per Share Purchase Price" has the meaning set forth in
Section 2.2(b).
"Series B-2 Preferred Shares" has the meaning set forth in Section
2.1.
"Series B-2 Preferred Stock" has the meaning set forth in the second
recital above.
"Series B-2 Purchase Price" has the meaning set forth in Section
2.4(c).
"Stockholder Approval" has the meaning set forth in Section 7.5.
"Stockholder Support Agreement" means the Stockholder Support
Agreement, dated as of the date hereof, among AdStar, Xxxxxx Xxxxxxxx and Xxx
Xxxxxx, in the form of Exhibit F hereto.
"Subsequent Closing" has the meaning set forth in Section 2.4(a).
"Subsequent Closing Date" has the meaning set forth in Section
2.4(a).
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more of the
other Subsidiaries of that Person or a combination thereof. For purposes hereof,
a Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of the gains or losses of
such limited liability company, partnership, association or other business
entity or shall be or control (or have the power to control) a managing
director, manager or general partner of such limited liability company,
partnership, association or other business entity.
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"Tax" (and, with correlative meaning, "Taxes" and "Taxable") means:
(i) any Federal, state, local or foreign net income, gross income,
gross receipts, windfall profit, severance, property, production, sales,
use, license, excise, franchise, employment, payroll, withholding,
alternative or add-on minimum, ad valorem, value-added, transfer, stamp,
or environmental tax, or any other tax, custom, duty, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest or penalty, addition to tax or additional amount imposed by any
Governmental Authority; and
(ii) any liability of AdStar for the payment of amounts with respect
to payments of a type described in clause (i) as a result of any
obligation of AdStar under any Tax sharing or indemnity arrangement.
"Tax Return" means any return, report or similar statement required
to be filed with respect to any Tax (including any attached schedules),
including any information return, claim for refund, amended return or
declaration of estimated Tax.
"Transaction Documents" means the Registration Rights Agreement, the
Second Deployment Agreement, the CareerBuilder Services Agreement, the
Governance Agreement, the Stockholder Support Agreement and each of the other
agreements, documents and instruments expressly contemplated hereby and thereby.
1.2. Interpretation. (a) As used in this Agreement and each
Transaction Document, unless the context clearly indicates otherwise:
(i) words used in the singular include the plural and words in the
plural include the singular;
(ii) reference to any Person includes such Person's successors and
assigns, but only if such successors and assigns are permitted by this
Agreement or such other Transaction Document, and reference to a Person in
a particular capacity excludes such Person in any other capacity;
(iii) reference to any gender includes the other gender;
(iv) whenever the words "include," "includes" or "including" are
used in this Agreement or any Transaction Document, they shall be deemed
to be followed by the words "without limitation" or "but not limited to"
or words of similar import;
(v) reference to any Article, Section, Exhibit or Schedule means
such Article or Section of, or such Exhibit or Schedule to, this
Agreement, as the case may be, and references in any Section or definition
to any clause means such clause of such Section or definition;
(vi) the words "herein," "hereunder," "hereof," "hereto" and words
of similar import shall be deemed references to this Agreement as a whole
and not to any particular Section or other provision hereof;
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(vii) reference to any agreement, instrument or other document means
such agreement, instrument or other document as amended, supplemented and
modified from time to time to the extent permitted by the provisions
thereof and by this Agreement;
(viii) reference to any law (including statutes and ordinances)
means such law (including all rules and regulations promulgated
thereunder) as amended, modified, codified or reenacted, in whole or in
part, and in effect at the time of determining compliance or
applicability, and reference to any particular provision of any law shall
be interpreted to include any revision of or successor to that provision
regardless of how numbered or classified;
(ix) relative to the determination of any period of time, "from"
means "from and including," "to" means "to but excluding" and "through"
means "through and including";
(x) in the event of any conflict between the provisions of the body
of this Agreement and the Exhibits or Schedules hereto, the provisions of
the body of this Agreement shall control; and
(xi) the titles to Articles and headings of Sections contained in
this Agreement have been inserted for convenience of reference only and
shall not be deemed to be a part of or to affect the meaning or
interpretation of this Agreement.
(b) This Agreement and each of the Transaction Documents were
negotiated by the Parties with the benefit of legal representation, and no rule
of construction or interpretation otherwise requiring this Agreement or any of
the Transaction Documents to be construed or interpreted against any Party shall
apply to any construction or interpretation hereof. Subject to Section 9.6, this
Agreement shall be interpreted and construed to the maximum extent possible so
as to uphold the enforceability of each of the terms and provisions hereof, it
being understood and acknowledged that this Agreement was entered into by the
Parties after substantial negotiations and with full awareness by the Parties of
the terms and provisions hereof and the consequences thereof.
1.3. Accounting Principles. The classification, character and amount
of all assets, liabilities, capital accounts and reserves and of all items of
income and expense to be determined, and any consolidation or other accounting
computation to be made, and the interpretation of any definition containing any
financial term, pursuant to this Agreement shall be determined and made in
accordance with GAAP, unless such principles are inconsistent with the express
requirements of this Agreement; provided, that, if because of a change of GAAP
after the date of this Agreement AdStar would be required to alter a previously
utilized accounting principle, method or policy in order to remain in compliance
with GAAP, such determination shall continue to be made in accordance with
AdStar's previous accounting principles, methods and policies.
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ARTICLE II
AUTHORIZATION AND SALE OF SERIES B PREFERRED SHARES; CLOSING
2.1. Authorization of the Series B Preferred Shares; Filing of
Series B-2 Certificate of Designation. (a) Prior to the Initial Closing (as
defined below), AdStar shall authorize (a) the issuance and sale to the Investor
of a sufficient number of shares of Series B-1 Preferred Stock (the "Series B-1
Preferred Shares") having the rights and preferences set forth in Exhibit A
attached hereto, (b) the issuance and sale to the Investor of a sufficient
number of shares of Series B-2 Preferred Stock (the "Series B-2 Preferred
Shares," and together with the Series B-1 Preferred Shares, the "Series B
Preferred Shares") having the rights and preferences set forth in Exhibit B
attached hereto, and (c) the reservation for issuance of a sufficient number of
shares of Common Stock upon conversion of the Series B Preferred Shares.
(b) On or before the Subsequent Closing Date, AdStar shall adopt and
file with the Secretary of State of the State of Delaware the Series B-2
Certificate of Designation.
2.2. Purchase and Sale of the Series B Preferred Shares. (a) At the
Initial Closing, subject to the terms and the conditions set forth herein, and
in reliance upon the representations and warranties of AdStar set forth herein
or in any certificate or other document delivered pursuant hereto, AdStar shall
issue, sell and deliver to the Investor, free and clear of all Liens, and the
Investor shall purchase from AdStar at a purchase price of $.75 per share, that
number of Series B-1 Preferred Shares set forth opposite the Investor's name on
Schedule 2.2. The Series B-1 Preferred Shares shall accrue dividends from the
date of issuance.
(b) At the Subsequent Closing, subject to the terms and the
conditions set forth herein, and in reliance upon the representations and
warranties of AdStar set forth herein or in any certificate or other document
delivered pursuant hereto, AdStar shall issue, sell and deliver to the Investor,
free and clear of all Liens, and the Investor shall purchase from AdStar at a
purchase price per share equal to the lower of (i) $.75, and (ii) the Current
Market Price on the Subsequent Closing Date (the "Series B-2 Per Share Purchase
Price"), that number of Series B-2 Preferred Shares as is determined by dividing
$600,000 by the Series B-2 Per Share Purchase Price.
(c) At the Subsequent Closing, subject to the terms and the
conditions set forth herein, and in reliance upon the representations and
warranties of AdStar set forth herein or in any certificate or other document
delivered pursuant hereto, AdStar shall issue, sell and deliver to the Investor,
free and clear of all Liens, in exchange for 1,200,000 shares of Series B-1
Preferred Stock, (i) 1,200,000 Series B-2 Preferred Shares plus (ii) that number
of Series B-2 Preferred Shares equal to the amount of accrued dividends on the
Series B-1 Preferred Shares divided by the Series B-2 Per Share Purchase Price.
The Series B-2 Preferred Shares issued at the Subsequent Closing shall accrue
dividends from the date of issuance.
2.3. Initial Closing; Delivery of Series B-1 Preferred Shares;
Payment of Purchase Price. (a) The closing of the purchase and sale of the
Series B-1 Preferred Shares (the "Initial Closing") shall take place at the
offices of Sidley Xxxxxx Xxxxx & Xxxx, 00 Xxxxx Xxxxxxxx Xxxxxx, Bank Xxx Xxxxx,
Xxxxxxx, Xxxxxxxx 00000 at 10:00 a.m., local time, on the date
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of this Agreement, or at such other place or time or on such other date as shall
be agreed to by AdStar and the Investor. The time and date on which the Initial
Closing is actually held are sometimes referred to herein as the "Initial
Closing Date."
