EXHIBIT 10.11
SERIES D CONVERTIBLE NON-VOTING
PREFERRED STOCK PURCHASE AGREEMENT
by and among
DEJA NEWS, INC.
and
THE PURCHASERS NAMED ON SCHEDULE I HERETO
Dated as of May 13, 1999
TABLE OF CONTENTS
1. Authorization and Sale of Shares.......................................1
1A. Authorization....................................................1
1B. Sale of Shares...................................................1
1C. Separate Sales...................................................2
1D. Use of Proceeds..................................................2
2. The Closing; Delivery of Shares; Closing Conditions....................2
2A. The Closing......................................................2
2B. Delivery of Shares and Purchase Price............................2
2C. Conditions to the Obligations of the Purchasers..................2
2D. Condition to the Obligations of the Company......................4
3. Representations and Warranties of the Company..........................4
3A. Organization.....................................................4
3B. Capitalization and Ownership.....................................5
3C. No Subsidiaries..................................................6
3D. Authorization and Enforceability.................................6
3E. Valid Issuance...................................................6
3F. No Violation of Laws or Agreement................................7
3G. No Undisclosed Liabilities.......................................7
3H. No Pending Litigation or Proceedings.............................7
3I. Consents.........................................................7
3J. Transactions with Related Parties................................7
3K. Compensation Arrangements; Officers and Directors................8
3L. Employee Benefit Plans...........................................8
3M. Brokerage........................................................8
3N. Financial Statements.............................................8
3O. Business Carried on in Ordinary Course...........................9
3P. Absence of Unusual Transactions..................................9
3Q. Minute Books and Corporate Records..............................10
3R. Accuracy of Books and Records...................................10
3S. No Guarantees, etc..............................................10
3T. Employment Matters..............................................10
3U. Title to Property...............................................11
3V. Material Contracts..............................................11
3W. Tax and Government Returns......................................11
3X. Compliance with Applicable Laws, etc............................12
3Y. Intellectual Property Rights....................................12
3Z. Obligations of Management.......................................14
3AA. Registration Rights; Rights of First Refusal; Preemptive
Rights..........................................................14
4. Representations and Warranties of the Purchasers......................15
4A. Investment......................................................15
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4B. Authority.......................................................16
4C. Accredited Investor.............................................16
4D. Access to Data..................................................16
4E. Brokerage.......................................................16
5. [Intentionally omitted.]..............................................16
6. [Intentionally omitted.]..............................................16
7. [Intentionally omitted.]..............................................16
8. Transfer of Shares....................................................16
8A. Restrictions....................................................16
8B. Requirements for Transfer.......................................16
8C. Rule 144A Information...........................................17
9. Certain Definitions...................................................17
10. Miscellaneous.........................................................18
10A. Successors and Assigns..........................................18
10B. Confidentiality.................................................18
10C. Survival of Representations and Warranties......................18
10D. Expenses. The Company agrees to pay and hold the
Purchasers and holders of the Shares harmless from liability for
the payment of:.......................................................19
10E. Notices.........................................................20
10F. Entire Agreement................................................21
10G. Amendments and Waivers..........................................21
10H. Counterparts....................................................21
10I. Headings........................................................21
10J. Severability....................................................21
10K. Governing Law...................................................21
10L. Further Assurances..............................................21
10M. Indemnification.................................................21
10N. Understanding Among Purchasers..................................22
10O. Preemptive Rights...............................................22
10P. Mutual Waiver of Jury Trial.....................................22
. THE COMPANY AND EACH OF THE PARTIES HERETO HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT,
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.....................22
INDEX TO SCHEDULES
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Schedule I Schedule of Purchasers
Schedule II Deja News, Inc. Disclosure Schedule
INDEX TO EXHIBITS
Exhibit A Form of Fifth Amended and Restated Articles of Incorporation
Exhibit B Form of Opinion of Counsel to Company
Exhibit C Form of Third Amended and Restated Shareholders and Voting
Agreement
Exhibit D Form of Second Amended and Restated Investors' Rights Agreement
Exhibit E Form of Promotion Agreement
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SERIES D CONVERTIBLE NON-VOTING
PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES D CONVERTIBLE NON-VOTING PREFERRED STOCK PURCHASE
AGREEMENT (the "Agreement") dated as of May 13, 1999 is entered into by and
among Deja News, Inc., a Texas corporation (the "Company"), and the persons
listed on Schedule I hereto (each, a "Purchaser" and collectively, the
"Purchasers").
