1
EXHIBIT 2.3
COMMON STOCK
PURCHASE AGREEMENT
BY AND AMONG
CNNFN, A DIVISION OF CABLE NEWS NETWORK LP, LLLP, AND
NEWSREAL, INC.
April 21, 1999
2
TABLE OF CONTENTS
1. Purchase, Sale and Terms of Purchased Shares...................................................................... 1
1.1 The Purchased Shares................................................................................... 1
1.2 Purchase and Sale of Purchased Shares; Consideration; Closing.......................................... 1
2. Representations and Warranties of the Company..................................................................... 1
2.1 Business, Organization, Corporate Power and Authority.................................................. 2
2.2 Validity............................................................................................... 2
2.3 Capitalization, Status of Capital Stock................................................................ 2
2.4 Taxes.................................................................................................. 3
2.5 Litigation............................................................................................. 4
2.6 No Violations.......................................................................................... 4
2.7 Consents and Approvals................................................................................. 4
2.8 Transactions With Affiliates........................................................................... 5
2.9 Intellectual Property.................................................................................. 5
2.10 Title to Properties.................................................................................... 5
2.11 Compliance With Law.................................................................................... 6
2.12 Financial Statements................................................................................... 6
2.13 Material Contracts..................................................................................... 6
2.14 Disclosure............................................................................................. 7
2.15 Compliance With Securities Laws........................................................................ 7
2.16 Brokers' and Finders' Fees............................................................................. 8
2.17 Insurance.............................................................................................. 8
2.18 Benefit Plans.......................................................................................... 8
2.19 Undisclosed Liabilities................................................................................ 8
3. Representations and Warranties of the Investor.................................................................... 8
4. Conditions of Purchase............................................................................................ 10
5. Covenants of the Company.......................................................................................... 12
5.1 Financial Statements and Reports....................................................................... 12
5.2 Requested Information.................................................................................. 12
5.3 Conduct of Business.................................................................................... 12
5.4 Inspection............................................................................................. 12
5.5 Insurance.............................................................................................. 12
5.6 Issuance of Stock in Connection with Vesting of Performance Options.................................... 13
5.7 Issuance of Stock in Connection with Conversion
of Certain Indebtedness................................................................................ 13
6. Additional Covenants of the Parties............................................................................... 13
6.1 Resale of Securities................................................................................... 13
6.2 Covenants Pending Closing.............................................................................. 14
6.3 Further Assurance...................................................................................... 14
6.4 Confidentiality........................................................................................ 14
7. Miscellaneous..................................................................................................... 14
7.1 Brokers' Fees.......................................................................................... 14
7.2 Remedies............................................................................................... 15
7.3 Specific Performance................................................................................... 16
-ii-
3
7.4 Amendments and Waivers................................ 16
7.5 Survival of Covenants, Assignability of Rights........ 16
7.6 Governing Law......................................... 16
7.7 Section Headings...................................... 16
7.8 Counterparts.......................................... 17
7.9 Notices............................................... 17
7.10 Severability.......................................... 18
7.11 Definitions of Terms.................................. 18
7.12 Expenses.............................................. 20
7.13 Entire Agreement...................................... 20
7.14 Enforcement........................................... 20
7.15 No Third-Party Beneficiaries.......................... 22
EXHIBITS
EXHIBIT A Certificate of Incorporation and all Amendments thereto
EXHIBIT B Promissory Note
EXHIBIT C Bylaws and all amendments thereto
EXHIBIT D Rights Agreement between the Company, the QIP Investors
and Investor
EXHIBIT E Amendment to Distribution Agreement between Investor and
Company
EXHIBIT F Opinion of Fulbright & Xxxxxxxx L.L.P. on behalf of
Company (to be provided)
SCHEDULES
Schedule 1.2 Stock Certificates and Shares Delivered at Closing
Schedule 2.1 Good Standing Exceptions
Schedule 2.3(b) List of Stockholders, Option Holders, Warrant Holders
and Other Rights Held With Respect To Capital Stock of
Company
Schedule 2.4 Tax Exceptions
Schedule 2.5 Litigation and Actions
Schedule 2.7 Consents and Approvals Required
Schedule 2.8 Transactions with Affiliates
Schedule 2.9(a) Patents, Copyrights and Trademarks Issued to the Company
Schedule 2.9(b) Infringements or Violations of Other Intellectual
Property Rights
Schedule 2.9(c) Exceptions to Required Patents, Copyrights and
Trademarks
Schedule 2.10 Exceptions to Title to Properties
Schedule 2.12 Exceptions to GAAP in Financial Statements and Changes
in Assets, Liabilities and Financial Condition
-iii-
4
Schedule 2.13(a) Contracts and Agreements With Consideration in Excess of
$50,000
Schedule 2.13(b) Material Agreements Not in the Ordinary Course
of Business, Employment Agreements, Employee Benefits,
Covenants Not to Compete, etc.
Schedule 2.14 List of Documents Executed in Connection with Issuance
of Purchased Shares
-iv-
5
COMMON STOCK
PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 21st day of April, 1999 by and among
NewsReal, Inc., a Delaware corporation (the "Company"), and CNNfn, a division of
Cable News Network LP, LLLP, a limited liability limited partnership (the
"Investor").
1. PURCHASE, SALE AND TERMS OF PURCHASED SHARES
1.1. THE PURCHASED SHARES. The Company has authorized the issuance and
sale to the Investor of Four hundred seventy thousand six hundred thirty-eight
(470,638) shares (the "Purchased Shares") of its authorized but unissued shares
of common stock, $.001 par value (the "Common Stock"), for a total purchase
price of Three Million Five Hundred Thousand and 00/100 Dollars
($3,500,000.00)(the "Purchase Price"). The designations, rights and preferences
and other terms and conditions relating to the Common Stock shall be as set
forth in the Company's Certificate of Incorporation, as amended from time to
time (the "Certificate"), which is attached hereto as Exhibit A, The Purchased
Shares shall be subject to the terms and conditions of the Shareholders
Agreement (as defined below).
1.2. PURCHASE AND SALE OF PURCHASED SHARES; CONSIDERATION; CLOSING. The
Company agrees to issue and sell to the Investor and, subject to and in reliance
upon the representations, warranties, terms and conditions of this Agreement,
the Investor agrees to purchase the Purchased Shares for the Purchase Price. In
consideration for the Purchase Price, the Investor agrees to deliver at a
closing (the "Closing") for cancellation a promissory note of NewsReal having an
aggregate principal amount of Three Million Five Hundred Thousand and 00/100
Dollars ($3,500,000.00)(the "Promissory Note"), together with a mutually
acceptable instrument of transfer, in the forms attached hereto as Exhibit B.
The purchase and sale of the Purchased Shares shall take place at the Closing to
be held at the offices of the Investor, at 2:00 P.M. (E.D.T.) on April 21, 1999
or on such other date and at such other time as may be mutually agreed to by the
parties hereto (the "Closing Date"). At the Closing, the Company will deliver to
the Investor a certificate or certificates for the number of the Purchased
Shares in the amounts shown on Schedule 1.2 against delivery to the Company of
the Promissory Note in the total amount of the Purchase Price.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to the Investor the following and that as of the Closing, after giving
effect to the transactions contemplated by the Transaction Documents (as defined
below), the following will be true and correct, except as set forth on the
attached schedules of exceptions:
-1-
6
2.1. BUSINESS, ORGANIZATION, CORPORATE POWER AND AUTHORITY. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has full corporate power and authority to own
and hold its properties and to carry on its business as presently conducted.