(b) Subject to satisfaction or waiver of the conditions set forth in
Article IV, at the Initial Closing, AdStar shall issue and deliver to the
Investor, free and clear of all Liens, one or more stock certificates, duly
executed by AdStar and registered in AdStar's stock ledger in the Investor's or
its nominee's name, evidencing the number of Series B-1 Preferred Shares to be
purchased by the Investor as set forth in Schedule 2.2.
(c) Subject to satisfaction or waiver of the conditions set forth in
Article III, at the Initial Closing, as payment in full for the Series B-1
Preferred Shares being purchased by it under this Agreement, and against
delivery of the stock certificate(s) therefor as described in subparagraph (a)
above, the Investor pay $900,000 (the "Series B-1 Purchase Price") to AdStar.
Payment of the Series B-1 Purchase Price may be made (i) by wire transfer of
cash to the account of AdStar, (ii) by cancellation of indebtedness of AdStar
owed to the Investor, or (iii) a combination of the foregoing.
2.4. Subsequent Closing; Delivery of Series B-2 Preferred Shares;
Payment of Purchase Price. (a) The closing of the purchase and sale of the
Series B-2 Preferred Shares (the "Subsequent Closing") shall take place at the
offices of Sidley Xxxxxx Xxxxx & Xxxx, 00 Xxxxx Xxxxxxxx Xxxxxx, Bank Xxx Xxxxx,
Xxxxxxx, Xxxxxxxx 00000 at 10:00 a.m., local time, no later than three (3)
Business Days following the satisfaction of the conditions set forth in Article
V hereof, or at such other place or time or on such other date as shall be
agreed to by AdStar and the Investor. The time and date on which the Subsequent
Closing is actually held are sometimes referred to herein as the "Subsequent
Closing Date."
(b) Subject to satisfaction or waiver of the conditions set forth in
Article VI, at the Subsequent Closing, AdStar shall issue and deliver to the
Investor, free and clear of all Liens, one or more stock certificates, duly
executed by AdStar and registered in AdStar's stock ledger in the Investor's or
its nominee's name, evidencing (i) the number of Series B-2 Preferred Shares to
be purchased by the Investor pursuant to Section 2.2(b); plus (ii) the amount of
Series B-2 Preferred Shares to be issued pursuant to Section 2.2(c).
(c) Subject to satisfaction or waiver of the conditions set forth in
Article V, at the Closing, as payment in full for the Series B-2 Preferred
Shares being purchased by it under this Agreement, and against delivery of the
stock certificate(s) therefor as described in subparagraph (a) above, the
Investor shall (i) transfer $600,000 to the account of AdStar by wire transfer
and (ii) surrender stock certificates representing 1,200,000 Series B-1
Preferred Shares (together, the "Series B-2 Purchase Price").
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ARTICLE III
CONDITIONS OF THE INVESTOR'S OBLIGATIONS AT THE INITIAL CLOSING
The obligation of the Investor to purchase the Series B-1 Preferred
Shares at the Initial Closing is subject to the fulfillment to the satisfaction
of the Investor at or prior to the Initial Closing of each of the following
conditions:
3.1. Representations and Warranties. Each of the representations and
warranties of AdStar contained in Article IX shall be true, correct and complete
on and as of the Initial Closing Date as though then made.
3.2. Performance. All covenants, agreements and conditions contained
in this Agreement to be performed or complied with by AdStar on or prior to the
Initial Closing Date shall have been performed or complied with.
3.3. Governmental Authority. On or prior to the Initial Closing
Date, any authorizations, consents, approvals or permits of any Governmental
Authority that are required by law in connection with the lawful sale and
issuance of the Series B-1 Preferred Shares, or the consummation of the
transactions contemplated by this Agreement and each of the Transaction
Documents, shall have been duly obtained by AdStar, and shall be effective on
and as of the Initial Closing Date.
3.4. Consents. On or prior to the Closing Date, AdStar shall have
delivered to special counsel to the Investor, copies of all consents and
approvals of third parties required under all Contracts to which AdStar is a
party or by which AdStar or any of its assets or properties is affected in
connection with the execution, delivery or performance by AdStar of this
Agreement or any of the other agreements or documents contemplated hereby
(including waivers of all preemptive rights and rights of first refusal).
3.5. Initial Closing Deliveries. At the Initial Closing, AdStar
shall have delivered to the Investor all of the following:
(a) copy of the Series B-1 Certificate of Designation certified as
of a recent date by the Secretary of State of the State of Delaware;
(b) Certificate of good standing of AdStar issued as of a recent
date by the Secretary of State of the State of Delaware;
(c) Certificate of the Chief Executive Officer or the President of
AdStar, dated the Initial Closing Date, to the effect that the conditions
specified in Sections 3.1 through 3.4 have been satisfied fully;
(d) one or more certificates, duly executed by AdStar and registered
in AdStar's stock ledger in the Investor's or its nominee's name, evidencing the
number of Series B-1 Preferred Shares to be purchased by the Investor;
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(e) Certificate of the Secretary or an Assistant Secretary of
AdStar, dated the Initial Closing Date, in form and substance reasonably
satisfactory to the Investor, as to (i) no amendments to the Certificate of
Incorporation; (ii) the By-laws; (iii) the resolutions duly adopted by the Board
of Directors authorizing and approving (including for purposes of ss. 203 of the
Delaware General Corporation Law), as appropriate, the execution, delivery and
performance of this Agreement and each of the Transaction Documents to which it
is a party and the transactions contemplated hereby and thereby, including the
issuance, sale and delivery of the Series B Preferred Shares and the reservation
for issuance of the Conversion Common Shares; and (iv) the incumbency and
signatures of the officers of AdStar authorized to execute and deliver this
Agreement and any of the Transaction Documents to which AdStar is a party;
(f) Legal opinion of Morse, Zelnick, Rose & Lander LLP, counsel for
AdStar, dated the Closing Date, addressed to the Investor and in the form
attached hereto as Exhibit G;
(g) Registration Rights Agreement, duly executed by AdStar;
(h) Second Deployment Agreement, duly executed AdStar;
(i) Governance Agreement, duly executed by AdStar and the Founders;
(j) Stockholder Support Agreement, duly executed by AdStar and each
other party thereto;
(k) Escrow Amendment, duly executed by AdStar; and
(l) such other documents, instruments, approvals or opinions
relating to the transactions contemplated by this Agreement as the Investor or
its special counsel may reasonably request.
3.6. Waiver. Any condition specified in this Article III may be
waived if consented to by the Investor; provided, that no such waiver shall be
effective against the Investor unless it is set forth in a writing duly executed
by the Investor.
ARTICLE IV
CONDITIONS OF ADSTAR'S OBLIGATIONS AT THE INITIAL CLOSING
The obligation of AdStar to issue, sell and deliver the Series B-1
Preferred Shares at the Initial Closing is subject to the fulfillment to the
reasonable satisfaction of AdStar at or prior to the Initial Closing of each of
the following conditions:
4.1. Representations and Warranties. Each of the representations and
warranties of the Investor contained in Article X shall be true, correct and
complete on and as of the Initial Closing Date as though then made.
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4.2. Performance. All covenants, agreements and conditions contained
in this Agreement and each of the Transaction Documents to be performed or
complied with by the Investor on or prior to the Initial Closing Date shall have
been performed or complied with.
4.3. Registration Rights Agreement. At the Initial Closing, the
Investor shall have executed and delivered the Registration Rights Agreement to
AdStar.
4.4. Second Deployment Agreement. At the Initial Closing, the
Investor shall have executed and delivered the Second Deployment Agreement to
AdStar.
4.5. Governance Agreement. At the Initial Closing, the Investor
shall have executed and delivered the Governance Agreement.
4.6. Stockholder Support Agreement. At the Initial Closing, the
Investor shall have executed and delivered the Stockholder Support Agreement.
4.7. Escrow Agreement. At the Initial Closing, the Investor shall
have executed and delivered the Escrow Amendment.
4.8. Payment of Series B-1 Purchase Price. The Investor shall have
delivered to AdStar the Series B-1 Purchase Price in accordance with Section
2.3(c).
4.9. Series A Consent. The Investor shall have executed and
delivered to AdStar the Series A Consent.
4.10. Waiver. Any condition specified in this Article IV may be
waived if consented to by AdStar; provided, that, no such waiver shall be
effective against AdStar unless it is set forth in a writing duly executed by
AdStar.