R E C I T A L S:
WHEREAS, the Company desires to sell, and the Purchasers desire to
purchase, shares of the Company's Series D Convertible Non-Voting Preferred
Stock, par value $0.001 per share (the "Series D Preferred Stock"); and
WHEREAS, the Company and the Purchasers desire to set forth certain
agreements and certain terms and conditions regarding the sale and purchase of
the Series D Preferred Stock and the relationship between the Company and the
Purchasers;
A G R E E M E N T:
NOW, THEREFORE, in consideration of the foregoing premises, the
respective representations, warranties and covenants contained herein, and
certain other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. Authorization and Sale of Shares.
1A. Authorization. The Company has, or before the Closing (as
defined in Section 2A) will have, duly authorized the issuance and sale,
pursuant to the terms of this Agreement, of 6,925,208 shares of its Series D
Preferred Stock having the rights, restrictions, privileges and preferences set
forth in the Company's Fifth Amended and Restated Articles of Incorporation, the
form of which is attached as Exhibit A (the "Restated Articles"). The Company
has, or before the Closing (as defined in Section 2A) will have, adopted and
filed the Restated Articles with the Secretary of State of the State of Texas.
1B. Sale of Shares. Subject to the terms and conditions of this
Agreement, at the Closing the Company will issue and sell to the Purchasers
listed on Schedule I, and the Purchasers listed on Schedule I, severally and not
jointly or jointly and severally will purchase from the Company, an aggregate of
up to 6,925,208 shares of Series D Preferred Stock at a purchase price of $3.61
per share, with each such Purchaser purchasing the number of shares of Series D
Preferred Stock set forth opposite such Purchaser's name on Schedule I hereto.
The shares of Series D Preferred Stock being sold under this Agreement and,
unless the context otherwise requires, the shares of Common Stock issued or
issuable upon the conversion of such shares of Series D Preferred Stock are
referred to as the "Shares."
1C. Separate Sales. The Company's agreement with each Purchaser is a
separate agreement, the sale of Shares to each Purchaser is a separate sale and
each Purchaser's obligation hereunder is several (and not joint or joint and
several).
1D. Use of Proceeds. The Company may use the proceeds from the sale
of the Shares for working capital and general corporate purposes, in addition to
such other purposes as the Company's Board of Directors may hereafter approve.
2. The Closing; Delivery of Shares; Closing Conditions.
2A. The Closing. Subject to the satisfaction of the conditions set
forth herein, the closing of the issuance, sale and purchase of the Shares under
Section 1B of this Agreement (the "Closing") shall take place on May 13, 1999 at
10:00 a.m., New York time, at the offices of the Company at 00 Xxxxx Xxxxxx, 0xx
Xxxxx, Xxx Xxxx, Xxx Xxxx, 00000 or at such other place and time as the Company
and the Purchasers may specify in writing.
2B. Delivery of Shares and Purchase Price. At the Closing, the
Company will deliver to each Purchaser of Shares a certificate in the name of
such Purchaser for the number of Shares being purchased by such Purchaser at the
Closing, against payment to the Company of the purchase price for such Shares,
by wire transfer, check, cancellation of indebtedness, any combination of the
foregoing, or other method acceptable to the Company and the Purchasers who will
purchase Shares at the Closing. It is understood and agreed that the purchase
price for the Shares being purchased by that certain Purchaser, the National
Broadcasting Company, Inc. a Delaware corporation ("NBC"), will be the execution
and delivery of the Promotion Agreement (as defined below) as provided in
Section 2D(ii) below.
2C. Conditions to the Obligations of the Purchasers. The obligation
of each of the Purchasers to purchase Shares at the Closing is subject to the
fulfillment or the waiver by such Purchaser of each of the following conditions
on or before the Closing:
(i) Accuracy of Representations and Warranties. Each
representation and warranty of the Company contained in part 3 shall be true on
and as of the Closing with the same effect as though such representation and
warranty had been made on and as of the date of the Closing.