Except as set forth in Schedule 2.1, the Company is duly licensed or qualified
and in good standing as a foreign corporation authorized to do business in all
jurisdictions in which the character of property owned or leased, or the nature
of the activities conducted by it, makes such licensing or qualification
necessary, except where the lack of such qualification would not have a Material
Adverse Effect (as defined below) on the Company. The Company has no
Subsidiaries (as defined below) and does not own of record or beneficially any
shares of capital stock or securities convertible into capital stock of, or any
other proprietary interest in, any Person (as defined below).
2.2. VALIDITY. The Company has all necessary power and authority to
enter into, and has taken all action required to execute, deliver and perform,
this Agreement, the Amendment to the Distribution Agreement, and the Rights
Agreement attached hereto as Exhibits E and D, respectively, and to issue, sell
and deliver the Purchased Shares. This Agreement, the Amendment to the
Distribution Agreement, the Rights Agreement, and all other documents and
instruments executed by the Company pursuant hereto (collectively, the
"Transaction Documents") when delivered are and will be duly authorized, legal,
valid and binding obligations of the Company and enforceable against the
Company, in accordance with their respective terms, subject to: (a) laws of
general application relating to bankruptcy, insolvency, moratorium, fraudulent
conveyance and the relief of debtors; (b) equitable principles limiting rights
to specific performance or other equitable remedies; and (c) with respect to the
enforceability of the provisions set forth in the registration rights provisions
of the Rights Agreement, applicable Federal and state securities laws. Upon the
issuance, sale and delivery of the Purchased Shares in accordance with the terms
hereof, the Purchased Shares will be duly authorized, validly issued, fully paid
and nonassessable, and will be free and clear of all liens, charges,
restrictions, claims and encumbrances of any kind, subject to restrictions on
transfer under Federal and state securities laws and the Rights Agreement.
2.3. CAPITALIZATION, STATUS OF CAPITAL STOCK. (a) Immediately prior to
the Closing, the authorized capital stock of the Company consists of (i) Five
Million (5,000,000) shares of preferred stock, $.001 par value (the "Preferred
Stock"), and (ii) Fifty Million (50,000,000) shares of Common Stock. Immediately
prior to the Closing, (i) Five Million (5,000,000) shares of the Company's
Common Stock will be issued and outstanding, (ii) warrants to purchase One
Million Seventy-seven Thousand Five Hundred (1,077,500) shares of Common Stock
and options to purchase One Million One Hundred Forty Thousand (1,140,000)
shares of Common Stock, excluding the Performance Options (defined below)
granted to the Managing Founders and employees of the Company and other options
granted to employees under the Stock Option Plan (defined below), will be
outstanding, (iii) options to purchase One Million Five Hundred Thousand
(1,500,000) shares of Common Stock are available for issuance under the Stock
Option Plan (defined below), of which time-based options to purchase Five
Hundred Eighty-three Thousand Four Hundred (583,400) shares and Performance
Options to purchase Four Hundred Twenty-seven Thousand Five Hundred Seventy
(427,570) shares of Common Stock will be outstanding under the Stock Option
Plan, (iv) Six Million Eight Hundred Nine Thousand Seven Hundred Seventeen
(6,809,717) shares of Common Stock will be issuable
-2-
7
upon the payment and conversion of the Guaranteed Indebtedness and the
conversion of the QIP Loans, subject to adjustment for any accrued but unpaid
interest on such loans or indebtedness at the time of conversion, (v)
Performance Options to purchase Seven Million Seven Hundred Eighteen Thousand
Nine Hundred Ten (7,718,910) shares of Common Stock will be available for
issuance to the Managing Founders in the aggregate and to the employees
following conversion of the Guaranteed Indebtedness and the QIP Loans (excluding
Performance Options that have been granted pursuant to the Stock Option Plan),
and (vi) no shares of the Company's Preferred Stock will have been issued. All
issued and outstanding shares of the Company's Common Stock have been duly
authorized and validly issued, are fully paid and nonassessable, and were issued
in compliance with all applicable state and Federal securities laws. The Company
has heretofore delivered to the Investor true and correct copies of its
Certificate and by-laws (the "By-laws"), each as amended and in effect on the
date hereof and certified by the Company's Secretary.
(b) Attached as Schedule 2.3(b) is a true and complete
list of the record holders of all voting securities of the Company. To the
Knowledge of the Company, each such holder owns all the securities shown to be
owned by such holder on Schedule 2.3(b) beneficially, free and clear of all
Liens, subject to the provisions of the Shareholders Agreement and the
subscription agreements between the Company and the Managing Founders. Except as
set forth on Schedule 2.3(b), there are no outstanding warrants, options,
rights, securities, agreements, subscriptions, anti-dilution rights, exchange
rights, first refusal rights or other commitments pursuant to which the Company
is or may become obligated to issue, deliver or sell any additional shares of
capital stock of the Company or to issue, grant, extend or enter into any such
warrant, option, right, security, agreement, subscription or other commitment.
Other than as set forth on Schedule 2.3(b), there are no outstanding options,
rights, securities, agreements or other commitments pursuant to which the
Company is or may become obligated to redeem, repurchase, exchange or otherwise
acquire or retire any shares of capital stock of the Company which are presently
outstanding or may be issued in the future.
(c) Other than the rights granted to Investor and
certain of the Company's other stockholders pursuant to the Rights Agreement and
the Shareholders Agreement, respectively, there are no outstanding rights which
permit the holder thereof to cause the Company to file a registration statement
under the Securities Act or which permit the holder thereof to include
securities of the Company in a registration statement filed by the Company under
the Securities Act, and there are no outstanding agreements or other commitments
which otherwise relate to the registration of any securities of the Company
under the Securities Act.
(d) All securities of the Company heretofore issued and
sold by the Company were issued and sold in compliance with all applicable
Federal and state securities laws. There are no agreements, options, rights or
subscriptions of any kind which governed the prior issuance of voting securities
of the Company that are still in effect.
2.4. TAXES. Except as set forth on Schedule 2.4, the Company has
accurately prepared and timely filed all Federal, state and other tax returns,
reports and forms that are required to be filed by it and has paid or made
provision for the payment of all taxes that have become due pursuant to such
returns and all other taxes, assessments and governmental charges
-3-
8
which have become due and payable, including, without limitation, all taxes
which the Company is obligated to withhold from amounts owing to employees,
creditors and third parties, except where the failure to file such tax returns
or pay such taxes would not have a Material Adverse Effect on the Company.
Except as set forth on Schedule 2.4, to the Company's Knowledge, no deficiency
assessment with respect to, or proposed adjustment of, the Company's Federal,
state, or other taxes is pending or threatened. Except as set forth on Schedule
2.4, to the Company's Knowledge, there is no tax lien, whether imposed by any
Federal, state, or other taxing authority, outstanding against the assets,
properties or business of the Company. Except as set forth on Schedule 2.4, no
returns, reports or forms filed by or on behalf of the Company with respect to
taxes are currently being audited or examined, nor has notice been received by
the Company of any audit or examination.
