COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is made as of this
5th day of December, 1996, by and between WebSite Management Company, Inc., a
Texas corporation conducting business as FlashNet Communications ("FlashNet" or
"Seller"), and Xxxxxxx Xxxxxxx Xxxxxxxxx, a resident of Fort Worth, Texas (the
"Purchaser"). FlashNet and the Purchaser hereby agree as follows:
SECTION 1
PURCHASE AND SALE OF COMMON STOCK
1.1 NUMBER OF SHARES; PURCHASE PRICE. Subject to the terms and conditions
hereof, FlashNet will issue and sell to the Purchaser, and the Purchaser will
buy from FlashNet, a total of 31,888 shares of FlashNet's Common Stock, without
par value (the "Shares"), for the cash purchase price of TWO HUNDRED THOUSAND
AND NO/100 DOLLARS ($200,000.00).
1.2 CLOSING.
(a) The closing of the purchase and sale of the Shares hereunder (the
"Closing") shall be held at the offices of FlashNet, 0000 Xxxxx Xxxxxx Xxxx
Xxxxxxxxx, Xxxx Xxxxx, Xxxxx 00000, at 10:00 a.m. on December 9, 1996, or at
such other place or date as FlashNet and the Purchaser shall agree in writing
(the date of the Closing is hereinafter referred to as the "Closing Date").
(b) At the Closing, FlashNet will deliver to the Purchaser against
payment therefore, a certificate registered in the Purchaser's name representing
the Shares purchased hereunder. The Purchaser will pay to FlashNet, by check
payable to the order of FlashNet, the cash purchase price for the Shares.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF FLASHNET
FlashNet hereby represents and warrants to the Purchaser as follows:
2.1 ORGANIZATION AND STANDING. FlashNet is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas.
FlashNet has all requisite corporate power and authority to own and operate its
properties and assets and to conduct its business as presently conducted.
FlashNet is, or is the process of being, qualified to do business as a foreign
corporation in all jurisdictions where the ownership or leasing of FlashNet's
properties or assets and the nature of FlashNet's business as presently
conducted requires such qualification.
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COMMON STOCK PURCHASE AGREEMENT PAGE 1
2.2 CORPORATE POWER. FlashNet has all requisite legal and corporate power
to execute and deliver this Agreement, to issue and sell the Shares hereunder
and to carry out and perform its obligations under the terms of this Agreement.
2.3 NO SUBSIDIARIES. FlashNet does not own of record or beneficially any
shares of capital stock or other equity interests which constitute a 10% or
greater equity interest in any other corporation, association, joint venture,
general or limited partnership or other legal person.
2.4 CAPITALIZATION. The authorized capital stock of FlashNet consists of
50,000,000 shares of Common Stock, without par value ("Common Stock"), of which
1,562,500 shares are issued and outstanding. All such issued and outstanding
shares have been duly authorized and validly issued and are fully paid and
nonassessable. Except as set forth on Schedule 2.4, there are no options,
warrants, conversion privileges or other rights currently outstanding to
purchase or otherwise acquire any authorized but unissued shares of capital
stock of FlashNet.
2.5 AUTHORIZATION. All corporate action on the part of FlashNet, its
directors and shareholders necessary for the authorization, execution, delivery
and performance of this Agreement by FlashNet, the authorization, sale, issuance
and delivery of the Shares and the performance of FlashNet's obligations
hereunder has been taken. This Agreement, when duly executed and delivered,
shall constitute the valid and binding obligation of FlashNet enforceable
against FlashNet in accordance with its terms, subject to principles of equity
and laws of general application relating to bankruptcy, insolvency and the
relief of debtors and except that rights to indemnification pursuant to Section
7.7 hereof may be limited or varied by applicable securities laws or public
policy. The Shares, when issued in compliance with the provisions of this
Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided, however,
that the Shares will be subject to restrictions on transfer under this Agreement
and state and federal securities laws.
2.6 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. Except as set forth on
Schedule 2.6, FlashNet has good and marketable title to the properties and
assets owned by it, and has valid leasehold interests or licenses in the
properties or assets leased by it or used in the conduct of it business, in each
case subject to no mortgage, pledge, lien, security interest, encumbrance,
charge or adverse claim that materially detracts from the value to FlashNet of
the property subject thereto or materially impairs the operations of FlashNet
and that has arisen other than in the ordinary course of business. Schedule 2.6
contains a listing of all material contracts and obligations of FlashNet.