(ii) Performance. The Company shall have performed and
complied with all agreements and conditions contained in this Agreement and the
Ancillary Agreements (as defined in subsection (iv) below) required to be
performed or complied with by the Company prior to or at the Closing.
(iii) Opinion of Counsel. Each Purchaser shall have received
an opinion from Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, counsel for the Company, dated
the date of the Closing addressed to the Purchasers purchasing Shares at the
Closing, and satisfactory in form and substance to the Purchasers and their
special counsel, substantially in the form attached as Exhibit B hereto.
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(iv) Ancillary Agreements.
(A) The Third Amended and Restated Shareholders and
Voting Agreement attached hereto as Exhibit C (the "Shareholders Agreement")
shall have been executed and delivered by the Company, Investors (as that term
is defined in the Shareholders Agreement) holding at least 66 2/3% of the
outstanding shares of the Company's Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock (collectively on an as-converted basis),
Xxxxxx X. Xxxxxx and Xxxxxx X. Xxxxxx. All such actions shall have been taken by
the Company and the Common Shareholders (as defined in the Shareholders
Agreement) as may be necessary to elect a Board of Directors of the Company (as
defined in the Shareholders Agreement), effective immediately following the
Closing, in accordance with the Shareholders Agreement.
(B) The Second Amended and Restated Investors' Rights
Agreement attached hereto as Exhibit D (the "Investors' Rights Agreement," and
together with the Shareholders Agreement, the "Ancillary Agreements") shall have
tbeen executed and delivered by the Company, Investors (as that term is defined
in the Investors' Rights Agreement) holding at least 66 2/3% of the outstanding
shares of the Company's Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock (collectively on an as-converted basis), Xxxxxx X.
Xxxxxx and Xxxxxx X. Xxxxxx.
(v) Certificates and Documents. The Company shall have
delivered to special counsel to the Purchasers:
(A) the Restated Articles certified by the Secretary of
State of the State of Texas;
(B) certificates, as of the most recent practicable
dates (in any event within 10 days of the date of the Closing), as to the
corporate existence and good standing of the Company issued by the Secretary of
State of Texas and the Comptroller of Public Accounts of Texas, respectively;
(C) Bylaws, as amended, of the Company, certified by its
Secretary as of the date of the Closing;
(D) resolutions of the Board of Directors of the
Company, authorizing and approving all matters in connection with this
Agreement, the Ancillary Agreements and the transactions contemplated hereby and
thereby, certified by the Secretary of the Company as of the date of the
Closing; and
(E) such other documents relating to the transactions
contemplated in this Agreement and the Ancillary Agreements as any Purchaser may
reasonably request.
(vi) Compliance Certificate. The Company shall have delivered
to the Purchasers a certificate, executed by the chief executive officer of the
Company, dated the date of the Closing, certifying to the fulfillment of the
conditions specified in paragraphs 2C(i), (ii), (iv) and (v).
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(vii) Other Matters. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and the
Ancillary Agreements and all documents and instruments incident to such
transactions shall be reasonably satisfactory in substance and form to the
Purchasers and their special counsel, and the Purchasers and their special
counsel shall have received all such counterpart originals or certified or other
copies of such documents as they may reasonably request.
2D. Condition to the Obligations of the Company. The obligations of
the Company to issue and sell the Shares to the Purchasers at the Closing are
subject to fulfillment, or the waiver by the Company, of each of the following
conditions on or before the Closing:
(i) Accuracy of Representations and Warranties. The
representations and warranties of the Purchasers contained in part 4 shall be
true on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing.
(ii) Execution of Promotion Agreement. The Promotion
Agreement, the form of which is attached as Exhibit E hereto (the "Promotion
Agreement") shall have been executed and delivered by the Company and NBC and
shall be in full force and effect without modification.
(iii) Purchase Price. Each Purchaser shall have tendered at
the Closing full consideration for the cash purchase price of the Shares to be
purchased by such Purchaser (other than NBC which shall have executed and
delivered the Promotion Agreement).
(iv) Other Matters. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and the
Ancillary Agreements and all documents, and instruments incident to such
transactions shall be reasonably satisfactory in substance and form to the
Company and its counsel, and the Company and its counsel shall have received all
such counterpart originals or certified or other copies of such documents as
they may reasonably request.
