EXHIBIT 10.4
COMPOSITE COPY
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") made as of this 29th day of
September, 1998, by and among Freedom of Information, Inc., a corporation duly
organized and existing under the laws of the State of Delaware ("FOI" or the
"Company") and Comdisco, Inc., a Delaware corporation (the "Investor").
WHEREAS, the Company has authorized the issuance and sale to the Investor
of an aggregate of 100,000 shares of Series A Convertible Participating
Preferred Stock, par value $.01 per share ("Convertible Preferred Stock"),
having the rights and preferences set forth in the Company's Amended and
Restated Certificate of Designation for Series Convertible Participating
Preferred Stock dated as of September 29, 1998, a copy of which is attached
hereto as Exhibit A;
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WHEREAS, the Investor has agreed to purchase an aggregate of 100,000 shares
of Convertible Preferred Stock at the Closing;
WHEREAS, the Company has authorized the issuance to the Investor of a
warrant (the Common Stock Warrant") to purchase 33,000 shares of common stock of
the Company, $.01 par value per share (the "Common Stock") with an exercise
price of $1.50 per share in connection with the purchase of the Convertible
Preferred Stock hereunder;
WHEREAS, the Company has authorized the issuance to the Investor as of the
date hereof of a warrant to purchase up to 600,000 shares of Convertible
Preferred Stock and a warrant to purchase 100,000 shares of Convertible
Preferred Stock in connection with certain other transactions between the
Company and the Investor (collectively the "Series A Warrants", and together
with the Common Stock Warrant, the "Warrants"); and
WHEREAS, the parties hereto desire to set forth the terms of their ongoing
relationship in connection with the Company.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
SECTION 1. TERMS OF PURCHASE
1.1 Description of Securities. The Convertible Preferred Stock shall
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have the rights, preferences and other terms set forth in Exhibit A. For
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purposes of this Agreement, the shares of Convertible Preferred Stock to be
acquired by the Investor from the Company hereunder are referred to as the
"Convertible Preferred Shares," the shares of Common Stock issuable on
conversion thereof are referred to as the "Conversion Shares" and the
Convertible Preferred Shares, the Conversion Shares, the Common Stock Warrant,
the shares of Common Stock issuable upon exercise of the Common Stock Warrant,
the Series A Warrants, the shares of Convertible Preferred Stock issuable
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upon exercise of the Series A Warrants and the shares of Common Stock issuable
upon conversion of such shares of Convertible Preferred Stock are referred to as
the "Securities".
1.2 Sale and Purchase. Upon the terms and subject to the conditions
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herein, and in reliance on the representations and warranties set forth in
Section 2, the Investor hereby purchases from the Company, and the Company
hereby issues and sells to the Investor, at the Closing (as defined in Section
1.4), 100,000 shares of Convertible Preferred Stock for the purchase price of
$1.00 per share, or an aggregate purchase price of $100,000. Payment hereunder
shall be made by wire transfer.
1.3 Delivery of Warrants. On the terms and subject to the conditions
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herein set forth, the Company hereby agrees to deliver to the Investor, at the
Closing, simultaneously with the delivery of the Convertible Preferred Shares,
(a) a warrant certificate in substantially the form of Exhibit B (the "Common
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Stock Warrant Certificate") representing the Common Stock Warrant and (b) a
warrant certificates in substantially the form of Exhibit C and Exhibit D
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(collectively, the "Series A Common Stock Warrant Certificates" and, together
with the Common Stock Warrant Certificate, the "Warrant Certificates")
representing the Series A Warrants.
1.4 Closing. The closing of the purchase and sale of Convertible
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Preferred Shares contemplated by Section 1.2 (the "Closing") shall take place on
the date hereof (the "Closing Date"). At the Closing, the Company shall deliver
or cause to be delivered to the Investor stock certificates representing the
Convertible Preferred Shares, free and clear of all liens created by the Company
other than as set forth herein, and bearing the legends set forth herein,
against payment of the purchase price therefor and the Warrant Certificates.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Investor to enter into this Agreement, the Company
hereby represents and warrants to the Investor as follows subject to the matters
set forth in the schedule of exceptions attached hereto (the "Disclosure
Schedule"). As used in this Agreement, (i) the term "August Transactions", means
the transactions consummated pursuant to or contemplated by the Stock Purchase
and Shareholders Agreement dated as of August 28, 1998 (the "August Stock
Purchase Agreement") among the Company, Xxxxxx X. Xxxxxx, Xx., Xxxxxx X. Xxxxxx,
and the other parties named therein or pursuant to or contemplated by the
Contribution Agreement (as defined in the Stock Purchase Agreement) and (ii) the
term "August Transactions Documents" means the August Stock Purchase Agreement,
the Contribution Agreement, the Stock Transfer Agreement dated as of August 28,
1998 among each of the stockholders of FOI listed on Schedule I thereto and each
subscriber listed on Schedule II thereto and all other agreements, documents and
instruments executed and delivered in connection with any such agreement.
2.1 Organization and Corporate Power. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Delaware, and is qualified to do business as a foreign corporation in each of
the Commonwealth of Massachusetts and the State of
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Pennsylvania. The Company has all required corporate power and authority to
carry on its business as presently conducted, to enter into and perform this
Agreement to which it is a party and to carry out the transactions contemplated
hereby. The copies of the Certificate of Incorporation and By-laws of the
Company which have been furnished to the Investor by the Company are complete
and correct at the date hereof.
2.2 Authorization and Non-Contravention. The execution, delivery and
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performance by the Company of this Agreement and the Warrant Certificates to be
executed and delivered by the Company as contemplated hereby and the issuance
and delivery of the Securities have been duly authorized by all necessary or
other action on the part of the Company. This Agreement and all documents
executed by the Company pursuant hereto are valid and binding obligations of the
Company, enforceable in accordance with their terms. The execution, delivery and
performance by the Company of this Agreement and all other agreements, documents
and instruments to be executed and delivered by the Company as contemplated
hereby and the issuance and delivery of the Securities and will not: (A)
violate, conflict with or result in a default (whether after the giving of
notice, lapse of time or both) of any provision of the certificate of
incorporation or by-law of the Company, (B) violate or result in a violation of,
or constitute a default under, any provision of any law, regulation or rule, or
any order of, or any restriction imposed by, any court or other governmental
agency applicable to the Company or (C) except as set forth on Schedule 2.2,
require from the Company any notice to, declaration or filing with, or consent
or approval of any governmental authority or third party.