2.7 FINANCIAL STATEMENTS. Attached as Schedule 2.7 are FlashNet's
unaudited financial statements as of September 30, 1996 and for the nine months
then ended (the "Financial Statements"). Except for the omission of certain
notes to the Financial Statements, the Financial Statements have been prepared
in accordance with generally accepted accounting principles consistently applied
throughout the periods indicated and present fairly the financial condition of
FlashNet as of the date indicated above and the results of operations of
FlashNet for the period then ended, subject to normal recurring year-end audit
adjustments none of which would be material in the aggregate. To the best of
FlashNet's knowledge, since September 30, 1996, there
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COMMON STOCK PURCHASE AGREEMENT PAGE 2
has not been any material adverse change in FlashNet's business, financial
condition, affairs, operations, properties or assets except as disclosed in
the Financial Statements.
2.8 PATENTS, TRADEMARKS, ETC. To the best of FlashNet's knowledge,
FlashNet owns or has the right to use all material patents, trademarks, trade
names, copyrights, licenses, proprietary rights, trade secrets, and
manufacturing processes and technologies (collectively, "Intellectual Property")
used in the conduct of its business, without infringing upon or otherwise acting
adversely to the valid and asserted rights of any person or entity under or with
respect to any such Intellectual Property. Schedule 2.8 is a listing of the
Intellectual Property owned by FlashNet.
2.9 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. The business and operations
of FlashNet have been conducted in accordance with all applicable statutes,
regulations, rules or other laws, except in those instances in which failure to
comply has not materially and adversely affected, and to the best of FlashNet's
knowledge on the Closing Date will not materially and adversely affect, FlashNet
or its business or finances. The execution, delivery and performance by
FlashNet of this Agreement do not, and to the best of FlashNet's knowledge on
the Closing Date will not, (a) require any authorization, consent, approval,
license, exemption of or filing or registration with any court or governmental
department, agency or instrumentality of government, except such as have been
lawfully and validly obtained, (b) cause FlashNet to violate or contravene any
statute, rule, regulation or other law of any agency or government, any order,
writ, judgment, decree or determination, or any provision of the Articles of
Incorporation or Bylaws of FlashNet, in each case as amended on the Closing
Date, (c) violate or conflict with, result in a breach of or constitute (with or
without notice or lapse of time, or both) a default under, any material
agreement, instrument, commitment or arrangement to which FlashNet is a party or
by which FlashNet or any of its properties or assets is bound or affected, or
(d) result in the creation or imposition of any material lien or encumbrance
upon the properties of FlashNet. FlashNet is not in violation of or (with or
without notice or lapse of time, or both) in default under, any term or
provision of its Articles of Incorporation or Bylaws, in each case as amended on
the Closing Date, or any material agreement, instrument, commitment or
arrangement to which FlashNet is a party or by which any of FlashNet's
properties or assets is bound or affected. FlashNet is not subject to any
restriction of any kind or character which materially and adversely (i) affects
in any way its business, properties or assets, or (ii) prohibits FlashNet from
entering into this Agreement, or (iii) would prevent or make burdensome the
performance of or compliance with all or any part of this Agreement or of the
Articles of Incorporation of FlashNet or the consummation by FlashNet of the
transactions contemplated hereby.
2.10 LITIGATION, ETC. Except as set forth on Schedule 2.10, there are no
actions, suits, proceedings or investigations pending against FlashNet or its
properties before any court or governmental agency (nor, to the best of
FlashNet's knowledge, is there any valid basis therefor or threat thereof)
which, either individually or in the aggregate, might result in any material
adverse change in the business or financial condition of FlashNet or any of its
properties or assets, or in any material adverse impairment of the right or
ability of FlashNet to carry on its business as now conducted, or in any
material liability on the part of FlashNet, or which questions the validity of
this Agreement or any action taken or to be taken in connection herewith.
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COMMON STOCK PURCHASE AGREEMENT PAGE 3
2.11 EMPLOYEES. To the best of FlashNet's knowledge, no employee of
FlashNet is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement that relates to the
employment of any such employee with FlashNet or with any former employer and
that may materially and adversely affect the business conducted by FlashNet.
FlashNet does not have any collective bargaining agreements covering any of its
employees. FlashNet is not aware of the imminent departure of any key employee,
the recent departure of any key employee or any threatened or pending material
litigation between a current employee and one of his or her former employers.
2.12 INSURANCE. FlashNet maintains policies of fire and casualty insurance
policies sufficient in amount to allow it to replace any of its properties which
might be damaged or destroyed through fire or other casualty so insured.
2.13 REGISTRATION RIGHTS. Except as set forth in this Agreement and in
substantially similar agreements with the purchasers of the notes and warrants
referred to in Schedule 2.4, FlashNet has not granted or agreed to grant any
right to register (as defined in Section 7.2 hereof) any of its currently
outstanding securities or any of its securities which may hereafter be issued.