3. Representations and Warranties of the Company. As a material inducement
to each Purchaser to enter into this Agreement and to purchase Shares, the
Company represents and warrants to each Purchaser as of the date hereof and as
of the date of the Closing that, except as set forth on the Disclosure Schedule
attached as Schedule II hereto and delivered concurrently herewith:
3A. Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas, and
is duly qualified and in good standing as a foreign corporation in each other
jurisdiction in which the location or nature of its property or the character of
its business makes such qualification necessary, except where the failure to be
so qualified would not materially adversely affect the business, financial
condition, prospects, properties or results of operations of the Company. The
Company has all requisite power and authority to own or lease its properties and
assets as now owned or leased and to carry on its business as and where now
being conducted and to consummate the transactions contemplated hereby. The copy
of the Company's bylaws, as amended to date,
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which has been delivered to Purchasers is correct and complete, and such bylaws
are in full force and effect. The Restated Articles, as certified by the
Secretary of State of the State of Texas, a copy of which has been delivered to
Purchasers, are correct and complete and are, or will be prior to Closing, in
full force and effect. There are no proceedings pending or contemplated for the
dissolution of the Company.
3B. Capitalization and Ownership.
(i) Capital Stock. The Company's authorized capital stock
consists solely of the following:
(A) Common Stock. 100,000,000 shares of Common Stock,
par value $0.001 per share (the "Common Stock"), 14,993,203 shares of which are
currently outstanding and none of which are held in its treasury. The Company
has reserved (1) 11,500,000 shares of Common Stock for issuance pursuant to the
exercise of options issued or issuable under the Company's 1997 Stock
Option/Stock Issuance Plan (the "1997 Plan"); (2) 5,182,667 shares of Common
Stock for issuance upon conversion of Series A Preferred Stock (as defined
below); (3) 16,822,921 shares of Common Stock for issuance upon conversion of
the Series B Preferred Stock (including shares issuable upon exercise of the
Imperial Bank Warrants (as defined below)); (4) 194,350 shares of Common Stock
for issuance upon the exercise of the MedVen Warrant (as defined below); (5)
4,166,668 shares of Common Stock for issuance upon the exercise of the warrants
held by holders of Series B Preferred Stock dated November 14, 1997 (the "Series
B Warrants"); (6) 9,142,388 shares of Common Stock for issuance upon conversion
of Series C Preferred Stock (as defined below); and (7) 6,925,208 shares of
Common Stock for issuance upon conversion of Series D Preferred Stock.
(B) Preferred Stock. 36,777,517 shares of Preferred
Stock, par value $0.001 per share, of which (1) 3,887,000 have been designated
as "Series A Convertible Non-Voting Preferred Stock" (the "Series A Preferred
Stock") and all of which are issued and outstanding, (2) 16,822,921 have been
designated as "Series B Convertible Non-Voting Preferred Stock" (the "Series B
Preferred Stock"), 16,666,671 of which are issued and outstanding, and 156,250
shares of which have been reserved for issuance upon the exercise of the
Imperial Bank Warrant (as defined below), (3) 9,142,388 have been designated
"Series C Convertible Non-Voting Preferred Stock (the "Series C Preferred
Stock") and all of which are issued and outstanding, and (4) 6,925,208 have
been, or will be prior to the Closing, designated as Series D Preferred Stock,
none of which are issued and outstanding.
(ii) Prior Issuances. All of such outstanding shares have been
duly authorized, validly issued and are fully paid and nonassessable, were not
issued in violation of the terms of any agreement or other understanding binding
upon the Company, and were issued in compliance with all applicable federal and
state securities, or "blue-sky," laws and regulations.
(iii) Options; Warrants. There are no outstanding options,
warrants, rights, agreements, calls, commitments or demands of any character
relating to the capital stock of the Company and no securities convertible into
or exchangeable for any of such capital stock other than (A) options to purchase
up to 11,500,000 shares of Common Stock which have been granted or are available
for grant pursuant to the 1997 Plan; (B) that certain warrants dated as of
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December 2, 1997 granted to MedVen Development Corporation (the "MedVen
Warrant"), to purchase up to 194,350 shares of Common Stock at a price of $0.60
per share; (C) a warrant to purchase up to 156,250 shares of Series B Preferred
Stock at a price of $0.60 per share granted to Imperial Bank dated October 15,
1997 (the "Imperial Bank Warrant"); (D) the Series B Warrants; (E) the
preemptive rights under the Investors' Rights Agreement; and (F) the rights
under the Shareholders Agreement.