2.3 Capitalization. As of the Closing and after giving effect to the
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transactions contemplated hereby, the authorized capital stock of the Company
will consist of 45,000,000 shares of Common Stock, of which 13,323,119 shares
will be issued and outstanding (after giving effect to the transaction
contemplated by section 1.4), 15,000,000 shares of Preferred Stock, of which
11,300,000 shares will be designated as Series A Convertible Participating
Preferred Stock, of which 10,600,000 shares will be issued and outstanding, and
3,700,000 shares of Preferred Stock will be undesignated. In addition, the
Company has authorized and reserved for issuance upon conversion of the
Convertible Preferred Shares, 100,000 shares of Common Stock (subject to
adjustment for stock splits, stock dividends and the like). Except for (i) the
Company's agreement to issue the shares of Common Stock issuable upon conversion
of shares of Convertible Preferred Stock, (ii) 3,465,000 shares of Common Stock
issuable upon exercise of warrants issued in connection with the August
Transactions, (iii) shares of Common Stock issuable pursuant to shares of
Convertible Preferred Stock issued in connection with the August Transactions,
(iv) shares of Convertible Preferred Stock issuable upon exercise of the Series
A Warrants and the Common Stock issuable upon conversion of such shares of
Convertible Preferred Stock and the Company Stock Warrant, (v) shares of Common
Stock issuable upon exercise of the Common Stock Warrant, and (vi) 7,739,251
shares of Common Stock reserved for issuance under the Company's 1998 Incentive
Stock Plan (referred to herein as the "Stock Option Pool"), in each case subject
to adjustment for stock splits, stock dividends and the like and except as
disclosed in the Disclosure Schedule, the Company has not issued or agreed to
issue and is not obligated to issue any outstanding warrants, options or other
rights to purchase or acquire any shares of its capital stock, nor any
outstanding securities convertible
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into such shares or any warrants, options or other rights to acquire any such
convertible securities. As of the Closing, and after giving effect to the
transactions contemplated hereby and assuming the accuracy of the Investors'
representations and warranties set forth in Section 3 hereof and the August
Transaction Documents, all of the outstanding shares of capital stock of the
Company (including without limitation the Convertible Preferred Shares) will
have been duly and validly authorized and issued and will be fully paid and
nonassessable and will have been offered, issued, sold and delivered in
compliance with applicable federal and state securities laws and not subject to
any preemptive rights that have not been waived. Assuming the accuracy of the
Investor's representations and warranties set forth in Section 3 hereof, the
Conversion Shares issuable upon conversion of the Convertible Preferred Shares
and the shares of Common Stock issuable upon exercise of the Common Stock
Warrant, assuming payment of the exercise price therefor in accordance with the
terms of the Common Stock Warrant Certificate, will upon issuance be duly and
validly authorized and issued, fully paid and nonassessable and not subject to
any preemptive rights and will be issued in compliance with federal and state
securities laws. The relative rights, preferences and other provisions relating
to the Convertible Preferred Shares are as set forth in Exhibit A hereto. There
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are no preemptive rights, rights of first refusal, put or call rights or
obligations or anti-dilution rights with respect to the issuance, sale or
redemption of the Company's capital stock, other than as described in the
Disclosure Schedule, rights to which the Investor is entitled as set forth in
this Agreement, as set forth in the Company's Certificate of Incorporation or as
set forth in any of the August Transaction Documents. Except as set forth
herein, in the Disclosure Schedule or as set forth in any of the August
Transaction Documents, there are no rights to have the Company's capital stock
registered for sale to the public under the laws of any jurisdiction, no
agreements relating to the voting of the Company's voting securities, and no
restrictions on the transfer of the Company's capital stock. After giving effect
to the transactions contemplated hereby, the outstanding shares of the Company's
capital stock are held beneficially and of record by the persons identified in
Schedule 2.3 in the amounts indicated thereon.
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2.4 Subsidiaries; Investments.
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(a) Subsidiaries. A complete and current list of all of the
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subsidiaries of FOI, the outstanding equity interests of each such subsidiary
and the stockholders, members or partners of each such subsidiary are set forth
in Section 2.4 of the Disclosure Schedule. All of the outstanding equity
interests of each such subsidiary are duly authorized, validly issued, fully
paid and nonassessable.
(b) Investments. Except as set forth in Section 2.4 of the
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Disclosure Schedule, none of FOI or any of its subsidiaries owns nor has any
direct or indirect interest in or control over any corporation, partnership,
joint venture or other entity of any kind, except for passive investments of
less than 2% in publicly-traded companies. The term "control" shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, whether through the
ownership of voting securities, by contract or otherwise.
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2.5 Financial Statements and Matters. FOI has previously furnished to the
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Investor copies of unaudited financial statements of the Company and each of its
subsidiaries for the fiscal year ended December 31, 1997 together with copies of
its unaudited financial statements for June 30, 1998. Such financial statements
referred to in this Section 2.5 were prepared in conformity with generally
accepted accounting principles applied on a consistent basis, in all material
respects are complete, correct and consistent with the books and records of the
Company and each such subsidiary and fairly present, in all material respects,
the financial position of each such subsidiary as of the dates thereof and the
results of operations the Company and each such subsidiary for the periods shown
therein (subject to the absence of footnotes and normal year-end adjustments).
2.6 Absence of Undisclosed Liabilities. Except as and to the extent
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reflected or reserved against in the unaudited pro forma combined balance sheet
of the Company at July 31, 1998 furnished to the Investor (the "Base Balance
Sheet"), disclosed in the Disclosure Schedule, incurred in connection with the
August Transactions, or incurred in the ordinary course of business since the
date of the Base Balance Sheet, the Company does not have and is not subject to
any material liability or obligation of any nature, whether accrued, absolute,
contingent or otherwise, other than liabilities incurred in connection with this
Agreement and the transactions contemplated hereby that would be required to be
described on such Base Balance Sheet or the notes thereto if it was an audited
pro forma balance sheet.
2.7 Absence of Certain Developments. Since the date of the Base Balance
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Sheet, other than as set forth in the Disclosure Schedule and other than in
connection with the August Transactions and other than in connection with
transactions and agreements entered into with the Investor, there has not been
any: (i) material adverse change in the financial condition of the Company or in
the assets, liabilities, condition (financial or other), business or results of
operations of the Company, (ii) declaration, setting aside or payment of any
dividend or other distribution with respect to, or any direct or indirect
redemption or acquisition of, any of the capital stock of the Company, (iii)
waiver of any valuable right of the Company or cancellation of any debt or claim
held by the Company in excess of $100,000 in the aggregate, (iv) loss,
destruction or damage to any property which is material to the assets,
liabilities, condition (financial or other), properties, business, results of
operations or prospects of the Company, whether or not insured, (v) acquisition
or disposition of any material assets or other material transaction by the
Company other than in the ordinary course of business, (vi) material transaction
or agreement involving the Company and any officer, director, employee or
shareholder of the Company, (vii) material increase, direct or indirect, in the
compensation paid or payable to any officer, director, employee or agent of the
Company or any establishment or creation of any employment or severance
agreement or employee benefit plan, (viii) material loss of personnel of the
Company, material change in the terms and conditions of the employment of the
Company's key personnel or any labor trouble involving the Company, (ix)
termination of the employment of any senior executive personnel, (x) material
arrangements relating to any royalty, dividend or similar payment based on the
sales volume of the Company, whether as part of the terms of the Company's
capital stock or by any separate agreement, (xi) material agreement with respect
to the endorsement of the Company's products, (xii) loss or any development that
would result in a loss of any significant customer, account or employee of the
Company,
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(xiii) incurrence of indebtedness in excess of $100,000 in the aggregate or any
material lien, (xiv) material transaction not occurring in the ordinary course
of business, or (xv) any agreement with respect to any of the foregoing actions.
2.8 Ordinary Course. Since the date of the Base Balance Sheet, except for
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transactions contemplated hereby and the August Transactions, the Company has
conducted its business only in the ordinary course.
2.9 Title to Properties. Section 2.9 of the Disclosure Schedule sets
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forth the addresses and uses of all real property that the Company owns, leases
or subleases. The Company has good, valid and (if applicable) marketable title
to all of its assets (other than leased assets) free and clear of all liens,
claims or encumbrances of any nature except, with respect to all such properties
and assets, (a) security interests in favor of the Investor in connection with
certain transactions entered into between the Company and the Investor (b)
mortgages or security interests shown on the Base Balance Sheet as securing
specified liabilities or obligations, with respect to which no default (or event
that, with notice or lapse of time or both, would constitute a default) exists,
(c) mortgages or security interests incurred in connection with the purchase of
property of assets after the date of the Base Balance Sheet (such mortgages and
security interests being limited to the property or assets so acquired and with
written consent of each of the Investors), with respect to which no default (or
event that, with notice of lapse of time or both, would constitute a default)
exists, (d) liens for current taxes not yet due, (e) liens, claims or
encumbrances disclosed on the Disclosure Schedule and (f) with respect to real
property, (i) minor imperfections of title, if any, none of which is substantial
in amount, materially detracts from the value or impairs the use of the property
subject thereto, or impairs the operations of the Company, and (ii) zoning laws
and other land use restrictions that do not impair the present or anticipated
use of the property subject thereto. All equipment included in such properties
which is necessary to the business of the Company is in good condition and
repair (ordinary wear and tear excepted) and all leases of real or personal
property to which the Company is a party are fully effective and afford the
Company peaceful and undisturbed possession of the subject matter of the lease.
The Company is not in violation of any zoning, building or safety ordinance,
regulation or requirement or other law or regulation applicable to the operation
of its owned or leased properties, which violation would have a material adverse
effect on the Company's assets, liabilities, condition (financial or otherwise)
business or results of operation, on a consolidated basis (a "Material Adverse
Effect"), nor has it received any notice of any such violation. There are no
defaults by the Company or to the knowledge of the Company, by any other party,
which might curtail in any material respect the present use of the Company's
property. Except as otherwise disclosed on Schedule 2.9, the performance by the
Company of this Agreement will not result in the termination of, or in any
material increase of any amounts payable under, any of its leases.