2.14 GOVERNMENTAL CONSENT, ETC. Subject to the accuracy of the Purchaser's
representations in Section 3 hereof, no consent, registration, qualification,
approval or authorization of or designation, declaration or filing with any
governmental authority on the part of FlashNet is required in connection with
the valid execution and delivery of this Agreement, or the offer, sale or
issuance of the Shares to the Purchaser or the consummation of any other
transaction contemplated hereby, except in the case of any filings pursuant to
Section 4(6) of, or Regulation D promulgated under, the Securities Act of 1933,
as amended (the "Securities Act") and pursuant to any state securities laws.
2.15 OFFERING. Subject to the accuracy of the Purchaser's representations
in Section 3 hereof, the offer, sale and issuance of the Shares to be issued in
conformity with the terms of this Agreement constitute transactions exempt from
the registration requirements of Section 5 of the Securities Act.
2.16 LICENSES. FlashNet possesses from the appropriate agency, commission,
governmental body and authority, all licenses, permits, authorizations,
approvals and rights as are necessary for FlashNet to engage in such business as
is conducted by it, including without limitation its development, use, sale and
marketing of its products and services.
2.17 NO BROKERS OR FINDERS. All negotiations relative to this Agreement
have been carried out by FlashNet directly with the Purchaser without the
intervention of any person on behalf of FlashNet in such manner as to give rise
to any claim by any such person for a finder's fee, broker's commission or
similar payment.
2.18 TAX RETURNS AND AUDITS. Except as set forth in Schedule 2.18,
FlashNet has accurately prepared and timely filed all federal, state and other
tax returns that are required to be filed by it and has paid or made provision
for payment of all taxes that have come due pursuant to such returns. The
federal income tax returns of FlashNet have not been audited by the Internal
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COMMON STOCK PURCHASE AGREEMENT PAGE 4
Revenue Service. No deficiency assessment or adjustment of FlashNet's federal,
state or other taxes is pending, and FlashNet has no knowledge of any proposed
liability for any tax to be imposed upon its properties or assets for which
there is not an adequate reserve reflected in the Financial Statements.
2.19 ERISA. FlashNet has no "employee benefit plan" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended.
2.20 DISCLOSURE. No representation or warranty of FlashNet contained in
this Agreement or furnished in connection with the transactions contemplated
hereby (when read together) contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained therein not misleading in light of the circumstances under which they
are made.
2.21 NO PRIOR RIGHTS. No person or entity has any preemptive right, right
of first refusal or similar right with respect to FlashNet's issuance and sale
of the Shares pursuant to this Agreement except such rights as shall be fully
waived by the holders thereof at or prior to the Closing Date.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to FlashNet as follows:
3.1 POWER AND AUTHORITY. The Purchaser has all requisite power and
authority to execute and deliver this Agreement and to carry out and perform his
obligations under the terms of this Agreement.
3.2 BINDING OBLIGATION. This Agreement, when duly executed and delivered
by FlashNet, shall constitute the valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, subject to
principles of equity and laws of general application relating to bankruptcy,
insolvency and the relief of debtors and except that rights to indemnification
pursuant to Section 7.7 below may be limited or varied by applicable securities
laws or public policy.
3.3 ACCREDITED INVESTOR; EXPERIENCE. The Purchaser is an "accredited
investor" as that term is defined in Section 2(15) of the Securities Act and the
rules promulgated thereunder and is experienced in evaluating and investing in
new, high technology companies such as FlashNet. The Purchaser has evaluated
the merits and risks of investing in the Shares and can afford a complete loss
of his investment therein.
3.4 INVESTMENT INTENT. The Purchaser is acquiring the Shares for
investment for his own account and not with the view to, or for resale in
connection with, any distribution thereof. The Purchaser understands that the
Shares have not been registered under the Securities Act or the
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COMMON STOCK PURCHASE AGREEMENT PAGE 5
securities laws of any state by reason of specific exemptions from the
registration provisions of the Securities Act and applicable state securities
laws, which exemptions are dependent upon, among other things, the bona fide
nature of investment intent of the Purchaser as expressed herein.
3.5 RULE 144. The Shares must be held indefinitely by the Purchaser
unless subsequently registered under the Securities Act and applicable state
securities laws or an exemption from such registration is available. The
Purchaser is aware of the provisions of Rule 144 promulgated under the
Securities Act which permit limited resale of securities purchased in a private
placement subject to the satisfaction of certain conditions, including without
limitation the existence of a public market for the securities, the availability
of certain current public information regarding FlashNet, the resale occurring
not less than two years after a person has purchased and paid for the security
to be sold, the resale being through a "broker's transaction" or in a
transaction directly with a "market maker" (as provided by Rule 144(f)) and the
number of securities being sold during any three-month period not exceeding
specified limitations.