(iv) No Redemptions. The Company has no obligation (contingent
or otherwise) to purchase, redeem or otherwise acquire any shares of its capital
stock or any interest therein.
(v) Shareholders. The current registered and beneficial
shareholders of the Company are as set forth in Schedule 3B of Schedule II.
(vi) Voting Agreements. Except for (A) that certain Deja News
1995 Voting Trust Agreement dated November 1, 1995 by and among the Company and
the Subscribers (as that term is defined therein) (the "Voting Trust") and (B)
the Shareholders Agreement, there are no voting trusts, stockholders agreements,
transfer arrangements, proxies or other agreements in effect with respect to
voting, transfer or other disposition of the shares of capital stock of the
Company.
3C. No Subsidiaries. The Company does not directly or indirectly own
any stock of, or any other interest in, any other corporation or business
entity.
3D. Authorization and Enforceability. The execution, delivery and
performance of this Agreement and the Ancillary Agreements have been duly
authorized by all necessary corporate action on the part of the Company. This
Agreement and the Ancillary Agreements have been duly executed and delivered by
the Company and constitute the legal, valid and binding obligations of the
Company enforceable in accordance with their respective terms, except (i) as the
enforceability thereof may be limited by bankruptcy, insolvency or other laws
relating to or affecting creditors' rights generally and by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding or action in equity or at law) and (ii) to the extent the
indemnification provisions contained in the Investors' Rights Agreement may be
limited by applicable federal or state securities law. The issuance, sale and
delivery of the Shares in accordance with this Agreement, the issuance and
delivery of the shares of Common Stock issuable upon conversion of the Shares
have been, or will be on or prior to the Closing, duly authorized by all
necessary corporate action on the part of the Company, and all such Shares have
been duly reserved for issuance.
3E. Valid Issuance. The shares of Series D Preferred Stock when so
issued, sold and delivered at Closing against payment therefor in accordance
with the provisions of this Agreement, the shares of Common Stock issuable upon
conversion of the shares of Series D Preferred Stock, when issued upon such
conversion in accordance with the Restated Articles, will be duly and validly
issued, fully paid and non-assessable. Upon delivery to the Purchasers at the
Closing of certificates representing the Shares in accordance herewith, the
Purchasers will acquire good and valid title to such Shares, free and clear of
all liens, claims, security interests, pledges, charges, preemptive rights,
rights of first refusal and options.
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3F. No Violation of Laws or Agreement. The execution and delivery of
this Agreement and the Ancillary Agreements do not, and the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements and the
compliance with the terms, conditions and provisions of this Agreement and the
Ancillary Agreements by the Company will not (i) contravene any provision of the
Restated Articles or the Company's bylaws, as amended through the date hereof;
(ii) conflict with or result in a breach of or constitute a default (or an event
which might, with the passage of time or the giving of notice or both,
constitute a default) under any of the terms, conditions or provisions of any
indenture, mortgage, loan or credit agreement or any other agreement or
instrument to which the Company is a party or by which it or any of its assets
may be bound or affected, or any judgment or order of any court or governmental
department, commission, board, agency or instrumentality, domestic or foreign,
or any applicable law, rule or regulation; (iii) result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the Company's assets or give to others any interests or rights therein; (iv)
result in the maturation or acceleration of any liability or obligation of the
Company or give others the right to cause such a maturation or acceleration; or
(v) result in the termination of or loss of any material right (or give others
the right to cause such a termination or loss) under any agreement or contract
to which the Company is a party or by which it may be bound.
3G. No Undisclosed Liabilities. The Company has no material
liability or obligation of any nature, whether due or to become due, absolute,
contingent or otherwise, including liabilities for or in respect of federal,
state and local taxes and any interest or penalties relating thereto, except
liabilities incurred in the ordinary course of business and fully reflected as
liabilities on the Financial Statements (as defined below).