2.5. LITIGATION. Except as set forth on Schedule 2.5 attached hereto,
there is no action, suit, arbitration, proceeding or, to the Knowledge of the
Company, investigation (a) pending or threatened against or affecting the
Company involving an amount in controversy in excess of One Hundred Thousand
Dollars ($100,000) which might result, either in any individual case or all such
cases in the aggregate, in a Material Adverse Effect on the Company or (b)
pending or threatened by or against any of the officers or employees of the
Company which relate to or involve the termination of such person's employment
with any of such person's former employers. To the Knowledge of the Company,
there is no basis for any such lawsuit, claim, arbitration or other proceeding
or investigation. There is no outstanding judgment, order or decree of any
governmental authority or arbitrator applicable to the Company or, to the
Knowledge of the Company, any of their respective properties, assets or
businesses having, or which, insofar as can be reasonably foreseen, in the
future may have, a Material Adverse Effect on the Company or its respective
businesses as presently conducted or as presently proposed to be conducted.
2.6. NO VIOLATIONS. The execution, delivery and performance of the
Transaction Documents, the consummation of the transactions contemplated hereby
and thereby (including the issuance, sale and delivery of the Purchased Shares),
and compliance with the provisions hereof and thereof, will not violate any
provision of law, the Certificate, or By-laws, as amended, of the Company, any
order of any court or other agency of government or indenture, any agreement or
other instrument to which the Company is bound, or conflict with, result in the
breach of or constitute (with due notice or lapse of time or both) a default
under any such indenture, agreement or other instrument or result in the
creation or imposition of any lien, charge, restriction, claim or encumbrance of
any nature whatsoever upon any of the properties or assets of the Company.
2.7. CONSENTS AND APPROVALS. Except as set forth on Schedule 2.7
attached hereto, the execution and delivery by the Company of the Transaction
Documents, the performance by the Company of its obligations hereunder and
thereunder and the consummation by the Company of the transactions contemplated
hereby and thereby do not require the Company to obtain any consent, approval or
action of, or make any filing with or give any notice to, any corporation,
person or firm or any public, governmental or judicial authority.
-4-
9
2.8. TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule 2.8
attached hereto, there are no loans, leases or other continuing transactions
between, on the one hand, the Company or any of the Company's customers or
suppliers, and, on the other hand, any stockholder, director or officer of the
Company, or any member of such officer's, director's or stockholder's immediate
family, or any Person "controlled" by such officers, directors or stockholders
or their immediate families as such term is defined in the Investment Company
Act of 1940, as amended (the "Investment Company Act").
2.9. INTELLECTUAL PROPERTY. (a) Schedule 2.9(a) identifies each patent
or registration which has been issued to the Company with respect to any of its
intellectual property, identifies each pending patent application or application
for registration which the Company has made with respect to any of its
intellectual property, and identifies each license, agreement, or other
permission which the Company has granted to any third party with respect to any
of its intellectual property. All patents, copyrights and trademarks of the
Company indicated on Schedule 2.9(a) have been duly registered and filed in or
issued by each appropriate governmental authority in the jurisdictions
indicated, all necessary affidavits of continuing use have been filed, and all
necessary maintenance fees have been paid to continue all such rights in effect.
(b) Except as disclosed in Schedule 2.9(b), the conduct of the
Company's business as presently conducted and as presently proposed to be
conducted, including, without limitation, the use of the Company's name and any
trade names, does not and will not infringe, violate or conflict with any U.S.
or foreign patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information or other proprietary rights or processes of any
other Person. The Company has not received any communications alleging that the
Company has violated, or that by conducting its business as proposed would
violate, any of the patents, trademarks, service marks, trade names, copyrights,
trade secrets or other proprietary rights or processes of any other Person.
(c) Except as disclosed in Schedule 2.9(c), the Company has all
patents, patent applications, patent rights, trademarks, trademark
registrations, trademark applications, licenses, brand names, trade names,
service marks, all other names or slogans embodying business or product
goodwill, copyrights, copyright registrations, computer programs, software
(including all source code and object code, development documentation,
programming tools, specifications, data, designs, trade secrets, technology,
inventions, discoveries and improvements), know-how, proprietary rights,
processes, confidential and proprietary information, and other intellectual
property rights, whether or not subject to statutory registration or protection,
required for use in its business as presently conducted.
2.10. TITLE TO PROPERTIES. Except as disclosed on Schedule 2.10, the
Company has good, clear and marketable title to its properties and assets,
tangible and intangibles, reflected on the Interim Balance Sheet (as defined
below) or acquired by it since the date of the Interim Balance Sheet (other than
properties and assets disposed of in the ordinary course of business since the
date of the Interim Balance Sheet), and all such properties and assets are free
and clear of mortgages, pledges, security interests, liens, charges, claims,
restrictions and other encumbrances (including without limitation, easements and
licenses), except for liens for or
-5-
10
current taxes not yet due and payable. Except as set forth on Schedule 2.10
attached hereto, the Company is not in default or in breach of any provision of
its leases or licenses where such default or breach would have a Material
Adverse Effect on the Company, and the Company holds valid leasehold or licensed
interests in the property which it leases or is licensed to it. All the tangible
personal property owned by the Company is in all material respects in good
operating condition and repair, ordinary wear and tear excepted, and all
personal property leased by the Company is in all material respects in the
condition required of such property by the terms of the lease applicable thereto
during the term of such lease and upon the expiration thereof.
2.11. COMPLIANCE WITH LAW. The Company is currently in compliance in all
material respects with all Federal and state laws, rules, regulations and orders
applicable to its business, operations, properties, assets, products, and
services.
2.12. FINANCIAL STATEMENTS. The Company has furnished to the Investor
the balance sheet of the Company as of December 31, 1998 (the "Balance Sheet")
and the related statements of income, stockholders' equity and cash flows of the
Company for the year ended December 31, 1998. All such financial statements are
in accordance with the books and records of the Company and have been prepared
in accordance with generally accepted accounting principles ("GAAP")
consistently applied and fairly present the financial position of the Company as
of December 31, 1998, and the results of its operations and cash flows for the
year ended December 31, 1998, and have been certified by the President and Chief
Financial Officer of the Company pursuant to Section 4.1.8. The Company also has
furnished to the Investor the balance sheet of the Company as of February 28,
1999 (the "Interim Balance Sheet") and the related statements of income,
stockholders' equity and cash flows of the Company for the two months ended
February 28, 1999. Except as provided on Schedule 2.12 attached hereto, all such
financial statements are in accordance with the books and records of the Company
and have been prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied and fairly present the financial
position of the Company as of February 28, 1999, and the results of its
operations and cash flows for the two months ended February 28, 1999. Since the
date of the Interim Balance Sheet and except as provided on Schedule 2.12
attached hereto, (i) there has been no change in the assets, liabilities or
financial condition of the Company from that reflected in the Interim Balance
Sheet except for changes in the ordinary course of business which in the
aggregate have not been materially adverse, (ii) except as set forth in the
Schedules to this Agreement, none of the business, prospects, financial
condition, operations, property or affairs of the Company has been materially
adversely affected by any occurrence or development, individually or in the
aggregate, whether or not insured against, (iii) the business of the Company has
been conducted in the ordinary course consistent with past practice and there
has not been any material adverse change with respect to the Company, and (iv)
the Company has not declared or paid or made, or agreed to declare or pay or
make, any dividends or other distributions in cash or property to the
stockholders of the Company.