ARTICLE V
CONDITIONS OF THE INVESTOR'S OBLIGATIONS AT THE SUBSEQUENT CLOSING
The obligation of the Investor to purchase the Series B-2 Preferred
Shares at the Subsequent Closing is subject to the fulfillment to the
satisfaction of the Investor at or prior to the Subsequent Closing of each of
the following conditions:
5.1. Consummation of the Initial Closing. The Initial Closing shall
have been consummated in accordance with the terms and provisions of this
Agreement.
5.2. No Material Adverse Effect. Since the Initial Closing Date, no
change shall have occurred which, in the reasonable opinion of the Investor, has
had or could reasonably be expected to have a Material Adverse Effect.
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5.3. Stockholder Approval. On or prior to the Subsequent Closing
Date, AdStar shall have obtained Stockholder Approval of the sale and issuance
of the Series B-2 Preferred Shares.
5.4. Compliance with Transaction Documents. On the Subsequent
Closing Date, AdStar shall be in compliance with all of the terms and conditions
of the Transaction Documents and any other outstanding agreement between AdStar
and the Investor, and no material breach of any such agreement shall have
occurred since the Initial Closing Date. Without limiting the foregoing, on or
prior to the Subsequent Closing Date, (a) AdStar shall have (i) fulfilled its
obligations set forth in Sections 2.3(a), 2.3(b), 8.2 and 10.2(a) and 10.2(b)(i)
of the Second Deployment Agreement, (ii) completed on a timely basis all tasks
set forth on Exhibit A to the Second Deployment Agreement that are required to
have been completed on or prior to the Subsequent Closing Date and (b) all Level
I and Level II, and if elected by the Investor, Level III, tasks set forth in
the Escrow Project Plan (as defined in the Second Deployment Agreement) shall
have been completed.
5.5. Representations and Warranties. Each of the representations and
warranties of AdStar contained in Article IX shall be true, correct and complete
on and as of the Subsequent Closing Date as though then made.
5.6. Performance. All covenants, agreements and conditions contained
in this Agreement to be performed or complied with by AdStar on or prior to the
Subsequent Closing Date shall have been performed or complied with.
5.7. Governmental Authority. On or prior to the Subsequent Closing
Date, any authorizations, consents, approvals or permits of any Governmental
Authority that are required by law in connection with the lawful sale and
issuance of the Series B-2 Preferred Shares, or the consummation of the
transactions contemplated by this Agreement and each of the Transaction
Documents, shall have been duly obtained by AdStar, and shall be effective on
and as of the Subsequent Closing Date.
5.8. Subsequent Closing Deliveries. At the Subsequent Closing,
AdStar shall have delivered to the Investor all of the following:
(a) copy of the Series B-2 Certificate of Designation certified as
of a recent date by the Secretary of State of the State of Delaware;
(b) Certificate of good standing of AdStar issued as of a recent
date by the Secretary of State of the State of Delaware;
(c) Certificate of the Chief Executive Officer or the President of
AdStar, dated the Subsequent Closing Date, to the effect that the conditions
specified in Sections 5.1 through 5.7 have been satisfied fully;
(d) one or more certificates, duly executed by AdStar and registered
in AdStar's stock ledger in the Investor's or its nominee's name, evidencing the
number of Series B-2 Preferred Shares to be purchased by the Investor;
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(e) Certificate of the Secretary or an Assistant Secretary of
AdStar, dated the Subsequent Closing Date, in form and substance reasonably
satisfactory to the Investor, as to (i) no amendments to the Certificate of
Incorporation; (ii) the By-laws; (iii) the resolutions duly adopted by the Board
of Directors authorizing and approving (including for purposes of ss. 203 of the
Delaware General Corporation Law), as appropriate, the execution, delivery and
performance of this Agreement and each of the Transaction Documents to which it
is a party and the transactions contemplated hereby and thereby, including the
issuance, sale and delivery of the Series B Preferred Shares and the reservation
for issuance of the Conversion Common Shares; and (iv) the incumbency and
signatures of the officers of AdStar authorized to execute and deliver this
Agreement and any of the Transaction Documents to which AdStar is a party;
(f) Legal opinion of Morse, Zelnick, Rose & Lander LLP, counsel for
AdStar, dated the Subsequent Closing Date, addressed to the Investor and in the
form attached hereto as Exhibit G; and
(g) such other documents, instruments, approvals or opinions
relating to the transactions contemplated by this Agreement as the Investor or
its special counsel may reasonably request.
5.9. Waiver. Any condition specified in this Article V may be waived
if consented to by the Investor; provided, that no such waiver shall be
effective against the Investor unless it is set forth in a writing duly executed
by the Investor.
ARTICLE VI
CONDITIONS OF ADSTAR'S OBLIGATIONS AT THE SUBSEQUENT CLOSING
The obligation of AdStar to issue, sell and deliver the Series B-2
Preferred Shares at the Subsequent Closing is subject to the fulfillment to the
reasonable satisfaction of AdStar at or prior to the Subsequent Closing of each
of the following conditions:
6.1. Representations and Warranties. Each of the representations and
warranties of the Investor contained in Article X shall be true, correct and
complete on and as of the Subsequent Closing Date as though then made.
6.2. Performance. All covenants, agreements and conditions contained
in this Agreement and each of the Transaction Documents to be performed or
complied with by the Investor on or prior to the Subsequent Closing Date shall
have been performed or complied with.
6.3. Payment of Series B-2 Purchase Price. The Investor shall have
delivered to AdStar the Series B-2 Purchase Price in accordance with Section
2.4(c).
6.4. Waiver. Any condition specified in this Article VI may be
waived if consented to by AdStar; provided, that, no such waiver shall be
effective against AdStar unless it is set forth in a writing duly executed by
AdStar.
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ARTICLE VII
COVENANTS
7.1. Reporting Status. AdStar shall comply with all applicable laws,
rules and regulations of all Governmental Authorities, including the rules and
regulations under the Securities Act and the Exchange Act, and the rules of any
securities exchange upon which any shares of its capital stock are listed.
AdStar shall use commercially reasonable efforts to maintain its status as a
company with securities registered under Section 12 of the Exchange Act and the
quotation of the Common Stock on NASDAQ, and shall timely file all reports and
other filings required to be filed by it under the Securities Act and the
Exchange Act, the rules and regulations adopted by the SEC thereunder or the
rules and regulations of NASDAQ. AdStar shall take such further action as the
Investor may reasonably request to enable such holders to sell Restricted
Securities pursuant to (a) Rule 144 adopted by the SEC under the Securities Act
(as such rule may be amended from time to time) or any similar rule or
regulation hereafter adopted by the SEC or (b) a registration statement on Form
S-2 or S-3 or any similar registration form hereafter adopted by the SEC. Upon
request, AdStar shall deliver to any holder of Restricted Securities a written
statement as to whether it has complied with such requirements.
7.2. Reservation of Common Stock. AdStar shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of issuance upon the conversion of the Series B Preferred
Shares, such number of shares of Common Stock as shall from time to time be
sufficient to effect the full conversion of all outstanding Series B Preferred
Shares, and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the full conversion of all of the
Series B Preferred Shares, AdStar 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 purposes. All shares of Common
Stock which are so issuable shall, when issued, be duly and validly issued,
fully paid and nonassessable and free from all Taxes and Liens other than
Permitted Liens and those created by the Investor.
7.3. Listing. AdStar shall promptly secure the listing of all the
Registrable Securities (as defined in the Registration Rights Agreement) upon
each national securities exchange and automated quotation system upon which
shares of Common Stock are then listed and shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all Registrable
Securities from time to time issuable under the terms of the Transaction
Documents and the Certificate of Designation.
7.4. Filing of Form 8-K. Within five Business Days following the
Initial Closing Date, AdStar shall file a current report on Form 8-K with the
SEC concerning the transactions contemplated hereby and shall attach this
Agreement, together with all exhibits hereto, as exhibits to such Form 8-K. Such
Form 8-K shall be approved by the Investor prior to issuance.