2.10 Tax Matters. The Company has filed all federal, state, local and
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foreign income, excise and franchise tax returns, real estate and personal
property tax returns, sales and use tax returns and other tax returns required
to be filed by it where the failure to file such returns would have a Material
Adverse Effect and has paid all taxes owing by it, except taxes which have not
yet accrued or otherwise become due, for which adequate provision has been made
in the pertinent
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financial statements referred to in Section 2.5 above or which will not have a
Material Adverse Effect. All taxes and other assessments and levies which the
Company is required to withhold or collect have been withheld and collected and
have been paid over to the proper governmental authorities except where the
failure to withhold or collect and pay over would not have a Material Adverse
Effect. With regard to the federal income tax returns of the Company, the
Company has never received notice of any audit or of any proposed deficiencies
from the Internal Revenue Service. There are in effect no waivers of applicable
statutes of limitations with respect to any taxes owed by the Company for any
year. Neither the Internal Revenue Service nor any other taxing authority is now
asserting or, to the knowledge of the Company, threatening to assert against the
Company any deficiency or claim for additional taxes or interest thereon or
penalties in connection therewith.
2.11 Certain Contracts and Arrangements. Other than as set forth in the
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Disclosure Schedule (with true and correct copies made available to legal
counsel to the Investors) and other than the August Transaction Documents, the
Company is not a party or subject to or bound by:
(a) any plan or contract providing for collective bargaining or the
like, or any contract or agreement with any labor union;
(b) any contract containing covenants directly or explicitly limiting
the freedom of the Company to compete in any line of business or with any person
or entity;
(c) any license agreement (i) in which the Company is the licensor
that provides for the license or escrow of the Company's source code or (ii) in
which the Company is a licensee that applies to software not commercially
available;
(d) any contract or agreement (other than license agreements)
obligating the Company to sell or purchase assets or services with a sale or
purchase price in excess of $50,000 in the aggregate;
(e) any material joint venture, partnership, manufacturing,
development or supply agreement;
(f) any endorsement or any other advertising, promotional or
marketing agreement providing for payments by the Company in excess of $50,000
in the aggregate which cannot be terminated on 90 days' or less notice without
the payment of penalties;
(g) any employment or severance contracts with officers, directors or
employees of the Company or agreements with shareholders of the Company or
persons or organizations related to or affiliated with any such shareholders;
(h) any stock redemption or purchase agreements or other agreements
affecting or relating to the capital stock of the Company, including without
limitation any agreement with any
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shareholder of the Company which includes without limitation, anti-dilution
rights, registration rights, voting arrangements, operating covenants or similar
provisions;
(i) any pension, profit sharing, retirement or stock options plans;
(j) any royalty, dividend or similar arrangement based on the sales
volume of the Company;
(k) any acquisition, merger or similar agreement;
(l) any contract with a governmental body under which the Company
may have an obligation for renegotiation; or
(m) any agreement with any shareholder of the Company or any
affiliate of any shareholder.
All of the Company's contracts and commitments are in full force and effect
and neither the Company, nor, to the knowledge of the Company, any other xxxxx
is in default thereunder (nor, to the knowledge of the Company, has any event
occurred which with notice, lapse of time or both would constitute a default
thereunder), except to the extent that any such failure to be in full force and
effect or default would not have a Material Adverse Effect, and the Company has
not received notice of any alleged default under any such contract, agreement,
understanding or commitment which has not been cured.
2.12 Intellectual Property Rights; Employee Restrictions. Except as set
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forth in Schedule 2.12:
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(a) The Company or one of its subsidiaries owns, or has the right to
use all Intellectual Property Rights (as hereinafter defined) material to the
conduct of its business as presently conducted, including, without limitation,
the trade names "Be Free," and the exclusive right to the domain name
"xxxxxx.xxx."
(b) The business of the Company as presently conducted does not
violate any agreements which the Company has with any third party or, to the
knowledge of the Company, materially infringe any trademark, copyright, trade
secret or patent or other Intellectual Property Rights of any third party.
(c) No claim is pending or, to the knowledge of the Company,
threatened against the Company nor has the Company received any notice or claim
from any person asserting that any of the Company's present or contemplated
activities infringe or may infringe any Intellectual Property Rights of such
person, and the Company is not aware of any infringement by any other person of
any rights of the Company under any Intellectual Property Rights that would have
a Material Adverse Effect.
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(d) The Company has taken all commercially reasonable steps required
to establish and preserve its ownership of all of the Intellectual Property
Rights, except where the failure to do so would not have a Material Adverse
Effect; each current and former employee of the Company, and each of the
Company's consultants and independent contractors involved in development of any
of the Intellectual Property Rights, has executed an agreement regarding
confidentiality, proprietary information and assignment of inventions and
copyrights to the Company, and, to the knowledge of the Company, none of such
employees, consultants or independent contractors is in violation of any
agreement or in breach of any agreement or arrangement with former or present
employers relating to proprietary information or assignment of inventions.
As used herein, the term "Intellectual Property Rights" shall mean all
intellectual property rights, including, without limitation, all of the
registered rights set forth on Section 2.12 of the Disclosure Schedule and all
patents, patent applications, patent rights, trademarks, trademark applications,
trade names, service marks, service xxxx applications, copyrights, copyright
applications, computer programs, domain names and other computer software,
inventions, designs, samples, specifications, schematics, know-how, trade
secrets, proprietary processes and formulae, including production technology and
processes, all source and object code, algorithms, promotional materials,
customer lists, supplier and dealer lists and marketing research, and all
documentation and media constituting, describing or relating to the foregoing,
including without limitation, manuals, memoranda and records. Section 2.12 of
the Disclosure Schedule contains a list of all Intellectual Property Rights
registered in the name of the Company and Section 2.12 of the Disclosure
Schedule sets forth certain Intellectual Property Rights of which the Company is
the licensor or a licensee, excluding any commercially or freely available
software of which the Company is the licensee.
2.13 Litigation. There is no litigation or governmental proceeding or
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investigation pending or, to the knowledge of the Company, threatened against
(i) the Company or affecting any of its properties or assets or (ii) any
officer, director or key employee of the Company in his or her capacity as an
officer, director or employee of the Company, in each case, which litigation,
proceeding or investigation is reasonably likely to have a Material Adverse
Effect, or which may call into question the validity or hinder the
enforceability of this Agreement or any other agreements or transactions
contemplated hereby; nor to the knowledge of the Company has there occurred any
event nor does there exist any condition on the basis of which any such
litigation, proceeding or investigation might be properly instituted or
commenced.
2.14 Employee Benefit Plans. The Company does not maintain or
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contribute to any employee benefit plan, stock option, bonus or incentive plan,
severance pay policy or agreement, deferred compensation agreement, or any
similar plan or agreement (an "Employee Benefit Plan") other than the Employee
Benefit Plans in the Disclosure Schedule. The terms and operation of each
Employee Benefit Plan maintained by the Company comply in all material respects
with all applicable laws and regulations relating to such Employee Benefit
Plans. There are no material unfunded obligations of the Company under any
retirement, pension, profit-sharing, deferred compensation plan or similar
program. The Company is not required to make any payments or
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contributions to any Employee Benefit Plan pursuant to any collective bargaining
agreement or, to the knowledge of the Company, any applicable labor relations
law. The Company has never maintained or contributed to any Employee Benefit
Plan providing or promising any health or other nonpension benefits to
terminated employees.
2.15 Labor Laws. The Company employs 14 employees and generally enjoys
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good employer-employee relationships. The Company is not delinquent in payments
to any of its employees for any wages, salaries, commissions, bonuses or other
direct compensation for any services performed for it as of the date hereof or
amounts required to be reimbursed to such employees. Except as disclosed in the
Disclosure Schedule, the Company is in compliance in all material respects with
all applicable laws and regulations respecting labor, employment, fair
employment practices, terms and conditions of employment, and wages and hours.