2.13. MATERIAL CONTRACTS. (a) Schedule 2.13(a) attached hereto lists all
contracts and other agreements to which the Company is a party the performance
of which will involve consideration in excess of $50,000. Each contract or other
agreement of the Company set forth on Schedule 2.13(a) (collectively, the
"Contracts") is in full force and effect and is a legal, valid and binding
agreement of the Company and, to the Knowledge of the Company, of each
-6-
11
other party thereto, enforceable in accordance with its terms, except as
enforceability may be limited by general equitable principles and by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally. Except as disclosed on Schedule 2.13(a), the
Company has performed or is performing in all material respects all material
obligations required to be performed by it under each Contract and, except as
disclosed on Schedule 2.13(a), is not (with or without notice or lapse of time
or both) in breach or default in any material respect thereunder and, to the
Knowledge of the Company and except as disclosed on Schedule 2.13(a), no other
party to any Contract is (with or without notice or lapse of time or both) in
breach or default in any material respect thereunder.
(b) Except as disclosed in Schedule 2.13(b), the Company
is not a party to or bound by, nor are any of its respective properties or
assets or business bound by or subject to, any written or oral: (a) material
agreement or contract not made in the ordinary course of business; (b)
employment agreement or employment contract that by its terms is not terminable
at will by the Company; (c)(i) employee collective bargaining agreement or other
contract with any labor union, (ii) plan, program, arrangement or agreement that
provides for the payment of severance, termination or similar type of
compensation or benefits upon the termination or resignation of any employee of
the Company or (iii) plan, program, arrangement or agreement that provides for
medical or life insurance benefits for former employees of the Company or for
current employees of the Company upon their retirement from, or termination of
employment with, the Company; (d) covenant not to compete; (e) agreement,
contract or other arrangement (other than the Shareholders Agreement and the
Transaction Documents) with (i) any stockholder of the Company, (ii) any
Affiliate of the Company or any Affiliate of any stockholder of the Company or
(iii) any officer, director or employee of the Company, or any any affiliate of
any officer, director or employee of the Company (other than employment
agreements covered by clause (b) above); (f) license or other agreement relating
in whole or in part to proprietary rights (including, but not limited to, any
license or other agreement under which the Company has the right to use any
proprietary rights owned or held by any other Person) other than those entered
into in the ordinary course of business or as listed on Schedule 2.13(b); or (g)
agreement or contract under which the Company has (i) incurred any Indebtedness
or (ii) given any guarantee other than as listed in Schedule 2.13(b).
2.14. DISCLOSURE. This Agreement, the schedules of exceptions furnished
contemporaneously herewith and the other agreements, documents or certificates
furnished to the Investor on the Closing Date by or on behalf of the Company in
connection with the transactions contemplated hereby do not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements contained therein or herein, in light of the circumstances in
which they were made, not misleading. There is no fact which is known to the
Company and which has not been disclosed herein or otherwise by the Company to
the Investor which may result in a Material Adverse Effect on or to the Company.
2.15. COMPLIANCE WITH SECURITIES LAWS. Based in part on the
representations of the Investor set forth in Section 3 hereof, the Company has
complied with and will comply with all applicable U.S. Federal and state
securities laws in connection with the offer, issuance and sale of the
Securities. The Company has not, either directly or through any agent, offered
any securities to, or otherwise approached, negotiated or communicated in
respect of any
-7-
12
securities with, any Person so as thereby to require that the offer or sale of
such securities (including but not limited to the Securities) be registered
pursuant to the provisions of Section 5 of the Securities Act of 1933, as
amended (the "1933 Act"). Based in part on the representations of the Investor
set forth in Section 3 hereof, the offer, sale and issuance of the Purchased
Shares and the Common Shares in conformity with the terms of this Agreement are
exempt from the registration requirements of Section 5 of the 1933 Act and all
applicable state securities laws.
2.16. BROKERS' AND FINDERS' FEES. The Company has retained no broker or
finder in connection with the transactions contemplated by this Agreement and
has no liability for any commission or compensation in the nature of an agent's
fee to any broker or finder or any other Person in connection with the issuance
of the Purchased Shares.
2.17 INSURANCE. The Company maintains valid policies of fire,
liability, product liability, workmen's compensation, health and other forms of
insurance with respect to the Company's business. All such policies are valid,
outstanding and enforceable policies and provide insurance coverage for the
properties, assets and operations of the Company, of the kinds, in the amounts
and against the risks required to comply with all applicable laws and as are
reasonable for the business and assets of the Company. The Company has not been
refused any insurance with respect to any aspect of the operations of its
business nor has its coverage been limited by any insurance carrier to which it
has applied for insurance or with which it has carried insurance. No notice of
cancellation or termination has been received with respect to any such policy.
The activities and operations of the Company have been conducted in a manner so
as to conform in all material respects to all applicable provisions of such
insurance policies.
2.18 BENEFIT PLANS. The Company is in compliance in all material
respects with the provisions of Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and the regulations and published interpretations
thereunder. Neither the Company nor any of its Affiliates maintains any benefit
plan which is subject to the provisions of Title IV of ERISA. No "reportable
event" (as defined in Section 4043 of ERISA and the regulations thereunder) has
occurred with respect to any benefit plan which is subject to the provisions of
Title IV of ERISA and which is maintained for employees of the Company or any of
its Affiliates. There are no unfunded vested liabilities under any such benefit
plan.
2.19 UNDISCLOSED LIABILITIES. The Company has no material liabilities
or obligations of any nature (whether accrued, absolute, contingent, unasserted
or otherwise) except (i) as set forth or reflected on the Balance Sheet (or
described in the notes thereto) and (ii) for liabilities and obligations
incurred in the ordinary course of business consistent with past practice since
the date of the Balance Sheet and not in violation of this Agreement.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF INVESTOR. The Investor
represents and warrants to the Company as to itself the following as of the
Closing:
3.1. The Transaction Documents (defined in Section 2.2 above) and other
instruments executed by the Investor pursuant hereto have each been duly
executed and delivered by the Investor, and each is a legal, valid and binding
obligation of the Investor enforceable
-8-
13
against the Investor in accordance with its terms, subject to: (a) laws of
general application relating to bankruptcy, insolvency, moratorium, fraudulent
conveyance and the relief of debtors; (b) equitable principles limiting rights
to specific performance or other equitable remedies; and (c) with respect to the
enforceability of the provisions set forth in the registration rights provisions
of the Rights Agreement, applicable Federal and state securities laws.. All
consents, approvals or authorizations of any Person on the part of the Investor
required as a condition precedent to the valid execution, delivery and
performance of this Agreement and the Rights Agreement shall have been obtained
or completed prior to, and be effective as of, the Closing.