7.5. Stockholder Approval; Put Right. (a) AdStar shall (i) as soon
as practicable, but not later than 30 days after the Initial Closing Date,
prepare and file a proxy statement with the SEC with respect to the holding of a
stockholders' meeting for the purpose of
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obtaining stockholder approval ("Stockholder Approval") of the issuance of the
Series B-2 Preferred Shares at the Subsequent Closing, and more generally, if
necessary, the approval of this Agreement, the Transaction Documents and the
transactions contemplated hereby and thereby, (ii) promptly call and give notice
of such meeting following the SEC's clearance of such proxy statement and (iii)
on or before the 40th day following the SEC's clearance of such proxy statement,
convene and hold such meeting. AdStar shall use its best efforts to obtain such
Stockholder Approval, including, but not limited to, responding promptly to the
SEC's comments in order to obtain clearance of such proxy statement. AdStar
shall, through its Board of Directors, recommend to its stockholders that
Stockholder Approval be given, and AdStar shall use its best efforts to cause
each member of its Board of Directors, the Founders and all other major
stockholders to vote their shares of Common Stock to approve the items set forth
in clause (i) of this Section 7.5(a). AdStar shall afford the Investor and its
counsel an opportunity to review and comment upon any description of the
Investor and its Affiliates, this Agreement, the Transaction Documents or the
transactions contemplated hereby and thereby set forth in such proxy statement
(including all drafts or amendments thereto). The Investor shall provide AdStar
with all necessary information reasonably requested with respect to itself and
its Affiliates solely for inclusion by AdStar in such proxy statement. AdStar
shall notify the Investor promptly of the receipt of any comments from the SEC
or its staff and of any request by the SEC or its staff for amendments or
supplements to such proxy statement or for additional information and will
supply the Investor with copies of all correspondence between AdStar or any of
its representatives, on the one hand, and the SEC or its staff, on the other
hand, with respect to such proxy statement. If at any time prior to such
stockholders meeting there shall occur any event that would be required, under
the Exchange Act and the rules and regulations thereunder, to be set forth in an
amendment or supplement to such proxy statement, AdStar will promptly prepare
and mail to its stockholders such an amendment or supplement.
(b) In the event that AdStar fails to obtain Stockholder Approval
within 120 days after the Initial Closing Date, then, from and after the 120th
day following the Initial Closing, the Investor shall have the right to sell to
AdStar (the "Put Right"), at a closing to be held on such date (the "Put Right
Closing Date") as is specified by the Investor in a written notice to AdStar
delivered at least 3 Business Days prior to such Put Right Closing Date, the
Series B-1 Preferred Shares at a purchase price equal to the Series B-1 Purchase
Price plus all accrued and unpaid dividends thereon (the "Put Right Purchase
Price"). On the Put Right Closing Date, the Investor shall deliver to AdStar,
free and clear of all Liens, one or more stock certificates representing the
Series B-1 Preferred Shares, together with duly executed stock powers, and
AdStar shall deposit into a bank account which shall be designated by the
Investor not later than one Business Day prior to such Put Right Closing Date,
by wire transfer of immediately available funds, an amount equal to the Put
Right Purchase Price.
7.6. Press Release. Any press release issued by AdStar in connection
with the transactions contemplated hereby or by any of the Transaction Documents
shall be approved of by the Investor prior to its issuance.
7.7. Expenses. Each of AdStar and the Investor shall bear its own
expenses in connection with the negotiation, execution, delivery and performance
of this Agreement, the Transaction Documents and the transactions contemplated
hereby and thereby, except that
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AdStar shall reimburse the Investor for the reasonable legal expenses of Sidley
Xxxxxx Xxxxx & Xxxx, special legal counsel to the Investor, not to exceed
$50,000.
7.8. Use of Proceeds. AdStar shall use the proceeds of the sale of
the Series B Preferred Shares to expand the capability of the AdStar Service (as
defined in the Second Deployment Agreement), develop the New Modules (as defined
in the Second Deployment Agreement) in accordance with the Second Deployment
Agreement and for other general corporate purposes.
7.9. Actions Requiring the Consent of the Investor. So long as the
Investor or any of its Affiliates beneficially own, in the aggregate, at least
33% of the aggregate outstanding shares of (i) either the Series A Preferred
Stock or the Series B Preferred Shares, (ii) any capital stock issued upon the
conversion of the Series A Preferred Stock or Series B Preferred Shares
(including, in each case, any capital stock issued by way of stock dividend with
respect to such capital stock) or (iii) any capital stock issued with respect to
the Series A Preferred Stock or Series B Preferred Shares by way of stock split
or in connection with a recapitalization, merger, consolidation or other
reorganization, AdStar shall not, unless it has received the prior written
approval of the Investor:
(a) enter into or approve any Restricted Transaction;
(b) enter into or amend any employment agreement or consulting
agreement; or
(c) issue to any individual, options to acquire more than 30,000
shares of Common Stock under any employee stock option plan or other
equity-based compensation plan of AdStar.
7.10. Operating Plan. (a) Attached hereto as Exhibit H is a true,
complete and correct copy of, AdStar's financial operating plan for fiscal 2003
(the "Operating Plan"). The Operating Plan includes, among other things, (i) a
current balance sheet, (ii) statements of historical profit and loss and
historical cash flows, and (iii) statements of forecasted profit and loss and
forecasted cash flows. AdStar shall not deviate materially from the operating
expense and capital expense forecasts contained in the Operating Plan without
the prior written consent of the Investor, which may not be unreasonably
withheld; provided, however, that any material deviation approved at a meeting
of the board of directors of AdStar shall not require such written consent of
the Investor if the Investor is notified in advance of such meeting (in the same
manner as members of AdStar's board of directors are notified) and is permitted
to attend. AdStar agrees that it will not, without the prior written approval of
the Investor, increase any compensation payable to any individual above the
level as set forth in the Operating Plan.
(b) Beginning in December 2002 and continuing each month thereafter,
AdStar shall provide to the Investor the AdStar Monthly Management Reporting
Package prepared for AdStar's senior management which shall include but not be
limited to, an income statement, cash projections and balance sheet. Such
information shall be provided to the Investor at the same time it is provided to
AdStar's senior management (it being understood that AdStar will provide such
information to senior management no later than the 15th day of each month).
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7.11. Service Agreements. AdStar understands and agrees that
Schedule 4 to the Second Deployment Agreement hereby (i) amends, restates and
replaces Exhibit C to the Newspaper Services Agreement dated as of August 1,
2002 between AdStar and the Investor and (ii) is hereby incorporated by
reference as "Schedule 4 to the Deployment Agreement" into the CareerBuilder
Services Agreement dated as of March 18, 2002 between AdStar and CareerBuilder.
The parties further agree that all references in such agreements to the
"Deployment Agreement" shall be deemed to be references to the Second Deployment
Agreement, as it shall be amended, modified or supplemented.
ARTICLE VIII
TRANSFER OF RESTRICTED SECURITIES
8.1. General Provisions. Restricted Securities are transferable only
pursuant to (a) public offerings registered under the Securities Act, (b) Rule
144 of the SEC (or any similar rule or rules then in force) if such rule is
available and (c) any other legally available means of transfer.
8.2. Legend. Each certificate or instrument representing Restricted
Securities shall be imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, ASSIGNED, PLEDGED
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
UNDER THE ACT OR IN A TRANSACTION WHICH QUALIFIES AS AN EXEMPT TRANSACTION
UNDER THE ACT, THE RULES AND REGULATIONS PROMULGATED THEREUNDER AND THE
SECURITIES LAW OF ANY APPLICABLE STATE."
8.3. Legend Removal. If any Restricted Securities become eligible
for sale pursuant to Rule 144(k), AdStar shall, upon the request of the holder
of such Restricted Securities, remove the legend set forth in Section 8.2 from
the certificates for such Restricted Securities.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES OF ADSTAR
As an inducement to the Investor to enter into this Agreement and to
the purchase of the Series B Preferred Shares, and except as set forth on the
Schedule attached hereto specifically identifying the Section of this Article IX
to which such exception relates (which in each case shall constitute the sole
representation and warranty as to which such exception shall apply), AdStar
hereby represents and warrants to the Investor and agrees as follows:
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9.1. Organization, Qualifications and Corporate Power. (a) AdStar is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. AdStar has full legal and corporate power and
authority to own or lease and to operate and use its properties and assets and
to carry on its business as now conducted and as proposed to be conducted by it.
AdStar is duly qualified or licensed to transact business as a foreign
corporation and is in good standing in each of the jurisdictions listed in
Schedule 9.1(a), which jurisdictions are the only ones in which the ownership or
leasing of its assets or the conduct of its business requires such qualification
or licensing, except where the failure to be so qualified or licensed,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect. No other jurisdiction has demanded, requested or
otherwise indicated that AdStar is required to so qualify.
(b) AdStar has full legal and corporate power and authority (i) to
execute, deliver and perform this Agreement and each of the Transaction
Documents, (ii) to issue, sell and deliver the Series B Preferred Shares and the
Conversion Common Shares and (iii) to carry out fully and perform its
obligations under the terms hereof and thereof.
(c) AdStar is in compliance in all material respects with all of the
terms and provisions of its Certificate of Incorporation and By-laws.