There are no charges of employment discrimination or unfair labor practices or
strikes, slowdowns, stoppages of work or any other concerted interference with
normal operations existing, pending or, to the knowledge of the Company,
threatened against or involving the Company.
2.16 List of Certain Employees and Suppliers. Section 2.16 of the
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Disclosure Schedule contains a list of all managers, employees and consultants
of the Company who, individually, have received compensation from the Company
for the calendar year ended December 31, 1997 in excess of $75,000. In each case
such Schedule includes the job title and aggregate annual compensation of each
such individual as of August 28, 1998. To the knowledge of the Company, no key
employee of the Company has announced or made known publicly any plan or
intention to terminate his employment with the Company and no supplier has
notified the Company that it has any plan or intention to terminate or reduce
its business with the Company or to materially and adversely modify its
relationship with the Company.
2.17 Hazardous Waste, Etc. No hazardous wastes, substances or materials
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or oil or petroleum products have been generated, transported, used, disposed,
stored or treated by the Company and to the knowledge of the Company no
hazardous wastes, substances or materials, or oil or petroleum products have
been released, discharged, disposed, transported, placed or otherwise caused to
enter the soil or water in, under or upon any real property owned, leased or
operated by the Company, in each case in violation of applicable environmental
laws and which would have a Material Adverse Effect.
2.18 Business; Compliance with Laws. The Company has all necessary
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franchises, permits, licenses and other rights and privileges necessary to
permit it to own its property and to conduct its business as it is presently
conducted except where the failure to have would not have a Material Adverse
Effect. To the Company's knowledge, the Company is currently and has heretofore
been in compliance n all material respects with all federal, state and local
laws and regulations.
2.19 Investment Banking; Brokerage. There are no claims for investment
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banking fees, brokerage Commissions, finder's fees or similar compensation
(exclusive of professional fees to
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lawyers and accountants) in connection with the transactions contemplated by
this Agreement payable by the Company or based on any arrangement or agreement
made by or on behalf of the Company.
2.20 Insurance. The Company insurance policies of such types and in such
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amounts with respect to its business and properties as are disclosed on the
Disclosure Schedule. There is no material default or event which could give rise
to a material default under any such policy.
2.21 Transactions with Affiliates. Except as disclosed on the Disclosure
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Schedule, effective as of the Closing Date there are no loans, leases, contracts
or other transactions between the Company and any officer, director or five
percent (5%) shareholder of the Company or any family member or affiliate of the
foregoing persons other than the August Transaction Documents and transactions
contemplated thereby.
2.22 Disclosure. The representations and warranties made or contained in
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this Agreement and the schedules hereto when taken together, do not and shall
not contain any untrue statement of a material fact and do not and shall not
omit to state a material fact required to be stated therein or necessary in
order to make such representations and warranties not misleading in light of the
circumstances in which they were made or delivered.
2.23 Sole Representations and Warranties. The representations and
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warranties set forth in this Section 2 constitute the only representations and
warranties of the Company made in connection with this Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
In order to induce the Company to enter into this Agreement, the Investor
hereby represents and warrants to the Company as follows:
3.1 Sophistication. The Investor has such knowledge and experience in
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financial and business matters that it is capable of evaluating the merits and
risks of the investment contemplated by this Agreement and making an informed
investment decision with respect thereto. The Investor is an "accredited
investor" as such term is defined in Rule 501 under the Securities Act of 1933,
as amended (the "Securities Act"). The Investor is purchasing the Securities for
its own account, for investment only and not with a view to, or any present
intention of, effecting a distribution of such Securities or any part thereof or
any securities issued upon exercise or conversion thereof except pursuant to a
registration or an available exemption under applicable law. The Investor
acknowledges and agrees that the Securities have not been registered under the
Securities Act or the securities laws of any state or other jurisdiction and
cannot be disposed of unless they are subsequently registered under the
Securities Act and any applicable state laws or exemption from such registration
is available.
3.2 Authorization and Non-Contravention. The Investor has full right,
-----------------------------------
authority and power under its certificate of incorporation and by-laws to enter
into this Agreement and each agreement,
-11-
document and instrument to be executed and delivered by or on behalf of the
Investor pursuant to or as contemplated by this Agreement and to carry out the
transactions contemplated hereby and thereby, and the execution, delivery and
performance by the Investor of this Agreement and each such other agreement,
document and instrument have been duly authorized by all necessary corporate or
other action of the Investor. This Agreement and each agreement, document and
instrument executed and delivered by the Investor pursuant to or as contemplated
by this Agreement constitute, or when executed and delivered will constitute,
valid and binding obligations of the Investor enforceable in accordance with
their respective terms. The execution, delivery and performance by the Investor
of this Agreement and each such other agreement, document and instrument, and
the performance of the transactions contemplated hereby and thereby do not and
will not: (A) violate, conflict with or result in a default (whether after the
giving of notice, lapse of time or both) any provision of its charter or by-
laws; (B) violate or result in a violation of, or constitute a default under,
any provision of any law, regulation or rule, or any order of, or any
restriction imposed by, any court or other governmental agency applicable to the
Investor; or (C) require from the Investor any notice to, declaration or filing
with, or consent or approval of any governmental authority or other third party.
3.3 Investment Banking Fees. The Investor represents that there are no
------------------------
claims for investment banking fees, brokerage commissions, finder's fees or
similar compensation (exclusive of professional fees to lawyers and accountants)
in connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of such Investor.
3.4 Opportunity for Questions, Etc. The Investor represents that it has
------------------------------
had during the course of the transaction and prior to its purchase of the
Convertible Preferred Shares and the Warrants, the opportunity to request
information from and ask questions of the Company and its officers, employees
and agents, concerning the Company, its assets, business and operations and to
receive information and answers to such requests and questions.
SECTION 4. CONDITIONS OF PURCHASE
The Investor's obligation to purchase and pay for the Convertible Preferred
Shares to be purchased by it shall be subject to compliance by the Company with
its agreements herein contained and to the fulfillment to the Investor's
satisfaction, or the waiver by the Investor, on or before and at the Closing
Date of the following conditions:
4.1 Satisfaction of Conditions. The representations and warranties of the
--------------------------
Company contained in this Agreement shall be true and correct on and as of the
Closing Date and each of the conditions specified in this Section 4 shall have
been satisfied or waived in writing by the Investor.
4.2 All Proceedings Satisfactory. All corporate and other proceedings
----------------------------
taken by the Company prior to or at the Closing in connection with the
transactions contemplated by this Agreement, and all documents and evidences
incident thereto, shall be reasonably satisfactory in form and substance to the
Investor.
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4.3 Authorization. The Board of Directors of FOI shall have duly adopted
-------------
resolutions in the form reasonably satisfactory to the Investor and shall have
taken all action necessary for the purpose of authorizing the Company to
consummate the transactions contemplated hereby in accordance with the terms
hereof and to cause the Amended and Restated Certificate of Designation with
respect to the Convertible Preferred Stock substantially in the form attached
hereto as Exhibit A to become effective; and the Investor shall have received a
---------
certificate of the Secretary of the Company setting forth a copy of the
resolutions authorizing the foregoing and the Certificate of Incorporation and
By-laws of FOI and such other matters as may be reasonably requested by the
Investor.
4.4 No Violation or Injunction. The consummation of the transactions
--------------------------
contemplated by this Agreement shall not be in violation of any law or
regulation, and shall not be subject to any injunction, stay or restraining
order.
4.5 Consents and Waivers. The Company shall have obtained all consents or
--------------------
waivers necessary to execute this Agreement and the other agreements and
documents contemplated herein and to carry out the transactions contemplated
hereby and thereby and shall have delivered evidence thereof to the Investor.
All corporate and other action and governmental filings necessary to effectuate
the terms of this Agreement and other agreements and instruments executed and
delivered by the Company in connection herewith shall have been made or taken.
4.6 Non-Disclosure and Non-Competition Agreements. The Company's
---------------------------------------------
employees listed in Section 4.6 of the Disclosure Schedule shall have entered
into Employee Confidential Information, Inventions and Writings and Non-
Competition Agreements substantially in the form attached as Exhibit I.2 hereto.