3.2. The Investor is acquiring its Purchased Shares for its own
account, for investment, and not with a view to any "distribution" thereof
within the meaning of the 1933 Act.
3.3. The Investor understands that because the Purchased Shares have
not been registered under the 1933 Act, it cannot dispose of any or all of the
Purchased Shares unless such Shares are subsequently registered under the 1933
Act or exemptions from such registration are available. The Investor
acknowledges and understands that, except as provided in the registration rights
provisions of the Rights Agreement, it has no independent right to require the
Company to register the Purchased Shares under the 1933 Act or any state
securities law. The Investor is aware that the Company may not undertake a
public offering of its stock. The Investor further understands that the Company,
as a condition to the transfer of any of the Purchased Shares other than
pursuant to an effective registration statement duly filed under the 1933 Act,
will require that the request for transfer be accompanied by an opinion of
counsel, in form and substance reasonably satisfactory to the Company, to the
effect that the proposed transfer does not result in violation of the 1933 Act,
unless such transfer is covered by an effective registration statement under the
Securities Act. The Investor understands that each certificate representing the
Purchased Shares will bear the following legends or ones substantially similar
thereto:
"These shares have not been registered under the Securities Act of
1933, as amended. These shares have been acquired for investment and
not with a view to distribution or resale and may not be sold,
mortgaged, pledged, hypothecated or otherwise transferred without an
effective registration statement for such shares under the Securities
Act of 1933 or an opinion of counsel for the corporation that
registration is not required under such act."
"These shares are subject to the terms and conditions of that certain
Rights Agreement, dated as of April 21, 1999, as amended, by and
among the Company, certain investors and certain other shareholders
of the Company identified therein, including certain restrictions on
transfer. A copy of this agreement has been filed with the Secretary
of the Company."
3.4. The Investor is knowledgeable and experienced in the making of
equity investments of the type contemplated under this Agreement, is able to
bear the economic risk of loss of its investment in the Company, has the
capacity to protect its own interests in connection with the transaction, has
been granted the opportunity to make an investigation of the affairs of
-9-
14
the Company, and has availed itself of such opportunity to the extent it has
deemed necessary, either directly or through its representative.
3.5. The Investor has been advised that the Purchased Shares delivered
hereunder have not been and are not being registered under the 1933 Act and that
the Company in issuing the Purchased Shares is relying upon, and will rely upon,
among other things, the representations and warranties of such Investor
contained in this Section 3.5 in concluding that each such issuance is a
"private offering" and does not require compliance with the registration
provisions of the Securities Act. The Investor has not responded to any
advertisement or publication concerning the availability of the Purchased
Shares.
3.6. The Investor is an "accredited investor" as that term is defined in
Rule 501 of Regulation D under the Securities Act.
4. CONDITIONS OF PURCHASE.
4.1. The Investor's obligation to purchase and pay for the Purchased
Shares in the manner described in Section 1.2 hereunder shall be subject to
compliance by the Company in all respects with their agreements herein contained
and to the fulfillment on or before the Closing of the following conditions:
4.1.1. CERTIFICATE OF COMPANY. The representations and
warranties of the Company contained in Section 2 of this Agreement shall be true
and correct in all respects with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date; the
Company's business, assets or condition, financial or otherwise, or operations
shall not have suffered a Material Adverse Effect between the date of the
Interim Balance Sheet and the Closing; the conditions hereafter specified in
this Section 4.1 shall have been satisfied, and on the Closing Date a
certificate to such effect executed by the President and Chief Financial Officer
of the Company shall be delivered to the Investor.
4.1.2. OPINION OF COUNSEL. The Investor shall have received from
counsel for the Company, Fulbright & Xxxxxxxx, their opinion, dated the Closing
Date, substantially in the form of Exhibit F attached hereto.
4.1.3. AUTHORIZATION, CONSENTS. The Board of Directors of the
Company shall have duly adopted resolutions in form satisfactory to the Investor
authorizing the Company to consummate the transactions contemplated hereby to
which it is a party in accordance with the terms hereof, and the Investor shall
have received a duly executed certificate of the Secretary of the Company dated
the Closing Date setting forth a copy of such resolutions and such other matters
as may be requested by the Investor. The Company shall have obtained any and all
other consents, permits and waivers, and made all filings necessary or
appropriate for consummation of the transactions contemplated by this Agreement,
except for any such post-Closing filings as may be required under applicable
securities laws.
-10-
15
4.1.4. CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate
and bylaws, as amended, shall be in the form set forth in Exhibit A and Exhibit
C, respectively, attached hereto.
4.1.5. COMPLIANCE WITH AGREEMENT. The Company shall have performed
and complied with all agreements, covenants and conditions contained in this
Agreement that are required to be performed or complied with prior to or on the
Closing Date.
4.1.6. RIGHTS AGREEMENT. The Company, the QIP Investors, the
Managing Founders and the Investor shall have executed and delivered the Rights
Agreement, in the form of Exhibit D attached hereto.
4.1.7. AMENDMENT TO DISTRIBUTION AGREEMENT. The Company and the
Investor shall have executed and delivered the Amendment to the Distribution
Agreement, in the form of Exhibit E attached hereto.
4.1.8. FINANCIAL STATEMENTS AND OTHER CERTIFICATIONS. The
President and the Chief Financial Officer of the Company shall have delivered
certificates guaranteeing the accuracy and completeness of the financial
statements described in Section 2.12 as of the Closing Date and, except as
provided in Schedule 2.12 with respect to the Interim Balance Sheet and any
other financial statements dated as of the date of the Interim Balance Sheet,
certifying that such financial statements have been prepared in accordance with
GAAP consistently applied and fairly present the financial position and results
of operations of the Company.
4.1.9. INJUNCTIONS, ETC. No injunction or order of any
governmental authority shall be in effect as of the Closing, and no lawsuit,
claim, proceeding or investigation shall be pending or threatened by or before
any governmental authority as of the Closing, which would restrain or prohibit
the issuance and sale of the Purchased Shares or the consummation of any of the
other transactions contemplated by the Transaction Documents or invalidate or
suspend any provision of the Transaction Documents or the Certificate of
Incorporation, as amended, of the Company.
4.2 The Company's obligation to issue and deliver the Purchased Shares
hereunder shall be subject to compliance by the Investor in all respects with
its agreements herein contained and to the fulfillment on or before the Closing
of the following conditions:
4.2.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investor contained in Section 3 hereof, shall be true and
correct in all respects with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date.
4.2.2. COMPLIANCE WITH AGREEMENT. The Investor shall have
performed and complied with all agreements, covenants and conditions contained
in this Agreement which are required to be performed or complied with prior to
or on the Closing Date.
-11-
16
4.2.3 RIGHTS AGREEMENT. The Company and the Investor shall have
executed and delivered the Rights Agreement, in the form of Exhibit D attached
hereto.
4.2.4. AMENDMENT TO DISTRIBUTION AGREEMENT. The Company and the
Investor shall have executed and delivered the Amendment to the Distribution
Agreement, in the form of Exhibit E attached hereto.