9.2. Authorization; No Conflicts. (a) The execution, delivery and
performance of this Agreement and each of the Transaction Documents, and the
issuance, sale and delivery of the Series B Preferred Shares and the Conversion
Common Shares, have been duly authorized and approved by all requisite corporate
action of AdStar. This Agreement has been duly authorized, executed and
delivered by AdStar and is the legal, valid and binding obligation of AdStar
enforceable in accordance with its terms, and each of the Transaction Documents
to which AdStar is a party has been duly authorized by AdStar and, upon
execution and delivery by AdStar, will be a legal, valid and binding obligation
of AdStar enforceable in accordance with its respective terms, in each case
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement thereof or by general equitable principles.
(b) Neither the execution and delivery of this Agreement or any of
the Transaction Documents or the consummation of any of the transactions
contemplated hereby or thereby nor compliance with or fulfillment of the terms,
conditions and provisions hereof or thereof will:
(i) conflict with, result in a breach or violation of the terms,
conditions or provisions of, or constitute a default, an event of default
or an event creating rights of acceleration, termination or cancellation
or a loss of rights under, or result in the creation or imposition of any
Lien upon any of the assets or properties of AdStar, under (A) the
Certificate of Incorporation or the By-laws or (B) any note, instrument,
contract, agreement, mortgage, lease, license, franchise, permit or other
authorization, right, restriction or obligation to which AdStar is a party
or any of its assets or properties is subject or by which AdStar is bound,
(C) any Court Order to which AdStar is a party or any of its assets or
properties is subject or by which AdStar is bound, (D) any rule or
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regulation of NASDAQ or (E) any Requirements of Laws affecting AdStar or
its assets or properties; or
(ii) require the approval, consent, authorization or act of, or the
making by AdStar of any declaration, filing or registration with, any
Person (except for (a) with respect to the Registration Rights Agreement,
the registration of the shares covered thereby with the SEC and filings
pursuant to state securities laws, (b) with respect to the offer and sale
of the Series B Preferred Shares, any required filings under state
securities laws (all of which have been made by AdStar) and (c) routine
post-Closing notice filings with the SEC and under state corporation and
securities laws, each of which will be filed timely within the applicable
period therefor).
9.3. Subsidiaries and Investments. Schedule 9.3 sets forth, as of
the date hereof, each Subsidiary of AdStar. Except as set forth in Schedule 9.3,
all of the outstanding shares of capital stock of each of the Subsidiaries set
forth on Schedule 9.3 are owned by AdStar, by another wholly-owned Subsidiary of
AdStar or by AdStar and another wholly-owned Subsidiary of AdStar, free and
clear of all Liens, and are duly-authorized, validly-issued, fully-paid and
nonassessable. Except as set forth in Schedule 9.3, AdStar does not, directly or
indirectly, (a) own of record or beneficially or hold the right to acquire any
outstanding voting securities or other equity interests in any Person or (b)
control or direct the operations of any Person.
9.4. Authorized Capital Stock. (a) As of the Initial Closing, the
authorized capital stock of AdStar consists of (i) 20,000,000 shares of Common
Stock, the number of issued and outstanding shares of which is as set forth in
Schedule 9.4 and (ii) 5,000,000 shares of preferred stock, $0.0001 par value, of
which 1,443,457 shares have been designated as Series A Preferred Stock and
1,200,000 shares have been designated as Series B-1 Preferred Stock and the
number of issued and outstanding shares of each of which is set forth in
Schedule 9.4. AdStar has reserved for issuance (x) sufficient shares of Common
Stock for issuance upon conversion of all outstanding shares of Series A
Preferred Stock, (y) sufficient shares of common stock for issuance upon
conversion of all outstanding Series B Preferred Shares, and (z) 3,457,976
shares of Common Stock for issuance upon exercise of outstanding options and
warrants to purchase shares of Common Stock. Immediately after the Closing, the
capitalization of AdStar shall be as set forth in the Capitalization Schedule
attached to Schedule 9.4, which Capitalization Schedule reflects the
capitalization of AdStar both on an actual shares outstanding basis and on a
fully-diluted basis assuming conversion of all convertible securities and the
exercise of all outstanding options and warrants.
(b) Except as set forth on Schedule 9.4, no Person is entitled to
any pre-emptive right or right of first refusal with respect to the issuance of
any capital stock of AdStar, including the Series B Preferred Shares. There are
no outstanding pre-emptive rights, options, warrants, conversion rights,
agreements or other rights to purchase any of the authorized but unissued
capital stock of AdStar or any securities convertible or exchangeable into any
capital stock of AdStar, other than (i) those issued, reserved or committed to
be issued pursuant to this Agreement and (ii) those set forth in the
Capitalization Schedule.
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(c) Except as set forth in Schedule 9.4, AdStar is not a party to
any existing written agreement with the holder of any of its securities that
requires AdStar to purchase any of such securities from their holder under any
circumstances.
(d) Except as set forth in Schedule 9.4, AdStar is not a party or
subject to any agreement or understanding, and AdStar has not received any
written notice of any agreement or understanding between any Persons, that
affects or relates to the voting or giving of written consents with respect to
any of the capital stock of AdStar.
(e) All outstanding securities of AdStar were issued in compliance
with all Federal and state securities laws.
(f) Except as provided in the Registration Rights Agreement and as
set forth in Schedule 9.4, AdStar is presently not under any obligation and has
not granted any rights to register any of its securities under the Securities
Act.
(g) The Series B Preferred Shares, when issued, sold and delivered
in accordance with the terms of this Agreement, will be (i) duly and validly
issued, fully paid, non-assessable and free and clear of all Liens except any
created by or through the Investor, and will be free of restrictions on transfer
other than restrictions on transfer under this Agreement and under applicable
state and Federal securities laws and (ii) issued in compliance with all state
and Federal securities laws and in compliance with the rules and regulations of
NASDAQ.
(h) The Conversion Common Shares issuable upon conversion of the
Series B Preferred Shares have been duly and validly reserved for issuance and,
upon issuance in accordance with the conversion provisions of the Series B
Preferred Shares, will be (i) duly and validly issued, fully paid,
non-assessable and free and clear of all Liens except any created by or through
the Investor, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and under applicable state and
Federal securities laws, (ii) issued in compliance with all state and Federal
securities laws and in compliance with the rules and regulations of NASDAQ and
(iii) subject to the registration of such shares in accordance with the
applicable provisions of the Securities and the Exchange Act, entitled to be
quoted and/or listed on NASDAQ.
9.5. SEC Documents. The Common Stock is registered pursuant to
Section 12 of the Exchange Act and AdStar has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Exchange Act, including all such
proxy information, solicitation statement and registration statements, and
amendments thereto required to have been filed (all of the foregoing and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein being referred to herein as the "SEC
Documents"). As of the date of filing of such SEC Documents, the SEC Documents
complied in all material respects with the applicable requirements of the
regulations of the Exchange Act and the rules and regulations promulgated
thereunder and other Federal, state and local laws, rules and regulations
applicable to such SEC Documents. None of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they
-23-
were made, not misleading. The SEC Documents contain all material information
concerning AdStar, and no event or circumstance has occurred prior to the date
hereof that would require AdStar to disclose such event or circumstance in order
to make the statements in the SEC Documents not misleading but which has not
been so disclosed. AdStar is not required to file and will not be required to
file any Contract entered into prior to the date hereof and to which AdStar is a
party or by which AdStar is bound that has not been previously filed as an
exhibit to its reports filed with the SEC under the Exchange Act.
9.6. Listing. The Common Stock is quoted on NASDAQ. Except as set
forth in Schedule 9.6, AdStar is not in violation of the listing or quotation
requirements of NASDAQ and has no Knowledge of any facts that would reasonably
lead to delisting or suspension of the Common Stock by NASDAQ in the foreseeable
future.
9.7. Financial Statements. The financial statements (including, in
each case, any related notes) of AdStar included in the SEC Documents complied
as to form and substance in all material respects with applicable accounting
requirements of the SEC and the published rules and regulations of the SEC or
other applicable SEC or NASDAQ rules and regulations with respect thereto. Such
financial statements were prepared in accordance with GAAP during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto or (ii) in the case of unaudited interim statements, to the
extent that they may include footnotes, may be condensed or summary statements)
and fairly presented in all material respects, the financial position of AdStar
as of the respective dates thereof and the results of operations and cash flows
for the periods indicated (subject, in the case of unaudited statements, to
normal year-end audit adjustments).
9.8. Absence of Undisclosed Liabilities. AdStar has no liabilities
or obligations not disclosed in the SEC Documents other than those liabilities
incurred in the ordinary course of AdStar's business since November 14, 2002.