4.7 Founder Employment Agreements. Each of Xxxxxx X. Xxxxxx, Xx. and
-----------------------------
Xxxxxx X. Xxxxxx (collectively, the "Founders") shall have executed and
delivered an Employment Agreement in substantially the form attached as Exhibit
-------
J to the August Stock Purchase Agreement.
-
4.8 Pro Forma Combined Balance Sheet. The Company shall have furnished to
---------------------------------
the Investor the Base Balance Sheet, which shall be reasonably satisfactory in
form and substance to the Investors.
SECTION 5. CONDITIONS OF SALE
The Company's obligation to issue the Convertible Preferred Shares and the
Warrants to the Investor shall be subject to compliance by the Investor with its
agreements herein contained and to the fulfillment to the Company's
satisfaction, or the waiver by the Company, on or before and at the Closing Date
of the following conditions:
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5.1 Satisfaction of Conditions. The representations and warranties of the
--------------------------
Investor contained in this Agreement shall be true and correct on and as of the
Closing Date and each of the conditions specified in this Section 5 shall have
been satisfied or waived in writing by the Company.
5.2 Payment of Purchase Price. The aggregate purchase price shall have
-------------------------
been paid by the Investor to the Company in accordance with Section 1.2.
5.3 All Proceedings Satisfactory. All corporate and other proceedings
----------------------------
taken by the Investor prior to or at the Closing in connection with the
transactions contemplated by this Agreement, and all documents and evidences
incident thereto, shall be reasonably satisfactory in form and substance to the
Company.
5.4 No Violation or Injunction. The consummation of the transactions
---------------------------
contemplated by this Agreement shall not be in violation of any law or
regulation, and shall not be subject to any injunction, stay or restraining
order.
SECTION 6. COVENANTS
---------
The Company agrees for the benefit of the Investor that it shall comply,
except as may be waived to in writing by two-thirds in interest of the holders
of the Convertible Preferred Stock with the following covenants, provided that
the covenants set forth in Section 7 shall terminate at the earlier of (i) as of
the closing of the Company's first Qualified Public Offering and (ii) such
earlier date as may be agreed to in writing by two-thirds in interest of the
holders of Convertible Preferred Stock. A "Qualified Public Offering" shall
have the meaning provided in the Terms of Preferred Stock attached hereto as
Exhibit A.
---------
6.1 Financial Statements and Budgetary Information; Inspection. So long
-----------------------------------------------------------
as the Investor holds an aggregate number of Convertible Preferred Shares and
Conversion Shares equal to at least 20% of the number of Convertible Preferred
Shares (subject to adjustments for stock splits, stock dividends and the like),
the Investor shall have the rights, and the Company shall have the obligations,
set forth in this Section 6.1. The Company will deliver to the Investor and any
person acquiring Convertible Preferred Shares from an Investor which holds an
aggregate number of shares of Convertible Preferred Stock and Conversion Shares
equal to at least 5% of the number of shares of Convertible Preferred Stock
(subject to adjustments for stock splits, stock dividends and the like),
internally prepared unaudited summary monthly financial statements, quarterly
financial statements for the first three fiscal quarters of the fiscal year and
audited annual financial statements, as well as annual budgets and operating
plans. The summary monthly and quarterly financial information, (in the case of
quarterly financial information) set forth in comparative form to the
corresponding budget and operating plan, will be provided within 30 days after
the end of each month and 45 days after each of the first three fiscal quarters,
respectively. The annual budget and operating plan will be presented at a Board
of Directors' meeting at least one month prior to the end of the fiscal year of
the Company preceding the year covered. An annual audit by an accounting firm of
national recognition selected by the Board of Directors will be provided within
90 days after each fiscal
-14-
year-end of the Company. The Company will provide annual financial information
set forth in comparative form to the corresponding annual budget and operating
plan within 90 days after each fiscal year-end of the Company.
6.2 Key Person Insurance. Within 120 days after the date hereof, the
--------------------
Company will use commercially reasonable efforts to purchase and maintain in its
or any subsidiary's name "key person" term life insurance policies of one
million dollars ($1,000,000) each on the lives of each of the Founders, with the
Company named as beneficiary. The Company hereby agrees that such policy shall
not be assigned, borrowed against or pledged.
6.3 Stock Awards. The Company will establish a pool for stock options,
------------
stock grants or other equity participation such that there will be a total of
7,739,251 shares of Common Stock available to employees of the Company subject
to increase with approval of each of the Founders and each of the Investors (the
"Stock Option Pool"). All securities granted pursuant to or under the Stock
Option Pool will vest over a four (4) year period.
6.4 Non-Disclosure and Non-Competition Agreements. On the date of hire of
---------------------------------------------
any future employee or upon any future grant to an existing employee under the
Plan, the Company and such employee will enter into (i) an Employee Confidential
Information, Inventions and Writings Agreement substantially in the form of
Exhibit I.1. attached to the August Stock Purchase Agreement if such employee is
-----------
a non-clerical employee (other than an engineering or executive employee) or
(ii) an Employee Confidential Information, Inventions and Writings and Non-
Competition Agreement substantially in the form of Exhibit I.2 attached to the
-----------
August Stock Purchase Agreement if such employee is an engineering or executive
employee, unless in each case such employee is already a party to such
agreement.
SECTION 7. RIGHTS TO PURCHASE
Notwithstanding anything herein to the contrary, the following provisions
of this Section 7 shall terminate immediately prior to the closing of a
Qualified Public Offering and shall not apply with respect to any Qualified
Public Offering.
7.1 Right to Participate in Certain Sales of Additional Securities. So
--------------------------------------------------------------
long as the Investor continues to hold an aggregate number of Convertible
Preferred Shares and Conversion Shares equal to at least 50% of the Convertible
Preferred Shares purchased hereunder (subject to adjustments for stock splits,
stock dividends and the like), the Company agrees that it will not sell or issue
any shares of capital stock of the Company or other securities convertible into
or exchangeable for capital stock of the Company, or options, warrants or rights
carrying any rights to purchase capital stock of the Company unless the Company
first submits a written offer to the Investor identifying the terms of the
proposed sale (including price, number or aggregate principal amount of
securities and all other material terms) (the "Offer"), and offers to the
Investor the opportunity to purchase its Pro Rata Share (as hereinafter defined)
of such securities on terms and conditions, including price, not less favorable
to the Investor than those on which the Company proposes to sell such securities
to a third
-15-
party or parties. For the purposes of this Agreement, the Investor's "Pro Rata
Share" of such securities shall be based upon the ratio which (A) the number of
shares of Common Stock (which shall include shares of Common Stock issuable upon
exercise or conversion of securities then outstanding) owned by it or him, as
the case may be, bears to (B) the total of all the issued and outstanding shares
of Common Stock (which shall include shares of Common Stock issuable upon
exercise or conversion of securities then outstanding). The Company's offer
shall remain open and irrevocable for a period of 7 days. The closing of any
such Offer shall occur no sooner than 30 days after the delivery of such Offer.
Any securities so offered which are not purchased pursuant to such offer may be
sold by the Company but only on the terms and conditions set forth in the
initial offer to the Investor, at any time within 120 days following the
termination of the above-referenced 30-day period but may not be sold to any
other person or on terms and conditions, including price, that are more
favorable to the purchaser than those set forth in such offer or after such 120-
day period without renewed compliance with this Section 7.1.
Notwithstanding the foregoing, the Company may issue (i) shares of
Convertible Preferred Stock pursuant to the Series A Warrants and shares of
Common Stock upon conversion of such shares of Convertible Preferred Stock, (ii)
Common Stock pursuant to the Common Stock Warrant and pursuant to warrants and
stock Options existing on the date hereof as set forth in Section 7.1 of the
Disclosure Schedule, (iii) shares of Common Stock and options (and the Common
Stock to be issued upon exercise thereof) included in the Stock Option Pool or
otherwise approved by the Board of Directors of the Company, (iv) shares of
Common Stock pursuant to warrants issued in connection with August Transactions;
and (v) the Conversion Shares and shares of Common Stock upon the conversion of
shares of Convertible Preferred Stock, and the other provisions of this Section
7.1 shall not apply with respect to such issuances.