4.2.5. CERTIFICATE OF INVESTOR. The Company shall have received a
certificate from the Investor, dated the Closing Date, signed by a duly
authorized representative of the Investor, certifying that the conditions in
Sections 4.2.1, 4.2.2. 4.2.3 and 4.2.4 (as that condition related to the
Investor only) of this Agreement have been fulfilled.
5. COVENANTS OF THE COMPANY. Until such time as the Company completes a
Qualified Public Offering (as defined below), or unless otherwise agreed by the
Investor so long as the Investor owns at least 25% of the Purchased Shares
issued hereunder, the Company shall comply, and shall cause all of its
subsidiaries to comply with the following covenants:
5.1. FINANCIAL STATEMENTS AND REPORTS. The Company shall furnish to the
Investor the financial statements and reports described in the Rights Agreement
in the manner provided therein.
5.2. REQUESTED INFORMATION. The Company shall furnish the Investor with
such other data and information as from time to time may be reasonably
requested.
5.3. CONDUCT OF BUSINESS. The Company will keep in full force and
effect its corporate existence and will comply in all material respects with all
applicable laws and regulations in the conduct of its business. The Company
shall require all of its employees and consultants who render services for or on
behalf of the Company to enter into appropriate confidentiality agreements to
protect confidential information relating to the Company and its business,
including trade secrets, in a form satisfactory to the Investor.
5.4. INSPECTION. The Company shall permit authorized representatives of
the Investor to visit and inspect any of the properties of the Company,
including its books of account (and to make copies thereof and take extracts
therefrom), and to discuss its affairs, finances and accounts with its officers,
administrative employees and independent accountants, all at such reasonable
times and as often as may be reasonably requested.
5.5. INSURANCE. The Company shall keep its insurable properties insured
by financially sound and reputable insurers against the perils of liability,
casualty, fire and extended coverage in amounts of coverage at least equal to
those customarily maintained by companies in the same or a similar business of
similar size. The Company shall also maintain with such insurers insurance
against other hazards and risks and liability to persons and property, to the
extent and in the manner customary for corporations engaged in the same or a
similar business of similar size.
-12-
17
5.6 ISSUANCE OF STOCK IN CONNECTION WITH VESTING OF PERFORMANCE
OPTIONS. The parties acknowledge that the Performance Options previously granted
and to be granted by the Company have not been taken into account in determining
the number of Purchased Shares deliverable to Investor hereunder, and that such
Performance Options, if and to the extent that they become exercisable, would
result in dilution to Investor. To that end, at any time a Performance Option
becomes exercisable to its holder (a "Vested Performance Option"), the Company
shall issue additional share's of Common Stock to Investor without the payment
of additional consideration beyond the Purchase Price (previously paid hereunder
which constituted consideration therefor), subject to the following:
5.6.1. The number of shares of Common Stock issuable to Investor
hereunder shall equal the number of shares of Common Stock necessary to maintain
the ownership percentage of Investor in the Company at the Applicable Percentage
(as defined below), after giving effect to the number of shares underlying the
Vested Performance Options, including the Vested Performance Option resulting in
the grant of such additional shares of Common Stock. Upon issuance, such
additional shares shall be duly authorized, validly issued, fully-paid and
non-assessable.
5.6.2. For purposes of this Agreement, the term "Applicable
Percentage" means 6.5421 percent.
5.7 ISSUANCE OF ADDITIONAL STOCK IN CONNECTION WITH CONVERSION OF
CERTAIN INDEBTEDNESS. The parties acknowledge that, to the extent the Guaranteed
Indebtedness (as defined in Section 7 below) is paid by QIP and the QIP
Investors elect to convert such Indebtedness and the QIP Loans into Common Stock
of the Company, up to 6,809,717 shares of Common Stock will be issued to the QIP
Investors, which shares have not been taken into account in determining the
number of Purchased Shares deliverable to Investor hereunder. Such additional
shares, if and to the extent that they are issued to the QIP Investors, would
result in additional dilution to Investor. To that end, at any time any
additional shares of Common Stock are issued to the QIP Investors in connection
with the exercise of conversion rights described in this Section 5.7, the
Company shall issue without payment of additional consideration beyond the
Purchase Price (previously paid hereunder which constituted consideration
therefor) that number of shares of Common Stock to Investor necessary to
maintain the ownership percentage of Investor in the Company at the Applicable
Percentage (as defined in Section 5.6 above), after giving effect to the number
of shares issued to the QIP Investors resulting in the issuance of such
additional shares to Investor. Upon issuance, such additional shares shall be
duly authorized, validly issued, fully-paid and non-assessable.
6. ADDITIONAL COVENANTS OF THE PARTIES.
6.1. RESALE OF SECURITIES.
6.1.1. The Investor covenants that it will not sell or otherwise
transfer the Purchased Shares except pursuant to an effective registration under
the Securities Act or in a transaction which, in the opinion of counsel
reasonably satisfactory to the Company and its counsel, qualifies as an exempt
transaction under the Securities Act and the rules and regulations promulgated
thereunder, and otherwise satisfies the requirements of the Rights Agreement.
-13-
18
6.1.2 The certificates evidencing the Purchased Shares will bear
the restrictive legends regarding the transfer of such securities as set forth
in Section 3.3 hereof.
6.2. COVENANTS PENDING CLOSING. Pending the Closing the Company will
not, without the Investor's prior written consent, take any action which would
result in any of the representations or warranties contained in this Agreement
not being true at and as of the time immediately after such action, or in any of
the covenants contained in this Agreement becoming incapable of performance. The
Company will promptly advise the Investor of any action or event of which it
becomes aware which has the effect of making incorrect any of such
representations or warranties or which has the effect of rendering any of such
covenants incapable of performance.
6.3. FURTHER ASSURANCE. Each of the parties shall execute such
documents and other papers and take such further actions as may be reasonably
required or desirable to carry out the provisions hereof and the transactions
contemplated hereby. Each such party shall use its reasonable efforts to fulfill
or obtain the fulfillment of the conditions to the Closing as promptly as
practicable.
6.4. CONFIDENTIALITY. As to so much of the information and other
material furnished under or in connection with this Agreement (whether furnished
before, on or after the date hereof, including, without limitation, information
furnished pursuant to Sections 5.1 and 5.2 hereof) as constitutes confidential
business, financial or other information of the Company, the Investor covenants
that it will use due care to prevent its officers, directors, employees,
counsel, accountants and other authorized representatives from disclosing such
information to Persons other than those Persons who have the authority to
possess such information or who have been granted written permission by the
Company to obtain such information; provided, however, that the Investor may
disclose or deliver any information or other material disclosed to or received
by it should the Investor be advised by its counsel that such disclosure or
delivery is required by law, regulation, or judicial or administrative order or
to the extent such information is made public without a breach hereof by
Investor. In the event of any termination of the this Agreement prior to the
Closing Date, the Investor shall return to the Company all confidential material
previously furnished to the Investor or its officers, directors, employees,
counsel, accountants and other representatives in connection with this
transaction. For purposes of this Section 6.4, "due care" means at least the
same level of care that the Investor would use to protect the confidentiality of
its own sensitive or proprietary information, and this obligation shall survive
the termination of this Agreement. Notwithstanding the foregoing restriction on
disclosure, the parties shall be authorized to disclose the transactions
contemplated under this Agreement to the extent provided in Section 2c of the
Amendment to the Distribution Agreement, attached hereto as Exhibit D.