9.9. No Material Adverse Change. Except as disclosed in the SEC
Documents, since November 14, 2002, (a) no Material Adverse Effect has occurred
or exists, (b) no event or circumstance has occurred that, with notice or
passage of time or both, is reasonably likely to result in a Material Adverse
Effect with respect to AdStar and (c) no change in the financial condition or
the assets, liabilities or properties of AdStar has occurred that could
reasonably be foreseen to have a Material Adverse Effect with respect to AdStar.
9.10. Title to Properties; Leasehold Interests. AdStar and its
Subsidiaries have good and marketable title in fee simple to all real property
and good and marketable title to all personal property owned by them that is
material to the business of AdStar and its Subsidiaries, in each case free and
clear of all Liens except such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of such
property by AdStar or any of its Subsidiaries. Any real property and facilities
held under lease by AdStar or any of its Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and facilities by AdStar or its Subsidiaries.
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9.11. Tax Matters. (a) (i) AdStar has timely filed all Tax Returns
required to be filed by it; (ii) all such Tax Returns are complete and accurate
in all material respects, disclose all Taxes required to be paid by AdStar, for
the periods covered thereby and have been prepared in compliance with all
applicable laws and regulations; (iii) AdStar has timely paid all Taxes (whether
or not shown on such Tax Returns) due and owing by it and has withheld and paid
over to the appropriate taxing authority all Taxes that it is required by law to
withhold or to collect for payment from amounts paid or owing to any employee,
stockholder, creditor or other third party; (iv) AdStar has not waived or been
requested to waive any statute of limitations in respect of Taxes which waiver
is currently in effect; (v) AdStar is not currently the beneficiary of any
extension of time within which to file any Tax Return; (vi) there is no action,
suit, investigation, audit, claim or assessment pending or, to the Knowledge of
AdStar, proposed or threatened with respect to Taxes of AdStar and no
information related to Tax matters has been requested by any foreign, Federal,
state or local taxing authority; (vii) there are no Liens for Taxes upon the
assets or properties of AdStar except Liens relating to current Taxes not yet
due; (viii) there are no material unresolved questions or claims concerning any
Tax liability of AdStar; and (ix) AdStar is not and has not been an S
corporation since June 1999.
(b) AdStar is not liable for the Taxes of another Person in a
material amount (i) under Treasury Regulation ss. 1.1502-6 (or comparable
provisions of state, local or foreign law), (ii) as a transferee or successor,
(iii) by contract or indemnity or (iv) otherwise. AdStar is not a party to any
Tax sharing or indemnity agreements. AdStar has not been a member of any
affiliated group as defined in Section 1504 of the Code that has filed a
consolidated return for Federal income tax purposes (or any similar group under
state, local or foreign law). AdStar has not made any payments, is not obligated
to make payments or is not a party to an agreement that could obligate it to
make any payments that would not be deductible under Section 280G of the Code.
9.12. Intellectual Property Rights. (a) Schedule 9.12 contains a
complete and accurate list of all material (i) patented or registered
Intellectual Property Rights owned or used by AdStar or any of its Subsidiaries,
(ii) pending patent applications and applications for registrations of other
Intellectual Property Rights filed by AdStar or any of its Subsidiaries (iii)
unregistered trade names and corporate names owned or used by AdStar or any of
its Subsidiaries and (iv) unregistered trademarks and service marks owned or
used by AdStar or any of its Subsidiaries. Schedule 9.12 also contains a
complete and accurate list of all exclusive licenses granted by AdStar or any of
its Subsidiaries to any third party with respect to any Intellectual Property
Rights and all licenses and other rights granted by any third party to AdStar or
any of its Subsidiaries with respect to any Intellectual Property Rights, in
each case identifying the subject Intellectual Property Rights. AdStar or its
Subsidiaries owns all right, title and interest to, or has the right to use
pursuant to a valid license, all Intellectual Property Rights necessary for the
operation of the business of AdStar and each of its Subsidiaries as presently
conducted and as presently proposed to be conducted, free and clear of all
Liens. The loss or expiration of any Intellectual Property Right or related
group of Intellectual Property Rights owned or used by AdStar or any of its
Subsidiaries has not had a Material Adverse Effect, and no such loss or
expiration is threatened, pending or reasonably foreseeable. AdStar has taken
reasonable actions to maintain and protect the Intellectual Property Rights that
it owns and uses, including, without limitation, causing its employees to
execute non-disclosure and confidentiality agreements. Except as set forth on
Schedule 9.12, (i) AdStar owns all right, title, and interest in and to all of
the Intellectual Property Rights which it owns and uses, including, without
limitation, causing its employees to execute non-disclosure and confidentiality
agreements. Except as indicated on Schedule 9.12, (i) AdStar owns all right,
title, and interest in
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and to all of the Intellectual Property Rights listed on such schedule and all
other Intellectual Property Rights material to the operation of the business of
AdStar, (ii) there have been no claims made against AdStar asserting the
invalidity, misuse or unenforceability of any of such rights, and there are no
grounds for the same, (iii) AdStar has not received a notice of conflict with
the asserted rights of others within the last five years and (iv) the conduct of
AdStar's business has not infringed or misappropriated and does not infringe or
misappropriate any Intellectual Property Rights of other Persons, nor would any
future conduct as presently contemplated infringe any Intellectual Property
Rights of other Persons and, to the best of AdStar's knowledge, the Intellectual
Property Rights owned by AdStar have not been infringed or misappropriated by
other Persons.
(b) (i) There have been no claims made against AdStar or any of its
Subsidiaries asserting the invalidity, misuse or unenforceability of any of the
Intellectual Property Rights listed on Schedule 9.12, and there are no grounds
for the same, (ii) neither AdStar nor any of its Subsidiaries has received any
written notices of, and neither AdStar nor any of its Subsidiaries is aware of
any facts that indicate a reasonable likelihood of, any infringement or
misappropriation by, or conflict with, any third party with respect to such
Intellectual Property Rights (including any demand or request that AdStar or any
of its Subsidiaries license any rights from a third party), (iii) the conduct of
AdStar's or any of its Subsidiaries' business has not infringed, misappropriated
or conflicted with and does not infringe, misappropriate or conflict with any
Intellectual Property Rights of other Persons and (iv) to the Knowledge of
AdStar, the Intellectual Property Rights owned by or licensed to AdStar or any
of its Subsidiaries have not been infringed, misappropriated or conflicted by
other Persons.
9.13. Compliance with Laws; Litigation.
(a) The assets of AdStar and each of its Subsidiaries and their
current and proposed uses comply and will comply in all material respects with
all applicable Requirements of Laws and Court Orders;
(b) AdStar and each of its Subsidiaries have complied in all
material respects with all Requirements of Laws and Court Orders that are
applicable to its assets or business;
(c) AdStar and each of its Subsidiaries owns, holds or possesses all
necessary permits, licenses, franchises and other authorizations from a
Governmental Authority required to conduct its business substantially as
conducted presently, except where the failure to do so does not have a Material
Adverse Effect; and neither of AdStar nor any of its Subsidiaries is in default
in any material respect under any such permit, license, franchise or other
authorization;
(d) Except as set forth in Schedule 9.13, there are no civil,
criminal, administrative or regulatory lawsuits, claims, suits, proceedings,
arbitrations or investigations pending or, to the Knowledge of AdStar,
threatened against or affecting AdStar or any of its Subsidiaries nor, to the
Knowledge of AdStar, is there any basis for any of the same, and there
-26-
are no lawsuits, claims or proceedings pending or threatened in which AdStar or
any of its Subsidiaries is the plaintiff or claimant;
(e) There are no civil, criminal, administrative or regulatory
lawsuits, claims, suits, proceedings, arbitrations or investigations pending or,
to the Knowledge of AdStar, threatened against the principal executive officers
of AdStar or any of its Subsidiaries by reason of the past employment
relationship of any such officer; and
(f) To the Knowledge of AdStar, no legislative or regulatory
proposal or other proposal for any change in any Requirement of Law, in each
case which is specifically focused on AdStar's or any of its Subsidiaries'
industry, is pending which, if adopted, could adversely affect AdStar's or any
of its Subsidiaries' ability to conduct its business.
9.14. Brokers. Neither AdStar nor any of its Subsidiaries has any
Contract with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement for which AdStar or any of its
Subsidiaries shall have any liability or responsibility.
9.15. Governmental Approvals; No Registration. Subject to the
accuracy of the representations and warranties of the Investor set forth in
Article X, no permit, consent, approval or authorization of, or registration to
or filing with, any Governmental Authority is or will be required in connection
with the execution, delivery and performance by AdStar of this Agreement or any
of the Transaction Documents, or the issuance, sale and delivery of the Series B
Preferred Shares or the reservation for issuance of the Conversion Common
Shares, or the consummation by AdStar of any other transactions contemplated
hereby or thereby, other than with respect to the Registration Rights Agreement,
the registration of the shares covered thereby with the SEC and filings, if any,
pursuant to state securities laws.