7.2 Right of First Refusal. In the event that the Investor proposes to
----------------------
Transfer (as defined below) all or any portion of its shares of capital stock of
the Company or any security convertible or exercisable into capital stock of the
Company to any proposed Transferee (other than to a Permitted Transferee (as
defined below)), the Investor may Transfer such shares or security only pursuant
to and in accordance with the following provisions of this Section 7.2:
(a) Transfer Notice. The Investor shall not make or suffer any
---------------
Transfer of all or any of its shares of capital stock of the Company or any
security convertible or exercisable into capital stock of the Company, whether
now owned or hereafter acquired, except in accordance with the terms of this
Agreement, and any purported Transfer not made in compliance with this Agreement
shall be void and of no force and effect, If the Investor, including any of its
Transferees Permitted pursuant to this Section 7.2(a), proposes to make or
suffers any Transfer of all or any portion of its shares of capital stock of the
Company or any security convertible or exercisable into capital stock of the
Company pursuant to a bona fide third party offer, the Investor shall so inform
the Company by notice in writing (the "Transfer Notice") stating the number or
amount of shares or other securities that are the subject of such proposed
Transfer (the "Offered Securities"), the name and address of the proposed
Transferee and all other terms and conditions of such proposed Transfer,
including any consideration proposed to be received for the Offered Securities,
the terms of any
-16-
financing in relation to the Transfer, and, if the proposed Transfer is to be
wholly or partly for consideration other than cash or an indebtedness of any
person, the amount of the cash consideration, if any, and a description of all
non-monetary consideration. By giving the Transfer Notice, the Transferee shall
be deemed to have granted to the Company an option to purchase the Offered
Securities if such Transfer is pursuant to a bona fide third party offer, at the
same consideration and on the same payment terms as are set forth in the
Transfer Notice (except that any portion of the consideration set forth in the
Transfer Notice which is not cash or indebtedness of the Transferee shall be
payable in cash in an amount equivalent to the fair market value of such
consideration).
(b) Manner of Exercise. The Company shall give notice of exercise or
------------------
nonexercise to the Investor within 15 days following the receipt of a Transfer
Notice given by the Investor pursuant to Section 7.2(a). The failure of the
Company to submit any such notice within the applicable period shall constitute
an election on its part not to purchase any of the Offered Securities to which
the Transfer Notice pertained.
(c) Requirement to Purchase All Offered Securities. Notwithstanding
----------------------------------------------
any other provision of this Section 7.2, in no event shall the Investor be
required to sell any of the Offered Securities to the Company unless, within the
period provided, the Investor has been notified that all the Offered Securities
will be purchased by the Company. If the Company does not elect to purchase all
the Offered Securities, then the Company shall not have any right or obligation
to purchase any of the Offered Securities.
(d) Closing. The Closing (herein so called) of the purchase and sale
-------
of securities that are being purchased and sold under this Section 7.2 shall
take place at the Company's principal executive offices on the 10th day
following the date of delivery of the notice of acceptance by the Company
pursuant to Section 7.2(b) herein (or if such date is a Saturday, Sunday or
legal holiday in the state where such offices are located, the first day
thereafter that is not a Saturday, Sunday or legal holiday) at 10:00 a.m., local
time. At the Closing, the parties shall take all action necessary to convey
such Offered Securities to be Transferred (as herein defined) in accordance with
this Agreement, free of all liens and encumbrances, all as reasonably determined
by the Company.
(e) Failure to Exercise. If the Company does not elect to purchase
-------------------
all of the Offered Securities within the period provided, then, subject to the
other terms and provisions of this Agreement, all of such Offered Securities may
be disposed of by the Investor to the prospective Transferee named in the
Transfer Notice, for the price and on the terms and conditions set forth in the
Transfer Notice, at any time within 120 days after the expiration of the period
provided for in the notice of the Company to be delivered pursuant to Section
7.2(b) herein, provided that each Transferee shall, prior to the Transfer of the
Offered Securities to such Transferee, execute and deliver to the Company a
valid and binding agreement, satisfactory to the Company, to become subject to
the provisions of this Section 7.2 on the same terms as the Investor. Each
party who is or becomes subject to this Section 7.2 agrees to grant to the
Company full access to all of relevant records of such party to determine to the
Company's reasonable satisfaction the terms of any Transfer pursuant to this
Section 7.2 to any Transferee named in the Transfer Notice. Any shares of
Common
-17-
Stock not so disposed of within such 120 day period shall remain subject
to all of the provisions of this Agreement.
(f) Definition of "Transfer". For purposes of this Section 7.2,
-----------------------
"Transfer" means any direct or indirect offer, transfer, donation, sale,
assignment, conveyance, encumbrance, mortgage, gift, pledge, hypothecation or
other disposal or attempted disposal of all or any portion of a security or of
any rights connected thereto or interests therein, whether voluntary or
involuntary, and, including but not limited to, any Transfer by operation of
law, by court order, by judicial process or by foreclosure, levy or attachment;
"Transferred" means the accomplishment of a Transfer; and "Transferee" means the
recipient of a Transfer.
(g) Permitted Transferees. Notwithstanding the foregoing, the
---------------------
Investor may Transfer all or any of its Securities without complying with this
Section 7.2 but subject to the other terms and provisions of this Agreement, by
any Transfer of (i) shares of Common Stock pursuant to a merger or consolidation
of the Company with any other entity in which all of the shareholders of the
Company are participating on ratable basis (based upon the number and class of
shares held), (ii) Securities to any affiliate of Investor, or (iii) Securities
to any financial institution who is not a competitor of the Company (any person
who acquires shares of Common Stock in a Transfer permitted by this Section
7.2(g) is referred to as a "Permitted Transferee"), in each case who agrees to
be bound by the provisions of this Section 7.2.
SECTION 8. REGISTRATION RIGHTS
-------------------
8.1 Optional Registrations. If at any time or times after the date
----------------------
hereof, the Company shall seek to register any shares of its capital stock or
securities convertible into capital stock under the Securities Act to be sold
for cash (whether in connection with a public offering of securities by the
Company (a "primary offering"), a public offering of securities by shareholders
of the Company (a "secondary offering"), or both), the Company will promptly
give written notice thereof to the Investor if the Investor holds Registrable
Securities as hereinafter defined in Section 8.2 below. If within 30 days after
their receipt of such notice the Investor requests the inclusion of some or all
of the Registrable Securities owned by it in such registration, the Company will
use its best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Investor may request in a writing delivered to
the Company within 30 days after their receipt of the notice given by the
Company. In the case of the registration of shares of capital stock by the
Company in connection with any underwritten public offering, if the Company is
advised in writing in good faith by the underwriter(s) that the amount to be
sold by holders other than the Company is greater than the amount which can be
offered without adversely affecting the offering, the Company shall not be
required to register Registrable Securities of the Investor in excess of the
amount, if any, of Registrable Securities which the principal underwriter of
such underwritten offering shall reasonably and in good faith agree to include
in such offering. If any limitation of the number of shares of Registrable
Securities to be registered by the Investor is required pursuant to this Section
8.1, the Company may reduce the amount offered for the account of the Investor
to a number deemed satisfactory by the principal underwriter provided that no
reduction shall be made in the amount of
-18-
Registrable Securities offered for the account of the Investor unless such
reduction is imposed pro rata with respect to all securities whose holders have
a contractual, incidental "piggy back" right to include such securities in the
registration statement as to which inclusion has been requested pursuant to such
right; provided, however, that there is first excluded from such registration
-------- -------
statement all shares of Common Stock sought to be included therein by any holder
not having any such contractual, incidental registration rights. The provisions
of this Section will not apply to a registration effected solely to implement
(x) an employee benefit plan, or (y) a transaction to which Rule 145 or any
other similar rule of the Securities and Exchange Commission (the "SEC"or the
"Commission") under the Securities Act is applicable.
The Company may require the Investor and each holder of Registrable
Securities to be sold under such registration statement, at the Company's
expense, to furnish the Company with such information and undertakings as it may
reasonably request regarding such Investor or holder and the distribution of
such securities as the Company may from time to time reasonably request in
writing. If any Registrable Securities are to be distributed by means of any
underwriting, the Investor and all holders proposing to distribute their
securities through such underwriting shall enter into an underwriting agreement
in customary form with the underwriters for such underwriting.