7. MISCELLANEOUS.
7.1. BROKERS' FEES. Each party hereto will indemnify and hold harmless
the other party against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements,
-14-
19
arrangements or understandings made or claimed to have been made by such party
with any third party.
7.2. REMEDIES.
7.2.1. The Company agrees to indemnify the Investor against all
claims, losses, damages and liabilities, including legal and other expenses
reasonably incurred in investigating or defending against the same, arising out
of any breach of any representation or warranty made by the Company in Section 2
hereof; provided, however, that the amount of such indemnification in the
aggregate shall not exceed $1,000,000. In addition, the Company will indemnify
the Investor for breach of any covenants of the Company contained in Sections 5
and 6 hereof, provided, however, that the amount of such indemnification in the
aggregate shall not exceed $1,000,000.
7.2.2. The Investor agrees to indemnify the Company against all
claims, losses, damages and liabilities, including legal and other expenses
reasonably incurred in investigating or defending against the same, arising out
of any breach of any representation and warranty made by the Investor in Section
3 hereof; provided, however, that the amount of such indemnification in the
aggregate shall not exceed $1,000,000. In addition, the Investor will indemnify
the Company for breach of any covenants of the Investor contained in Section 6
hereof provided, however, that the amount of such indemnification in the
aggregate shall not exceed $1,000,000.
7.2.3. In case any proceeding (including any government
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 7.2, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 7.2(a) or (b) hereof shall be available
to any party who shall fail to give notice as provided in this Section 7.2.3,
but only to the extent that such failure to give such notice has a material
adverse effect on the indemnifying party, and the failure to give such notice
shall not relieve the indemnifying party or parties from any liability which it
or they may have to the indemnified party for contribution or otherwise than on
account of the provisions of Section 7.2.1 or 7.2.2 hereof. In case any such
proceeding shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate therein and, to the extent that it shall wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof to the extent of its obligation to indemnify, with counsel
reasonably satisfactory to such indemnified party and shall pay as incurred the
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own counsel
at its own expense. Notwithstanding the foregoing, the indemnifying party shall
pay as incurred the reasonable fees and expenses of the counsel retained by the
indemnified party in the event (i) the indemnifying party and the indemnified
party shall have' mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between
-15-
20
them. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but if settled with such consent
or if there be a final judgment for the plaintiff, the indemnifying party agrees
to indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment.
7.2.4. In the event indemnification arises hereunder as a result
of a third party claim against the indemnifying party, no indemnification shall
be made pursuant to Section 7.2 until such time as the indemnifying party shall
have been finally adjudicated or otherwise found to be liable hereunder to such
third party.
7.3. SPECIFIC PERFORMANCE. The rights of the parties under this
Agreement are unique and, accordingly, the parties shall have the right, in
addition to such other remedies as may be available to any of them at law or in
equity, to enforce their rights hereunder by actions for specific performance in
addition to any other legal or equitable remedies they might have to the extent
permitted by law.
7.4. AMENDMENTS AND WAIVERS. This Agreement may not be amended or
modified, and no provisions hereof may be waived, without the written consent of
the Company and the Investor, or any of Investor's successors in interest under
this Agreement to the Purchased Shares.
7.5. SURVIVAL OF COVENANTS, ASSIGNABILITY OF RIGHTS.
7.5.1. All covenants, agreements, representations and warranties
of the Company made herein and in the certificates, lists, exhibits, schedules
or other written information delivered or furnished in connection therewith and
herewith, except as provided otherwise in this Agreement, shall survive the
delivery of the Purchased Shares and shall bind the Company's successors and
assigns, whether so expressed or not, and, except as provided otherwise in this
Agreement, all such covenants, agreements, representations and warranties shall
inure to the benefit of the Investor's successors and assigns and to permitted
transferees of the Purchased Shares under the Shareholders Agreement, whether so
expressed or not.
7.5.2. All covenants, agreements, representations and warranties
of the Investor made herein, except as provided otherwise in this Agreement,
shall survive the delivery of the Purchased Shares and shall bind the Investor's
successors and assigns, whether so expressed or not and, except as provided
otherwise in this Agreement, all such covenants, agreements, representations and
warranties shall inure to the benefit of the Company's successors and assigns,
whether so expressed or not.
7.6. GOVERNING LAW. This Agreement shall be deemed to be a contract
made under, and shall be construed in accordance with, the laws of the State of
Delaware, without reference to its conflicts with laws provisions.
7.7. SECTION HEADINGS. 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 hereof.
-16-
21
7.8. 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.
7.9. NOTICES. As the terms "notice" or notices are used herein as
between the. parties, such term shall mean a written document, explaining in
reason for the notice, which shall become effective and shall be deemed
delivered (a) on the day of delivery in person; (b) three (3) days after deposit
in first-class registered mail; (c) one (1) day after deposit with a nationally
recognized overnight courier; or (d) on the date sent by facsimile, if receipt
is available for the transmittal and is confirmed by first-class, registered
mail; in each case properly posted and fully prepaid to the appropriate address
set forth below:
to the Company:
NewsReal, Inc.
00 Xxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Chief Financial Officer & General Counsel
Fax: (000) 000-0000
with a copy by mail and fax which shall not constitute notice, to:
Xxxxxxx Xxxxxxxx, Esq.
Fulbright & Xxxxxxxx L.L.P.
Market Square
000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Fax: (000) 000-0000
to the Investor at:
Xx. Xxxxx Xxxxxx
CNNfn, a division of Cable News Network LP, LLLP
0 Xxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
with a copy by mail and fax, which shall not constitute notice, to:
Cable News Network LP, LLLP
Xxx XXX Xxxxxx
X.X. Xxx 000000
Xxxxxxx, XX 00000
Attention: General Counsel
-17-
22
Fax: (000) 000-0000
The parties shall, as a matter of convenience and courtesy send each party
receiving notice a copy of said notice by facsimile or electronic means, or by
courier, Federal Express, or similar service, but such notifications shall not
be deemed lawful "notice" as required hereby. The parties may from time to time
amend the above addresses and names by written notice given the other party as
required herein.
7.10. SEVERABILITY. 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.
7.11. DEFINITIONS OF TERMS.
Affiliate. The term "affiliate" shall have the meaning set forth in Rule
12b-2 of the regulations promulgated under the Securities Exchange Act of 1934,
as amended.
Amendment. The term "Amendment" means the amendment to the Distribution
Agreement of even date herewith between the Investor and the Company, which
amendment modifies the rights and obligations of the parties arising under the
Distribution Agreement.
Certified. A financial statement shall be deemed to be "certified" only
if the person or firm certifying it shall express the opinion that it has been
prepared in accordance with GAAP consistently applied and that the balance sheet
included therein fairly presents the financial position of the Company as at the
date thereof and that the statements of income and of changes in financial
position included therein fairly present the results of operations of the
Company for the period indicated. If the person certifying is an officer of the
Company, the certificate shall also state that the financial statements are
true, correct and complete in all material respects. If the person certifying is
a member of an accounting firm, the certificate shall also state that the
examination included such tests of accounting records and such other auditing
procedures as the accountant considered necessary in the circumstances.