9.16. Insurance. AdStar and each of its Subsidiaries has in full
force and effect fire and casualty insurance policies, with extended coverage,
sufficient in amount (subject to reasonable deductibles) to allow it to replace
any of its properties that might be damaged or destroyed. Except as set forth on
Schedule 9.16, AdStar does not have any self-insurance or co-insurance programs.
Neither AdStar nor any of its Subsidiaries has been refused any insurance
coverage sought or applied for and neither AdStar nor any of its Subsidiaries
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business at a
cost that would not have a Material Adverse Effect.
9.17. Employees. AdStar is not aware that any executive officer of
AdStar or any of its Subsidiaries or any group of employees of AdStar or any of
its Subsidiaries has any plans to terminate employment with AdStar or any of its
Subsidiaries. AdStar and each of its Subsidiaries have complied in all material
respects with all laws relating to the employment of labor (including provisions
relating to wages, hours, equal opportunity, collective bargaining and the
payment of social security and other Taxes, and the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), and AdStar is not aware that it has
any labor relations problems (including any union organizational activities,
threatened or actual strikes or work stoppages or grievances). Neither AdStar
nor any of its Subsidiaries is a party to or bound by any collective bargaining
agreement or any other Contract with any labor union. None of
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AdStar, any of its Subsidiaries or, to the Knowledge of AdStar, any of its or
their employees is subject to any noncompete, nondisclosure, confidentiality,
employment, consulting or similar agreements, affecting or in conflict with the
present business activities of AdStar or the proposed business activities of
AdStar as contemplated by the Second Deployment Agreement, except for agreements
between AdStar and its present and former employees.
9.18. ERISA. Except as set forth on Schedule 9.18:
(a) Multiemployer Plans. AdStar does not have any obligation, and
has never been required, to contribute to (or any other liability, including
current or potential withdrawal liability, with respect to) any "multiemployer
plan" (as defined in Section 3(37) of ERISA).
(b) Retiree Welfare Plans. AdStar does not maintain or have any
obligation to contribute to (or any other liability with respect to) any plan or
arrangement whether or not terminated, which provides medical, health, life
insurance or other welfare-type benefits for current or future retired or
terminated employees (except for limited continued medical benefit coverage
required to be provided under Section 4980B of the Code or as required under
applicable state law).
(c) Defined Benefit Plans. AdStar does not maintain, contribute to
or have any liability under (or with respect to) any employee plan that is a
tax-qualified "defined benefit plan" (as defined in Section 3(35) of ERISA),
whether or not terminated.
(d) Defined Contribution Plans. AdStar does not maintain, contribute
to or have any liability under (or with respect to) any employee plan that is a
tax-qualified "defined contribution plan" (as defined in Section 3(34) of
ERISA), whether or not terminated.
(e) Other Plans. AdStar does not maintain, contribute to or have any
liability under (or with respect to) any plan or arrangement providing benefits
to current or former employees, including any bonus plan, profit sharing, stock
option, employee stock purchase or other plan or arrangement providing for
deferred or other compensation, employee health or other welfare benefit plan or
other arrangement, or severance agreements, programs, policies or arrangements,
whether or not terminated and whether or not subject to ERISA.
(f) Unfunded Liability. No Plan maintained by AdStar or to which
AdStar has an obligation to contribute, or with respect to which AdStar has any
other liability, has any material unfunded liability.
(g) Plan Qualification and Compliance. None of the employee benefit
plans set forth on Schedule 9.18 is intended to be qualified under Section
401(a) of the Code. Each employee benefit plan set forth on Schedule 9.18 and
all related trusts, insurance contracts and funds have been maintained, funded
and administered in material compliance with their respective terms and with all
applicable laws.
(h) AdStar. For purposes of this Section 9.18, the term "AdStar"
includes all entities under common control with AdStar pursuant to Section
414(b) or (c) of the Code.
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9.19. Environmental Matters. To the Knowledge of AdStar, (a) the
operations of AdStar and each of its Subsidiaries comply in all material
respects with all applicable Environmental Laws, (b) neither AdStar nor any of
its Subsidiaries is or has been subject to any judicial or administrative
proceeding, Court Order or settlement alleging or addressing a violation of or
liability under any Environmental Law, (c) no material quantity of hazardous
wastes, substances or materials or oil or petroleum products have been
generated, transported, used, disposed, stored or treated by AdStar or any of
its Subsidiaries and (d) no material quantity of hazardous wastes, substances or
materials or oil or petroleum products have been released, discharged, disposed,
transported, placed or otherwise caused by AdStar or any of its Subsidiaries to
enter the soil or water in, under or upon any real property owned, leased or
operated by AdStar or any of its Subsidiaries.
9.20. Related-Party Transactions. Except as set forth in Schedule
9.20, no Related Party is indebted to AdStar or any of its Subsidiaries, nor is
AdStar or any of its Subsidiaries indebted (or committed to make loans or extend
or guarantee credit) to any of such persons, other than for (a) payment of
salary for services rendered, (b) reimbursement for reasonable expenses incurred
on behalf of AdStar or any of its Subsidiaries and (c) other standard employee
benefits made generally available to all employees. To the Knowledge of AdStar,
no Related Party has any direct or indirect ownership interest in any firm or
corporation with which AdStar or any of its Subsidiaries is affiliated or with
which AdStar or any of its Subsidiaries has a business relationship, or any firm
or corporation that competes with AdStar or any of its Subsidiaries, except that
employees, officers, stockholders or directors of AdStar and its Subsidiaries
and members of their immediate families may own not more than 5% of the
outstanding capital stock of any publicly-traded company. To the Knowledge of
AdStar, no officer, stockholder or director of AdStar, or any member of his or
her immediate family, is, directly or indirectly, a party to any material
Contract with AdStar or any of its Subsidiaries (other than such Contracts as
relate to any such person's employment or ownership of capital stock of AdStar).
9.21. Disclosure. To the Knowledge of AdStar, none of the
representations or warranties of AdStar contained herein, none of the
information contained in the Schedules referred to in this Article IX, and none
of the other written information or documents furnished to the Investor or any
of its representatives by AdStar or its representatives in connection with the
transactions contemplated by this Agreement, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
herein or therein, in light of the circumstances under which they were made, not
misleading in any material respect. There is no fact that AdStar has not
disclosed to the Investor in writing that has had or would reasonably be
expected to have Material Adverse Effect.
9.22. No General Solicitation. None of AdStar, any of its Affiliates
or any Person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) in connection with the offer or sale of the Series B
Preferred Shares.
9.23. No Integrated Offering. None of AdStar, any of its Affiliates
or any Person acting on its or their behalf, has directly or indirectly made any
offers or sales of any security or solicited any offers to buy any security
under circumstances that would require
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registration of the Series B Preferred Shares or cause this offering of Series B
Preferred Stock to the Investor to be integrated with any prior offering of
AdStar's securities.
9.24. Application of Takeover Protections. AdStar does not have a
stockholder rights plan or other similar plan. AdStar and its Board of Directors
have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination or other similar anti-takeover
provision under the Certificate of Incorporation or the laws of the state of its
incorporation that is or could become applicable to the Investor as a result of
the transactions contemplated hereby.
ARTICLE X
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
As an inducement to AdStar to enter into this Agreement and to issue
and sell the Series B Preferred Shares, the Investor hereby represents and
warrants to AdStar and agrees as follows:
10.1. Authorization. The execution, delivery and performance of this
Agreement and each of the Transaction Documents to which the Investor is a party
have been duly authorized and approved by the Investor. This Agreement has been
duly executed and delivered by the Investor and is the legal, valid and binding
obligation of the Investor enforceable in accordance with its terms, and each of
the Transaction Documents to which the Investor is a party has been duly
authorized by the Investor and, upon execution and delivery by the other parties
thereto, will be a legal, valid and binding obligation of the Investor
enforceable in accordance with its respective terms, in each case subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement thereof or by general equitable principles.
10.2. Brokers. The Investor has no Contract with any broker, finder
or similar agent with respect to the transactions contemplated by this Agreement
for which the Investor shall have any liability or responsibility.