8.2 Registrable Securities. For the purposes of this Section 9, the term
----------------------
"Registrable Securities" shall mean the Conversion Shares, shares of Common
Stock issuable upon conversion of the Convertible Preferred Stock issuable upon
exercise of the Series A Warrants, and shares of Common Stock issuable upon
exercise of the Common Stock Warrant, including any shares issued by way of a
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization; provided,
--------
however, that if the Investor owns Convertible Preferred Stock, it may exercise
-------
its registration rights hereunder by converting the shares to be sold publicly
into Common Stock as of the closing of the relevant offering and shall not be
required to cause such Convertible Preferred Stock to be converted to Common
Stock until and unless such Closing occurs, it being understood that the Company
shall at the request of the Investor effect the reconversion of Common Stock to
Convertible Preferred Stock if such a conversion occurs notwithstanding the
foregoing and a public offering does not close; and provided, however ,that
-------- -------
purposes of clauses (a) and (b) any Common Stock that is sold in a registered
sale pursuant to an effective registration statement under the Securities Act or
pursuant to Rule 144 thereunder, or that may be sold without restriction as to
volume or otherwise pursuant to Rule 144 under the Securities Act (as confirmed
by an unqualified opinion of legal counsel to the Company), shall not be deemed
Registrable Securities.
8.3 Further Obligations of the Company. Whenever the Company is required
----------------------------------
hereunder to register any Registrable Securities, it agrees that it shall also
do the following:
(a) Pay all expenses of such registrations and offerings (exclusive of
underwriting discounts and commissions) and the reasonable fees and expenses of
one independent counsel for the Investor, as the case may be, satisfactory to
the Piggy Back Holders, as the case may be; provided, however, that the Company
-------- -------
shall not be required to pay more than $5,000 in fees and
-19-
expenses of counsel to the Investor in connection with any single registration
pursuant to this Section 9.
(b) Furnish to the Investor such copies of each preliminary and final
prospectus and such other documents as the Investor may reasonably request to
facilitate the public offering of its Registrable Securities;
(c) Enter into any reasonable underwriting agreement required by the
proposed underwriter in such form and containing such terms as are customary;
(d) Use its reasonable best efforts (with due regard to management of
the ongoing business of the Company and the allocation of managerial resources)
to register or qualify the securities covered by said registration statement
under the securities or "blue sky" laws of such jurisdictions as the Investor
may reasonably request, provided that the Company shall not be required to
register or qualify the securities in any jurisdictions which require it to
qualify to do business therein;
(e) Immediately notify the Investor, at any time when a prospectus
relating to its Registrable Securities is required to be delivered under the
Securities Act, of the happening of any event as a result of which such
prospectus contains an untrue statement of a material fact or omits any material
fact necessary to make the statements therein not misleading, and, at the
request of the Investor, prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus will not contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not
misleading;
(f) Cause all such Registrable Securities to be listed on each
securities exchange or quotation system on which similar securities issued by
the Company are then listed or quoted;
(g) Otherwise use its best efforts to comply with the securities laws
of the United States and other applicable jurisdictions and all applicable rules
and regulations of the SEC and comparable governmental agencies in other
applicable jurisdictions and make generally available to its holders, in each
case as soon as practicable, but not later than 45 days after the close of the
period covered thereby, an earnings statement of the Company which will satisfy
the provisions of Section 11(a) of the Securities Act;
(h) Use its reasonable efforts to obtain and furnish to the Investor,
immediately prior to the effectiveness of the registration statement (and, in
the case of an underwritten offering, at the time of delivery of any Registrable
Securities sold pursuant thereto), a cold comfort letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by cold comfort letters as the holders of a
majority of the securities being sold may reasonably request; and
-20-
(i) Otherwise cooperate with the underwriter or underwriters, the
Commission and other regulatory agencies and take all actions and execute and
deliver or cause to be executed and delivered all documents necessary to effect
the registration of any Registrable Securities under this Section 8.
8.4 Indemnification; Contribution.
-----------------------------
(a) Incident to any registration statement referred to in this
Section 8, the Company (in such capacity, an "Indemnifying Party") will
indemnify and hold harmless each underwriter, the Investor if it offers or sells
any such Registrable Securities in connection with such registration statement
(including its partners (including partners of partners and stockholders of any
such partners), and directors, officers, employees and agents of any of them (a
"Selling Holder"), and each person who controls any of them within the meaning
of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act
of 1934 (the "Exchange Act") (a "Controlling Person")) (each in such capacity,
an "Indemnified Party"), from and against any and all losses, claims, damages,
expenses and liabilities, joint or several (including any reasonable
investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claim
asserted, as the same are incurred, to which they, or any of them, may become
subject under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities arise out of or are based on (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement (including any related preliminary or definitive
prospectus, or any amendment or supplement to such registration statement or
prospectus), (ii) any omission or alleged omission to state in such document a
material fact required to be stated in it or necessary to make the statements in
it not misleading, or (iii) any violation by the Company of the Securities Act,
any state securities or "blue sky" laws or any rule or regulation thereunder in
connection with such registration; provided, however, that (i) the Company shall
-------- -------
not be liable in respect of any settlement effected without its consent (which
consent shall not be unreasonably withheld) and (ii) the Company will not be
liable to the extent that such loss, claim, damage, expense or liability arises
from and is based on (i) an untrue statement or omission or alleged untrue
statement or omission made in reliance on and in conformity with information
furnished in writing to the Company by such underwriter, Selling Holder or
Controlling Person expressly for use in such registration statement, or (ii)
such Selling Holder or Controlling Person being subject to an obligation to
deliver a definitive prospectus and fails to do so. With respect to such untrue
statement or omission or alleged untrue statement or omission in the information
furnished in writing to the Company by such Selling Holder expressly for use in
such registration statement, such Selling Holder (each such Selling Holder in
such capacity, an "Indemnifying Party") will indemnify and hold harmless each
underwriter, the Company (including its directors, officers, employees and
agents), each other selling stockholder (including its partners (including
partners of partners and stockholders of such partners) and directors, officers,
employees and agents of any of them, and each person who controls any of them
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) (each in such capacity, an "Indemnifying Party"), from and against
any and all losses, claims, damages, expenses and liabilities, joint or several,
to which they, or any of them, may become subject under the
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Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise to the same extent provided in the
immediately preceding sentence. In no event, however, shall the liability of a
Selling Holder for indemnification under this Section 8.4(a) exceed the lesser
of (i) that proportion of the total of such losses, claims, damages or
liabilities indemnified against equal to the proportion of the total securities
sold under such registration statement which is being sold by such Selling
Holder or (ii) the proceeds received by such Selling Holder from its sale of
Registrable Securities under such registration statement.
(b) If the indemnification provided for in Section 8.4(a) above for
any reason is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party in respect of any losses, claims, damages, expenses or
liabilities referred to therein, then each indemnifying party under this Section
8.4, in lieu of indemnifying such Indemnified Party thereunder, shall contribute
to the amount paid or payable by such Indemnified Party as a result of such
losses, claims, damages, expenses or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, the other
selling stockholders and the underwriters from the offering of the Registrable
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company, the other selling stockholders and the underwriters in
connection with the statements or omissions which resulted in such losses,
claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company, the
Selling Holders, the other selling stockholders and the underwriters shall be
deemed to be in the same respective proportions that the net proceeds from the
offering (before deducting expenses) received by the Company, the Selling
Holders, the other selling stockholders and the underwriting discount received
by the underwriters, in each case as set forth in the table on the cover page of
the applicable prospectus, bear to the aggregate public offering price of the
Registrable Securities. The relative fault of the Company, the Selling Holders,
the other selling stockholders and the underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to State a material fact
relates to information supplied by the Company, the Selling Holders, the other
selling stockholders or the underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Selling Holders agree that it would not be just and
equitable if contribution pursuant to this Section 8.4(b) were determined by pro
rata or per capita allocation or by any other method of allocation which does
not take account of the equitable considerations referred to in the immediately
preceding paragraph. In no event, however, shall a Selling Holder be required
to contribute any amount under this Section 8.4(b) in excess of the lesser of
(i) that proportion of the total of such losses, claims, damages or liabilities
indemnified against equal to the proportion of the total Registrable Securities
sold under such registration statement which are being sold by such Selling
Holder or (ii) the proceeds received by such Selling Holder from its sale of
Registrable Securities under such registration statement. No person found
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not found guilty of such fraudulent misrepresentation.