3.6 NO PUBLIC MARKET. The Purchaser understands that no public market now
exists for any of the securities issued by FlashNet and that a public market may
never exist for the Shares.
3.7 ACCESS. The Purchaser acknowledges that (a) he has been given the
opportunity to make such inquiries concerning the proposed operations of
FlashNet as the Purchaser considers necessary or advisable to enable him to form
a decision concerning the purchase of the Shares, (b) all documents, records and
books of FlashNet that the Purchaser has asked to examine in connection with the
proposed purchase of the Shares have been made available to the Purchaser, (c)
the Purchaser has had an opportunity to view FlashNet's facilities and to ask
questions of and receive answers from FlashNet's executive officers, directors,
employees and agents concerning FlashNet's business, financial condition,
results of operations and properties and the terms and conditions of such
purchase, and all such questions have been answered to the satisfaction of the
Purchaser, and (d) the Purchaser has not received any representations or
warranties from FlashNet or its officers, directors, employees or agents, other
than those contained in this Agreement and the documents contemplated herein,
including, without limitation, the Schedules hereto.
3.8 NO BROKERS OR FINDERS. All negotiations relative to this Agreement
have been carried out by the Purchaser directly with FlashNet without the
intervention of any person on behalf of the Purchaser in such manner as to give
rise to any claim by any such person for a finder's fee, broker's commission or
similar payment.
SECTION 4
CONDITIONS TO OBLIGATIONS OF THE PURCHASER
The Purchaser's obligation to purchase the Shares on the Closing Date is
subject to the satisfaction on or prior to the Closing Date of all of the
following conditions:
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COMMON STOCK PURCHASE AGREEMENT PAGE 6
4.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties of FlashNet contained or referred to in this Agreement shall be true
and correct in all material respects when made, and shall be true and correct in
all material respects on the Closing Date with the same force and effect as if
they had been made on and as of the Closing Date.
4.2 COVENANTS. All covenants, agreements and conditions contained in this
Agreement to be performed by FlashNet on or prior to the Closing Date shall have
been performed or complied with in all material respects.
4.3 CONSENTS. All authorizations, approvals or permits of any entity or
person, governmental or otherwise, including but not limited to the waivers
referred to in Section 2.21 of this Agreement, that are required in connection
with the issuance of the Shares pursuant to this Agreement shall have been duly
obtained and shall be effective on and as of the Closing Date.
SECTION 5
CONDITIONS TO OBLIGATIONS OF FLASHNET
FlashNet's obligation to sell the Shares to the Purchaser are subject to
the fulfillment to FlashNet's satisfaction on or prior to the Closing Date of
the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Purchaser pursuant to this Agreement shall be true and
correct in all material respects.
5.2 COVENANTS. All covenants, agreements and conditions contained in this
Agreement to be performed by the Purchaser on or prior to the Closing Date shall
have been so performed or complied with in all material respects. (The
Purchaser's payment for the Shares shall conclusively evidence certification as
to the fulfillment of the conditions set forth in Sections 5.1 and 5.2).
5.3 CONSENTS. All authorizations, approvals or permits of any entity or
person, governmental or otherwise, including but not limited to the waivers
referred to in Section 2.21 of this Agreement, that are required in connection
with the issuance of the Shares pursuant to this Agreement shall have been duly
obtained and shall be effective on and as of the Closing Date.
SECTION 6
AFFIRMATIVE COVENANTS OF FLASHNET
FlashNet hereby covenants and agrees as follows:
6.1 FINANCIAL INFORMATION. FlashNet will furnish the following reports to
the Purchaser for so long as the Purchaser is a holder of not less than 1,000
shares of Common Stock:
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COMMON STOCK PURCHASE AGREEMENT PAGE 7
(a) As soon as practicable after the end of each fiscal year, and
in any event within 120 days thereafter, consolidated balance sheets of
FlashNet and its subsidiaries, if any, as of the end of each fiscal year, and
consolidated statements of operations and consolidated statements of changes
in financial position of FlashNet and its subsidiaries, if any, for such
year, prepared in accordance with generally accepted accounting principles
and setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail and audited by independent
public accountants of recognized national standing selected by FlashNet;
(b) as soon as practicable after the end of each fiscal quarter,
and in any event within 45 days thereafter, a consolidated balance sheet of
FlashNet and its subsidiaries, if any, as of the end of such quarter, and
consolidated statements of operations of FlashNet and its subsidiaries, if
any, for each quarter and for the current fiscal year to date; and
(c) with reasonable promptness, such other information and data
with respect to FlashNet and its subsidiaries, if any, as the Purchaser may
from time to time reasonably request.