Common Stock. The term "Common Stock" shall mean (a) the Company's Common
Stock, $.001 par value, as authorized on the date of this Agreement, (b) any
other capital stock of any class or classes (however designated) of the Company,
authorized on or after the date hereof, the holders of which shall have the
right, without limitation as to amount, either to all or to a share of the
balance of current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference, and the
holders of which shall ordinarily, in the absence of contingencies or in the
absence of any provision to the contrary in the Company's Certificate, be
entitled to vote for the election of a majority of directors of the Company
(even though the right so to vote has been suspended by the happening of such a
contingency or provision), and (c) any other securities into which or for which
any of the
-18-
23
securities described in (a) or (b) may be converted or exchanged pursuant to a
plan of recapitalization, reorganization, merger, sale of assets or otherwise.
Distribution Agreement means the agreement dated as of January 1, 1998,
pursuant to which the Investor and the Company have created a co-branded
Internet product substantially based on NewsReal's "IndustryWatch" product that
is linked to a button on the home page of the Investor's World Wide Web site.
Guaranteed Indebtedness. The term "Guaranteed Indebtedness" means the
indebtedness in the principal amount of $4,000,000 (as of the date of the
Interim Balance Sheet) owed by the Company to Hypo und- Vereinsbank, A.G., which
indebtedness has been fully guaranteed by QIP.
Immediate Family. The term "immediate family" shall include spouse,
parents, mother-in-law and father-in-law, brother and sister, brother-in-law and
sister-in-law, son-in-law and daughter-in-law and children.
Indebtedness. The term "Indebtedness" shall mean with respect to any
Person (i) all indebtedness or other obligations of such Person for borrowed
money or for the deferred purchase price of property or services, other than for
trade accounts payable incurred in the ordinary course of the Company's
business, (ii) all indebtedness described in clause (i) of any other Person in
respect of which such Person is liable, contingently or otherwise, to pay or
advance money or property as guarantor, endorser or otherwise (except as
endorser for collection in the ordinary course of business), and (iii) all lease
obligations of such Person which are required, in accordance with GAAP, to be
capitalized on the books of the lessee.
Knowledge. The term "Knowledge," or similar terms when applied to the
Company means the knowledge, after due inquiry, of the Company or its respective
officers or directors.
Material Adverse Effect. The term "Material Adverse Effect" shall mean a
material adverse effect on the assets, business, operations, properties, profits
or condition (financial or otherwise) of the Company.
Performance Options. The term "Performance Options" refers to performance
options and warrants to purchase 3,974,570 shares of the Company's Common Stock
that have been granted to the Managing Founders, Infoseek and the Company's
employees, at exercise prices ranging from $.001 per share to $1.0023 per share,
which options become exercisable only if certain revenue and operating income
performance targets are achieved or if the QIP Investors earn a specified return
on their investment in the Company, and performance options to purchase
5,249,410 shares of the Company's Common Stock available for issuance to the
Managing Founders and the employees of the Company upon conversion of the
Guaranteed Indebtedness and the QIP Loans by the QIP Investors, which options
shall be subject to the same performance criteria.
-19-
24
Person. The term "Person" shall mean any corporation, association,
partnership, limited liability company, joint venture, organization, business or
individual, and shall include any successor (by merger or otherwise) of such
entity.
QIP. "QIP" means Quantum Industrial Partners, LDC, a Cayman Islands
exempted limited duration company.
QIP Loans. The term "QIP Loans" shall refer to the loans to the Company
in the aggregate principal amount of up to $4 million from QIP and those of its
affiliates who also are shareholders of the Company.
Qualified Public Offering. The term "Qualified Public Offering" shall
mean a firm commitment underwritten public offering of shares of Common Stock
pursuant to a registration statement filed with the Commission under the 1933
Act, and in which the gross proceeds, before deducting underwriters' discounts
and commissions and offering expenses, to the Company equal or exceed Ten
Million Dollars ($10,000,000.00).
Stock Option Plan. The term "Stock Option Plan" refers to the Company's
1998 Stock Option Plan, as amended, pursuant to which the Company was authorized
to reserve up to 1,500,000 shares of Common Stock (following the Company's 100:1
stock split), which plan was approved by the Company's Board of Directors on May
7, 1998, and was ratified by a majority of the holders of the Company's Common
Stock on April 6, 1999.
Subsidiary. The term "Subsidiary" shall mean any Person of which any
other Person at the applicable time owns or controls, directly or indirectly
through one or more Subsidiaries, a majority of the voting stock or ownership
interest.
7.12. EXPENSES. Each party shall be responsible for paying its own
costs and expenses that it incurs with respect to the negotiation, execution,
delivery and performance of this Agreement and the Transaction Documents.
7.13. ENTIRE AGREEMENT. This Agreement and the other Transaction
Documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with respect to the subjects hereof and
thereof.
7.14 ENFORCEMENT.
7.14.1. REMEDIES AT LAW OR IN EQUITY. If the Company shall
default in any of its obligations under this Agreement or if any representation
or warranty made by or on behalf of the Company in this Agreement or in any
certificate, report or over instrument delivered under or pursuant to any term
hereof shall be untrue or misleading in any material respect as of the date of
this Agreement or as of the Closing Date or as of the date it was made,
furnished or delivered, the Investor may proceed to protect and enforce its
rights by suit in equity or action at law, whether for the specific performance
of any term contained in this Agreement, injunction against the breach of any
such term or in furtherance of the exercise of any power granted in this
Agreement, or to enforce any other legal or equitable right of such party or to
take
-20-
25
any one or more of such actions.
7.14.2. REMEDIES CUMULATIVE; WAIVER No remedy referred to herein
or in any exhibit hereto is intended to be exclusive, but each shall be
cumulative and in addition to any other remedy referred to above or otherwise
available to a party at law or in equity. No express or implied waiver by any
party of any default shall be a waiver of any future or subsequent default. The
failure or delay of any party in exercising any rights granted it hereunder
shall not constitute a waiver of any such right and any single or partial
exercise of any particular right by such party will not exhaust the same or
constitute a waiver of any other right provided herein. No notice or demand on
any party in any case shall entitle the party to any other or further notice or
demand in similar or other circumstances.
7.15 NO THIRD-PARTY BENEFICIARIES. This Agreement is for the sole
benefit of the parties hereto and their permitted assigns and nothing herein
expressed or implied shall give or be construed to give to any Person, other
than the parties hereto and such assigns, any legal or equitable rights
hereunder.
[The next page is the signature page.]
-21-
26
IN WITNESS WHEREOF, the duly authorized representatives of the
undersigned corporations have executed this Agreement as of the date first
written above.
CNNFN, A DIVISION OF CABLE NEWS NETWORK LP, LLLP
By: /s/ XXX XXXXXX
-------------------------------
Name: Xxx Xxxxxx
Title:
NEWSREAL, INC.
By:/s/ XXXXX X. XXXXXXXX
-------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: President & CEO
-22-