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(c) The amount paid by an Indemnifying Party or payable to an
Indemnified Party as a result of the losses, claims, damages and liabilities
referred to in this Section 8 shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any such
action or claim, payable as the same are incurred. The indemnification and
contribution provided for in this Section 8.4 will remain in full force and
effect regardless of any investigation made by or on behalf of the indemnified
parties or any officer, director, employee, agent or controlling person of the
Indemnified Parties.
(d) Promptly after receipt by an Indemnified Party of notice of the
commencement of any action or proceeding involving a claim referred to in this
Section 8.4, such Indemnified Party will, if a claim in respect thereof is to be
made against an Indemnifying Party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
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Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligation under the preceding subdivisions of this
Section 8.4, except to the extent that the Indemnifying Party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an Indemnified Party, provided the Indemnifying Party provides the
Indemnified Party reasonable assurances that the Indemnifying Party has the
ability to satisfy any judgment which may be entered against the Indemnified
Party, and unless in such Indemnified Party's reasonable judgment a conflict of
interest between such Indemnified Party and Indemnifying Party may exist in
respect of such action; the Indemnifying Party shall be entitled to participate
in and to assume the defense thereof, jointly with any other Indemnifying Party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such Indemnified Party, and after notice from the Indemnifying
Party to such Indemnified Party of its election so to assume the defense
thereof, the Indemnifying Party shall not be liable to such Indemnified Party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. No Indemnifying Party shall consent to any settlement without
the consent of the Indemnified Party which 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 that could have been brought against it in such
action.
8.5 Rule 144 and Rule 144A Requirements. In the event that the Company
-----------------------------------
becomes subject to Section 13 or Section 15(d) of the Exchange Act, the Company
shall use its best efforts to take all action as may be required as a condition
to the availability of Rule 144 or Rule 144A under the Securities Act (or any
successor or similar exemptive rules hereafter in effect). The Company shall
furnish to the Investor, within 15 days of a written request, a written
statement executed by the Company as to the steps it has taken to comply with
the current public information requirement of Rule 144 or Rule 144A or such
successor rules.
8.6 Lock-up. The Investor agrees, if so reasonably required by the
-------
managing underwriter in a public offering or registration of the Common Stock,
not to effect any public sale or distribution of securities of the Company or
sale of such securities pursuant to Rule 144 or Rule 144A under the Securities
Act, during the seven days prior to and the 180 days (or such shorter period as
may be
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agreed to by such managing underwriter) after the effective day of such public
offering or registration.
8.7 Transfer of Registration Rights. The registration rights and related
-------------------------------
obligations under this Section 8 of the Investor with respect to its Registrable
Securities may be assigned in connection with any transaction or series of
related transactions involving the Transfer to one or more transferees of at
least 500,000 shares of capital stock of the Company, other than pursuant to an
effective registration statement under the Securities Act or pursuant to Rule
144 thereunder (subject to adjustments for stock splits, stock dividends and the
like and aggregating all contemporaneous transfers by the Investor), and upon
any such transfer such transferee shall be deemed to be included within the
definition of Investor for purposes of this Section 8 with the rights set forth
herein, subject to such transferee agreeing to be bound by the provisions
hereof. The Investor shall notify the Company at the time of such transfer.
SECTION 9. GENERAL
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9.1 Compliance with Registration Requirements of the Securities Act. The
---------------------------------------------------------------
Investor agrees not to Transfer any of the Securities, except pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and in compliance with applicable state
securities laws and, in the case of an exempt transaction, only if the Investor
agrees to require, as a condition to such transfer, that such transferee agree,
in writing, to be bound to this Section 9.1 as if such transferee were the
transferring Investor.
9.2 Amendments, Waivers and Consents. For the purposes of this Agreement
--------------------------------
and all agreements executed pursuant hereto, no course of dealing between or
among any of the parties hereto and no delay on the part of any party hereto in
exercising any rights hereunder or thereunder shall operate as a waiver of the
rights hereof and thereof. No provision hereof may be waived otherwise than by
a written instrument signed by the party or parties so waiving such covenant or
other provision. No amendment to this Agreement may be made without the written
consent of the Company and the Investor.
9.3 Legend on Securities. The Company and the Investor acknowledge and
--------------------
agree that the following legend shall be typed on each certificate evidencing
any of the securities issued hereunder held at any time by an Investor:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES OR BLUE
SKY LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE
ASSIGNED EXCEPT (1) PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR (2) PURSUANT TO AN AVAILABLE
EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION OF
SECURITIES AND (3) IN ACCORDANCE WITH APPLICABLE STATE SECURITIES AND BLUE SKY
LAWS.
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THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF A STOCK
PURCHASE AGREEMENT DATED AS OF SEPTEMBER 29, 1998. A COMPLETE AND CORRECT COPY
OF THIS AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE
COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE.
9.4 Governing Law. This Agreement shall be deemed to be a contract made
-------------
under, and shall be construed in accordance with, the laws of The Commonwealth
of Massachusetts, without giving effect to conflict of laws principles thereof.
9.5 Section Headings and Gender. The descriptive headings in this
---------------------------
Agreement have been inserted for convenience only and shall not be deemed to
limit or otherwise affect the construction of any provision thereof or hereof.
The use in this Agreement of the masculine pronoun in reference to a party
hereto shall be deemed to include the feminine or neuter, and vice versa, as the
context may require.
9.6 Counterparts. This Agreement may be executed simultaneously in any
------------
number of counterparts, each of which when so executed and delivered shall be
taken to be an original; but such counterparts shall together constitute but one
and the same document.
9.7 Notices and Demands. Any notice or demand which is required or
-------------------
provided to be given under this Agreement shall be deemed to have been
sufficiently given and received for all purposes when delivered by hand,
telecopy, telex or other method of facsimile, or five days after being sent by
certified or registered mail, postage and charges prepaid, return receipt
requested, or two days after being sent by overnight delivery providing receipt
of delivery, to the following addresses:
(i) If to the Company, to:
Freedom of Information, Inc.
000 Xx. Xxxxxx Xxxxxx
Xxxxx 000X
Xxxxxxxxx, XX 00000
with a copy to:
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxx X. Xxxxxx, Esq.
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(ii) If to the Investor, to it at:
Comdisco, Inc.
0000 Xxxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: Venture Group
with a copy to:
Comdisco, Inc.
0000 Xxxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: General Counsel
or to such other address as may have been furnished in the same manner by any
party to the others.
9.8 Remedies; Severability. It is specifically understood and agreed that
----------------------
any breach of the provisions of this Agreement by any person subject hereto will
result in irreparable injury to the other parties hereto, that the remedy at law
alone will be an inadequate remedy for such breach, and that, in addition to any
other remedies which they may have, such other parties may enforce their
respective rights by actions for specific performance (to the extent permitted
by law). The Company may refuse to recognize any unauthorized transferee as one
of its shareholders for any purpose, including, without limitation, for purposes
of dividend and voting rights, until the relevant party or parties have complied
with all applicable provisions of this Agreement. Whenever possible, each
provision of this Agreement shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Agreement
shall be deemed prohibited or invalid under such applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity and such
prohibition or invalidity shall not invalidate the remainder of such provision
or the other provisions of this Agreement.
9.9 Integration. This Agreement, including the exhibits, documents and
-----------
instruments referred to herein or therein, constitutes the entire agreement, and
supersedes all other prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, including, without
limitation, the letter of intent between the parties hereto in respect of the
transactions contemplated herein.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
FREEDOM OF INFORMATION, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------
Name: Xxxxxxx X. Xxxxxx
Title: CFO
COMDISCO, INC
By: /s/ Xxxxx X. Xxxx
-----------------
Name: Xxxxx X. Xxxx
Title: President
September 28, 1998
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