The Purchaser covenants, however, that the financial or other
information or data received by it pursuant to this Section 6.1 or Section
7.9 hereof will not be used in violation of any applicable federal or state
securities laws, including without limitation the antifraud provisions of
such laws.
6.2 USE OF PROCEEDS. FlashNet will use the proceeds from the sale of
the Shares for general corporate purposes, but not for the payment of (i)
dividends or (ii) existing material undisclosed claims or indebtedness as of
the Closing Date.
6.3 RIGHT OF OBSERVATION. For so long as the Purchaser is a holder of
not less than 1,000 shares of Common Stock, until FlashNet completes an
Initial Public Offering, the Purchaser shall have the right to designate,
through written notice delivered to FlashNet, one individual to attend and
observe meetings of FlashNet's Board of Directors with the right to review
all documents presented at the meeting including all financial material, and
the further right to review any other information that is available to any
Director regarding the Company, all with appropriate decorum and
confidentiality; provided, however, that no such individual shall be entitled
to vote on any matter as a Director of the Company. Each designated
individual shall be entitled to the same notice of such Director's meetings
as is given to FlashNet's Directors, but the failure to give such notice to
the designated individual shall not affect the validity of such meeting or
any action taken thereat.
SECTION 7
RESTRICTIONS ON TRANSFERABILITY OF
SECURITIES; COMPLIANCE WITH SECURITIES ACT
7.1 RESTRICTIONS ON TRANSFERABILITY. The Shares shall not be
transferable except upon the conditions specified in this Section 7, which
conditions are intended to ensure compliance with the provisions of the
Securities Act and applicable state securities laws. Purchaser will not sell
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COMMON STOCK PURCHASE AGREEMENT PAGE 8
or transfer or offer to sell or transfer the Shares (a) unless a registration
statement has been filed with respect to the offer of such securities, and
such registration statement has become effective with respect to the sale of
such securities, under the Securities Act and applicable state securities
laws, or (b) except in a manner that would not require registration under the
Securities Act and any applicable state securities laws and would not
jeopardize the exemption from such registration of the offer, sale and
issuance of the Shares. Each transferee of the Shares shall take and hold
such securities subject to the provisions and upon the conditions specified
in this Section 7.
7.2 CERTAIN DEFINITIONS. As used in this Section 7, the following
terms shall have the meanings respectively ascribed to them:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Holder" shall mean any holder of Registrable Securities.
"Restricted Securities" shall mean the securities of FlashNet required
to bear the legend set forth in Section 7.3 hereof.
"Registrable Securities" shall mean (a) the Shares, and (b) any Common
Stock issued in respect of such shares of the Common Stock upon any stock
split, stock dividend, recapitalization, or similar event declared or
effected by FlashNet.
The terms "register", "registered" and "registration" refer to a
registration of FlashNet's securities effected by preparing and filing a
registration statement in compliance with the Securities Act, and the
declaration or ordering by the Commission of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses incurred by FlashNet in
complying with Section 7.4 hereof, including without limitation all
out-of-pocket registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for FlashNet, blue sky fees
and expenses, and the expense of any special audits incident to or required
by any such registration (but excluding the compensation of regular employees
of FlashNet which shall be paid in any event by FlashNet).
"Requesting Investors" shall mean the respective Holders under and as
defined in this Agreement that are then requesting the inclusion of their
securities of FlashNet in a registration and underwriting subject to Section
7.4 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any federal statute enacted in substitution thereof, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect
at the time.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities by or on behalf
of any Holder and all fees and disbursements of counsel for any Holder.