10.3. Investment Representations.
(a) The Investor acknowledges that it has been furnished with such
documents, materials and information as the Investor deems necessary or
appropriate for evaluating an investment in AdStar. The Investor confirms that
it has made such further investigation of AdStar as was deemed appropriate to
evaluate the merits and risks of this investment. The Investor further
acknowledges that it has had the opportunity to ask questions of, and receive
answers from, the directors and officers of AdStar, and Persons acting on
AdStar's behalf, concerning the terms and conditions of the offering of the
Series B Preferred Shares. Notwithstanding the foregoing, it is agreed and
understood by the Parties that the acknowledgements made in this Section 10.3(a)
shall not be construed to limit or modify in any way the representations and
warranties of AdStar contained in Article IX or the right of the Investor to
rely on such representations and warranties.
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(b) The Investor represents that it is acquiring the Series B
Preferred Shares purchased hereunder for its own account with the present
intention of holding such securities for purposes of investment, and that it has
no intention of selling such securities in a public distribution in violation of
the Federal securities laws or any applicable state securities laws; provided,
that nothing contained herein shall prevent the Investor and subsequent holders
of the Series B Preferred Shares from transferring such securities in compliance
with the provisions of Article VIII.
(c) The Investor is an "accredited investor" as such term is defined
in Rule 501(a) of Regulation D under the Securities Act.
ARTICLE XI
MISCELLANEOUS
11.1. Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by any Party
in connection herewith will survive the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, regardless of any
investigation made by or on behalf of the Investor.
11.2. Amendments and Waivers. Except as otherwise expressly provided
herein, the provisions of this Agreement may be amended, modified or waived only
with the written consent of AdStar and the Investor. No course of dealing
between AdStar and the holder of any Series B Preferred Shares or any delay in
exercising any rights hereunder or under the Transaction Documents, the Series
B-1 Certificate of Designation or the Series B-2 Certificate of Designation will
operate as a waiver of any rights of any such holders.
11.3. Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the Parties will bind and inure to the benefit of the respective
successors and permitted assigns of the Parties, whether so expressed or not. It
is expressly understood that, in the event of a sale by Investor of a portion of
its Series B Preferred Stock to Gannett or Knight Ridder, Gannett or Knight
Ridder, as applicable, shall qualify as a permitted assign under this Section
11.3, and after any such sale Gannett or Knight Ridder, as applicable, shall be
entitled to all rights and remedies (and shall be bound by any obligations) of a
holder of Series B Preferred Stock hereunder to the same extent as the Investor.
11.4. Remedies. The Investor shall be entitled to enforce any rights
it has under this Agreement or the Transaction Documents specifically (without
posting a bond or other security), to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights granted by law.
11.5. Indemnification. In consideration of the Investor's execution
and delivery of this Agreement and acquisition of the Series B Preferred Shares
and in addition to all of AdStar's other obligations under this Agreement,
AdStar shall defend, protect, indemnify and hold harmless the Investor and each
other holder of Series B Preferred Shares and Conversion Common Shares and all
of their partners, officers, directors, employees and agents (including
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those retained in connection with the transactions contemplated by this
Agreement) (collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by the Indemnitees as a result of, or
arising out of, or relating to (a) any breach by AdStar of any of the
representations, warranties or covenants contained in this Agreement or any of
the Transaction Documents or (b) any third-party claims incurred solely as a
result of the fact that such Person is a stockholder of AdStar (or a partner,
officer, director, employee or agent of such Person). To the extent that the
foregoing undertaking by AdStar may be unenforceable for any reason, AdStar
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities that is permissible under applicable law.
11.6. Severability. Wherever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law and in such a way as to, as closely as possible, achieve the
intended economic effect of such provision and this Agreement as a whole, but if
any provision contained herein is, for any reason, held to be invalid, illegal
or unenforceable in any respect, such provision shall be ineffective to the
extent, but only to the extent, of such invalidity, illegality or
unenforceability without invalidating the remainder of such provision or any
other provisions hereof, unless such a construction would be unreasonable.
11.7. Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or delivered
(a) when delivered personally, (b) if transmitted by facsimile when confirmation
of transmission is received, (c) if sent by registered or certified mail,
postage prepaid, return receipt requested, three Business Days after mailing or
(iv) if sent by reputable overnight courier service, one Business Day after
delivery to such service; and shall be addressed as follows:
If to AdStar, to: with a copy to:
AdStar, Inc. Morse, Zelnick, Rose & Lander, LLP
0000 Xxxxxxx Xxxxxx, Xxxxx 000 000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx xxx Xxx, Xxxxxxxxxx 00000 Xxx Xxxx, Xxx Xxxx, 00000
Attention: Xxxxxx Xxxxxxxx, President and Chief Attention: Xxxxxxx X. Xxxxxxx, Esq.
Executive Officer Facsimile: (000) 000-0000
Facsimile: (000) 000-0000
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If to the Investor, to: with a copy to:
Tribune Company Sidley Xxxxxx Xxxxx & Xxxx
000 X. Xxxxxxxx Xxx. Bank Xxx Xxxxx
Xxxxxxx, XX 00000 00 Xxxxx Xxxxxxxx Xxxxxx
Attention: General Counsel Xxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000 Attention: Xxxxx X. Xxxxxx
Xxx X. Xxxxxx
Facsimile: (000) 000-0000
and also to
Tribune Company
000 X. Xxxxxxxx Xxx.
Xxxxxxx, XX 00000
Attention: Vice President of Strategy and Development
Facsimile: (000) 000-0000
11.8. Governing Law. This Agreement and the Exhibits and Schedules
hereto shall be governed by, and construed in accordance with, the laws of the
State of Illinois, without giving effect to any choice of law or conflict of law
rules or provisions (whether of the State of Illinois or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Illinois. In furtherance of the foregoing, the internal law of the
State of Illinois shall control the interpretation and construction of this
Agreement (and all Schedules and Exhibits hereto), even though under that
jurisdiction's choice of law or conflict of law analysis, the substantive law of
some other jurisdiction would ordinarily apply.
11.9. Submission to Jurisdiction; Waiver of Jury Trial. (a) Each of
the Parties hereby irrevocably submits in any suit, action or proceeding arising
out of or related to this Agreement or any of the Transaction Documents, or any
of the transactions contemplated hereby or thereby, to the exclusive
jurisdiction of the United States District Court for the Northern District of
Illinois and the Circuit Court of Xxxx County, Illinois and, to the extent
permissible by law, waives any and all claims and objections that any such court
is an inconvenient forum.
(b) EACH OF THE PARTIES HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL
BY JURY IN ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN
OR AMONG ANY OF THE PARTIES ARISING OUT OF OR RELATED TO THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR ANY OF THE TRANSACTION DOCUMENTS, OR ANY OTHER
INSTRUMENT OR DOCUMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR
THEREWITH. ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES TO
THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
11.10. Attorneys' Fees. In the event of any action or suit based
upon or arising out of any actual or alleged breach by any Party of any
representation, warranty or agreement in
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this Agreement, the prevailing party shall be entitled to recover its reasonable
attorneys' fees and expenses of such action or suit from the losing party, in
addition to any other relief ordered by the court.
11.11. Execution in Counterparts. This Agreement may be executed in
any number of counterparts (including via facsimile), each of which will be
considered an original instrument, but all of which together will be considered
one and the same agreement, and will become binding when one or more
counterparts have been signed by and delivered to each of the Parties.
11.12. Delivery by Facsimile. This Agreement, to the extent signed
and delivered by means of a facsimile machine, shall be treated in all manner
and respects as an original agreement or instrument and shall be considered to
have the same binding legal effect as if it were the original signed version
thereof delivered in person. At the request of any Party, each other Party shall
reexecute original forms thereof and deliver them to all other Parties. No Party
shall raise the use of a facsimile machine to deliver a signature or the fact
that any signature or agreement or instrument was transmitted or communicated
through the use of a facsimile machine as a defense to the formation or
enforceability of a contract and each such Party forever waives any such
defense.
11.13. Entire Agreement. This Agreement and the Exhibits and
Schedules referred to herein, the Transaction Documents and the other documents
delivered pursuant hereto contain the entire understanding of the Parties with
regard to the subject matter contained herein or therein, and supersede all
prior agreements, understandings or letters of intent between or among any of
the Parties.
11.14. Third Party Beneficiaries. The Parties hereto expressly
intend the provisions of Section 7.11 to confer a benefit upon and be
enforceable by, as third party beneficiaries of this Agreement, the third
persons referred to in such provision.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties have caused this Stock Purchase
Agreement to be executed the day and year first above written.
ADSTAR, INC.
By: /s/ Xxxxxx Xxxxxxxx
----------------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: President and Chief Executive Officer
TRIBUNE COMPANY
By: /s/ Xxxxxxx Xxxxxx
----------------------------------------------
Name: Xxxxxxx Xxxxxx
Title: President/Tribune Classifieds
Signature Page
to the
Stock Purchase Agreement