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COMMON STOCK PURCHASE AGREEMENT PAGE 9
7.3 RESTRICTIVE LEGEND. Each certificate representing (a) the Shares,
or (b) any other securities issued in respect to the Shares upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar
event declared or effected by FlashNet, shall (unless otherwise permitted by
the provisions of this Section 7) be stamped or otherwise imprinted or
endorsed with a legend substantially in the following form (in addition to
any other required legend, if any):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS, HAVE BEEN TAKEN FOR INVESTMENT AND MAY NOT BE SOLD OR
TRANSFERRED OR OFFERED FOR SALE OR TRANSFER UNLESS A REGISTRATION
STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS WITH
RESPECT TO SUCH SECURITIES IS THEN IN EFFECT, OR IN THE OPINION OF
COUNSEL (SATISFACTORY TO THE COMPANY), SUCH REGISTRATION UNDER THE ACT
AND APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
The foregoing legend shall be removed from any such certificate representing
Restricted Securities, and FlashNet shall issue in substitution thereof a
certificate that shall be identical thereto except for the deletion of such
legend, (a) if the Restricted Security evidenced thereby is registered under
the Securities Act and applicable state securities laws or (b) if FlashNet
has been provided with an opinion of counsel satisfactory to FlashNet to the
effect that a public sale or transfer of such Restricted Security may be made
by the Holder without registration under the Securities Act and applicable
state securities laws; provided, however, that if, but only to the extent,
any such securities cease to be registered, or to be eligible for public sale
or transfer without registration under the Securities Act and applicable
state securities laws, and if the foregoing legend has been removed from the
certificate representing such securities pursuant to this Section 7.3, the
Holder agrees to surrender (within 15 calendar days following his or its
receipt of FlashNet's written request therefor) the certificate representing
such securities, and FlashNet agrees at its expense to return promptly to the
Holder a new certificate for such securities which again shall bear the
foregoing legend and shall be deemed Restricted Securities for purposes of
this Agreement.
7.4 REGISTRATION BY FLASHNET.
(a) If at any time or from time to time before December 1, 1998
FlashNet shall determine to register any of its securities, either for its
own account or the account of a security holder or holders exercising their
respective registration rights, other than (i) a registration on Form S-8 or
similar forms which may be promulgated in the future relating solely to
employee benefit plans or (ii) a registration on Form S-4 or similar forms
which may be promulgated in the future relating solely to a reclassification,
merger, consolidation, asset acquisition or other business combination
subject to Rule 145 under the Securities Act or any similar transaction,
FlashNet will:
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(A) promptly give to each Holder written notice thereof (which
shall include a list of the states in which FlashNet intends to attempt to
qualify such securities under applicable state securities laws); and
(B) except as provided herein or as set forth in Section 7.4(b)
hereof, include in such registration under the Securities Act and any related
qualification under such state securities laws, and in any underwriting
involved therein, all the Registrable Securities specified by any Holder or
Holders in a written request or requests therefor delivered to FlashNet
within 20 calendar days after receipt by such Holder or Holders of FlashNet's
written notice given pursuant to Section 7.4(a)(A) hereof.
(b) If the registration of which FlashNet gives written notice
pursuant to Section 7.4(a) hereof is for a registered public offering
involving an underwriting, FlashNet shall so advise the Holders as a part of
such notice. In such event, the right of any Holder to registration pursuant
to this Section 7.4 shall be conditioned upon, and shall not be exercisable
by any Holder without, such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting to
the extent provided herein. If required by the underwriter or underwriters
selected by FlashNet for such underwriting (collectively the "Underwriter"),
(i) all Holders proposing to distribute their Registrable Securities through
such underwriting shall enter into an underwriting agreement with the
Underwriter in customary form, and (ii) all Holders shall agree not to sell
publicly any of their Registrable Securities for such period as the
Underwriter may reasonably request. Notwithstanding any other provision of
this Section 7.4, if the Underwriter determines that marketing or other
factors require a limitation of the number of securities to be underwritten,
the Underwriter in its sole discretion may exclude from such registration and
underwriting some or all of the securities requested to be included in such
registration and underwriting by Requesting Investors and other persons other
than FlashNet; provided, however, that if all securities requested to be
included in such registration and underwriting by Requesting Investors and
persons other than FlashNet are not so excluded by the Underwriter, the
number of such non-excluded securities shall be allocated proportionately
among all having the right to request registration of securities (including
Requesting Investors). If securities requested to be registered by
Requesting Investors are excluded pursuant to this Section 7.4(b), such
exclusion shall be apportioned among such Requesting Investors in the same
proportion as the number of such securities covered by the respective
Requesting Investor's instant registration request bears to the total number
of such securities covered by the instant registration requests of all
persons (including Requesting Investors). If different classes or types of
securities are to be excluded in whole or in part from registration pursuant
to this Section 7.4(b), all percentage calculations for such exclusions shall
be based on the respective public offering prices of such classes or types of
securities, which public offering prices shall be determined or estimated by
the Underwriter. If any Holder disapproves of the terms of any underwriting
subject to this Section 7.4(b), such Holder may elect to withdraw therefrom
by written notice to FlashNet and the Underwriter. Any securities excluded
or withdrawn from such underwriting shall be withdrawn from such
registration. FlashNet shall advise all persons seeking to include their
securities in such registration and underwriting of the number of each such
person's securities that may be so included.
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COMMON STOCK PURCHASE AGREEMENT PAGE 11
7.5 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration or qualification pursuant to this Section 7
shall be borne by FlashNet; and, unless otherwise agreed by FlashNet and the
Underwriter, all Selling Expenses relating to Registrable Securities included
pursuant to this Section 7 in a registration statement, whether or not filed
or declared effective, shall be borne by the Holders of such Registrable
Securities pro rata on the basis of the number of such securities so included.
7.6 REGISTRATION PROCEDURES. In the case of each registration or
qualification effected by FlashNet pursuant to this Section 7, FlashNet will
keep each Holder advised in writing as to the initiation of each registration
or qualification, as to the status thereof from time to time, and as to the
completion thereof. At its Registration Expense, FlashNet will:
(a) use all commercially reasonable efforts to cause the
respective registration statement to become effective under the Securities
Act and securities laws of the states designated by FlashNet pursuant to
Section 7.4(a) hereof and to keep such registration and qualification
effective for a period of 120 days or until the Holder or Holders have
completed the distribution described in such registration statement relating
thereto, whichever first occurs; and
(b) furnish such reasonable number of the registration statement,
preliminary prospectuses, final prospectuses, amendments and supplements
thereto, and other documents incident thereto as a Holder from time to time
may reasonably request.
7.7 INDEMNIFICATION.
(a) FlashNet will indemnify each Holder, each of its officers and
directors and partners, if any, and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to which
registration or qualification has been effected pursuant to Section 7.4
hereof, and each underwriter, if any, for such Holder and each person who
controls any such underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages and liabilities
(or actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or
based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, offering circular
or other document, or any amendment or supplement thereto, incident to any
such registration or qualification, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, or any violation by FlashNet of any
rule or regulation promulgated under the Securities Act applicable to
FlashNet and relating to action or inaction required of FlashNet in
connection with any such registration or qualification, and will reimburse
each such Holder and such officers, directors, partners, underwriters and
controlling persons for any legal and any other expenses reasonably incurred
in connection with investigating, preparing or defending any such claim,
loss, damage, liability or action; provided, however, that FlashNet will not
be liable in any such case to a particular Holder to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission or alleged untrue statement or omission, made in
reliance upon and in conformity with written information furnished to
FlashNet by such Holder or such underwriter.
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COMMON STOCK PURCHASE AGREEMENT PAGE 12
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration or
qualification is being effected, indemnify FlashNet, each of its directors,
partners and officers, each underwriter, if any, of FlashNet's securities
included in such registration or qualification, each person who controls
FlashNet or such underwriter within the meaning of Section 15 of the
Securities Act, and each other Holder whose Registrable Securities are so
included, each of its officers, partners and directors and each person
controlling such other Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages, liabilities and expenses
(or actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or
based on any untrue statement (or alleged untrue statement) by such Holder of
a material fact contained in any such registration statement, prospectus,
offering circular or other document, or any amendment or supplement thereto,
incident to any such registration or qualification, or based on any omission
(or alleged omission) by such Holder to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, nor misleading, or any
violation by the indemnifying Holder of any rule or regulation promulgated
under the Securities Act applicable to such Holder and relating to action or
inaction required of such Holder in connection with such registration or
qualification, and will reimburse each of FlashNet, such other Holders, and
such directors, officers, partners, underwriters and control persons for any
legal or any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability
or action, in each case to the extent, but only to the extent, that such
untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereto, in
reliance upon and in conformity with written information furnished to
FlashNet by such indemnifying Holder; provided, however, that the obligations
of an indemnifying Holder hereunder shall be limited to an amount equal to
the proceeds to such Holder of Registrable Securities sold as contemplated
herein.
(c) Each person entitled to indemnification under this Section 7.7
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought
and shall permit the Indemnifying Party to assume the defense of any such
claim or any litigation resulting therefrom; provided, however, that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall
not unreasonably be withheld), and the Indemnified Party may participate in
such defense at such party's expense; and provided further, that the failure
of any Indemnified Party to give notice as provided herein shall not relieve
the Indemnifying Party of its indemnity obligations under this Section 7.7
unless, but only to the extent, the rights or obligations of the Indemnifying
Party have been materially and adversely affected by such failure. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to the entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
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COMMON STOCK PURCHASE AGREEMENT PAGE 13
(d) Notwithstanding anything to the contrary herein, if the
registration and public offering of the Registrable Securities is
accomplished pursuant to a valid underwriting agreement, the provisions
thereof shall supersede the provisions of this Section 7.7 with respect to
the matters covered in said underwriting agreement.
7.8 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish FlashNet such
information regarding such Holder or Holders, the distribution proposed by
such Holder or Holders, and such other matters as FlashNet may request in
writing and as shall be required in connection with any registration or
qualification referred to in this Section 7.
7.9 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the Commission that may at any time
permit the sale of the Restricted Securities to the public without
registration, after such time as a public market exists for the Common Stock,
FlashNet agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, so long as a
Holder owns any Restricted Securities at all times after the effective date
of the first registration statement under the Securities Act filed by
FlashNet for an offering of its securities to the general public;
(b) use all commercially reasonable efforts to file with the
Commission in a timely manner all reports and other documents required of
FlashNet under the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), at any time after FlashNet has become subject
to such reporting requirements; and
(c) so long as a Holder owns any Restricted Securities, to furnish
to the Holder, promptly upon such Holder's written request, a written
statement by FlashNet, as to its compliance with the reporting requirements
of Rule 144 (at any time after 90 days following the effective date of the
first registration statement filed by FlashNet for an offering of its
securities to the general public), and of the Securities Act and the Exchange
Act (at any time after it has become subject to such reporting requirements),
a copy of the most recent annual or quarterly report of FlashNet, and such
other reports and documents of FlashNet as a Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing a Holder
to sell any such Restricted Securities without registration.
7.10 TRANSFER OF REGISTRATION RIGHTS. The rights to cause FlashNet to
register securities granted to Holders under Section 7.4 above may be
assigned to a transferee or assignee in connection with a transfer or
assignment of such securities but only to a transferee or assignee which
receives in such transfer or assignment not less than 10,000 shares of the
Common Stock. Except as provided in the foregoing sentence, such
registration rights shall not be transferrable or assignable.
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COMMON STOCK PURCHASE AGREEMENT PAGE 14
SECTION 8
MISCELLANEOUS
8.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of Texas applicable to contracts wholly made and to be
wholly performed in the State of Texas.
8.2 SURVIVAL. The representations, warranties, covenants and
agreements contained in this Agreement shall survive any investigation made
by the Purchaser and FlashNet and the Closing Date until December 1, 1998;
provided, however, the covenants and agreements contained in Sections 6 and
7.4 hereof shall survive any investigation by the Purchaser and the Closing
Date for the periods set forth in such Sections.
8.3 SUCCESSORS AND ASSIGNS. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors
and administrators of the parties hereto; provided, however, the Purchaser's
right to purchase the Shares shall not be assignable without FlashNet's prior
written consent.
8.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement (including the
Schedules hereto) and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof. Neither this
Agreement nor any term hereof may be amended, waived, discharged or
terminated, except by a written instrument signed by the parties hereto.
8.5 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or delivered either by hand or by messenger,
addressed
(a) If to the Purchaser, at 0000 Xxxx Xxxxxxxx, Xxxx Xxxxx, Xxxxx
00000 or at such other address as the Purchaser shall have furnished FlashNet
in writing, or
(b) If to FlashNet, at 0000 Xxxxx Xxxxxx Xxxx Xxxxxxxxx, Xxxx
Xxxxx, Xxxxx 00000, Attention: M. Xxxxx Xxxxxx, or at such other address as
FlashNet shall have furnished to the Purchaser.
8.6 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to FlashNet, the Purchaser or any other Holder, upon
any breach or default of FlashNet, the Purchaser, or any other Holder, as the
case may be, under this Agreement, shall impair any such right, power or
remedy; nor shall any such delay or omission be construed to be a waiver of
any such breach or default, or an acquiescence therein, or of or in any
similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval
of any kind or character on the part of FlashNet, the Purchaser or any other
Holder of any breach or default under this Agreement, or any waiver on the
part of FlashNet, the Purchaser or any other Holder of any provisions or
conditions of this Agreement must be in writing and shall
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COMMON STOCK PURCHASE AGREEMENT PAGE 15
be effective only to the extent specifically set forth in such writing. All
remedies either under this Agreement or by law or otherwise afforded shall be
cumulative and not alternative.
8.7 SEVERABILITY. In the event any provision of this Agreement becomes
or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided, however, that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to
any party.
8.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.9 TITLES AND SUBTITLES. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year first written above.
FLASHNET: WEBSITE MANAGEMENT COMPANY, INC.
By: /s/ M. Xxxxx Xxxxxx
-------------------------------------
PURCHASER: /s/ Xxxxxxx Xxxxxxx Xxxxxxxxx
----------------------------------------
Xxxxxxx Xxxxxxx Xxxxxxxxx
----------------------------------------
Social Security Number
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COMMON STOCK PURCHASE AGREEMENT PAGE 16