3H. No Pending Litigation or Proceedings. There are no actions,
suits or proceedings pending or, to the Company's knowledge, threatened against
or affecting the Company or any of its assets or affecting its issued capital or
the Shares, at law or in equity, by or before any court or governmental
department, agency or instrumentality. There are no outstanding judgments or
decrees or orders of any court or any governmental or administrative agency
against or affecting the Company, or any of its assets or businesses, or
affecting the Shares. The Company has not initiated and does not currently
intend to initiate any actions, suits or proceedings.
3I. Consents. Except (i) the filing of the Restated Articles with
the Secretary of State of the State of Texas, (ii) filings required or permitted
pursuant to federal or state securities laws which have been filed prior to
Closing or will be filed in due course after the Closing, (iii) consents or
approvals of the holders of the Series A Preferred Stock, Series B Preferred
Stock and/or Series C Preferred Stock and Common Stock which are required to
amend and restate the Ancillary Agreements and the Restated Articles, each of
which has been obtained, no consent, approval or authorization of, or
registration or filing with, any persons including any governmental authority or
other regulatory agency, is required in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
3J. Transactions with Related Parties. Since July 14, 1998, no
Affiliate (as defined in Section 9) of the Company or any person related to the
Company, including any
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director, officer and/or shareholder or any immediate family member of, or
corporation affiliated with (excluding the portfolio corporations in which
Austin Ventures, Prime New Ventures or affiliates of Purchasers, as each is
defined in part 9 below, have invested), the foregoing:
(i) has borrowed money or loaned money to the Company which
has not been repaid;
(ii) has any contractual or other claim, express or implied,
of any kind whatsoever against the Company;
(iii) has been party, to any other transaction with the
Company other than the payment of compensation and the provision of employee
benefits, as set forth on Schedule 3L to Schedule II, and the reimbursement of
expenses or the grant of options under the 1997 Plan.
3K. Compensation Arrangements; Officers and Directors. Schedule 3K
to Schedule II sets forth the following information:
(i) the names and current annual compensation, including any
bonus, if applicable, of all present officers and employees of the Company whose
current annual salary, including any promised, expected or customary bonus,
equals or exceeds $100,000, together with a statement of the full amount of all
remuneration paid by the Company to each such person and to any director of the
Company as of March 31, 1999;
(ii) a complete list of all holders of issued and outstanding
options under the 1997 Plan; and
(iii) the names and titles of all directors and officers of
the Company and of each trustee, fiduciary or plan administrator or each
employee benefit plan of the Company.
3L. Employee Benefit Plans. The only employee pension benefit plans
(as defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), welfare benefit plans (as defined in Section 3(l)
of ERISA), bonus, stock purchase, stock ownership, stock option, deferred
compensation, incentive or other compensation plan or arrangements and other
material employee fringe benefit plans presently maintained by or contributed to
by the Company, are those listed in Schedule 3L to Schedule II (the "Benefit
Plans"), a true and complete copy of each of which has been furnished to
Purchasers.
3M. Brokerage. The Company has not made any agreement or taken any
other action which might cause anyone to become entitled to a broker's fee or
commission as a result of the transactions contemplated hereunder.
3N. Financial Statements. The Company's Financial Statements (as
defined below) have been prepared in accordance with generally accepted
accounting principles, consistently applied during the respective periods
indicated thereon, except that the Financial Statements for the three months
ended March 31, 1999 do not contain all of the footnotes which may be required
by generally accepted accounting principles. The Financial Statements are
8
complete and correct in all material respects, are in accordance with the books
and records of the Company and present fairly the financial condition of the
Company and:
(i) all the assets, liabilities (whether accrued, absolute,
contingent or otherwise) and the financial condition of the Company as of the
periods covered thereby; and
(ii) the sales, earnings and results of operations of the
Company for the periods covered thereby.
"Financial Statements" as used in this Agreement means the audited
financial statements of the Company for the year ended December 31, 1998 (the
"Balance Sheet Date") and the unaudited financial statements of the Company for
the three months ended March 31, 1999, consisting in each case of the balance
sheet of the Company and the accompanying statements of operations, for the
periods indicated thereon, true copies of which are attached to Schedule 3N to
Schedule III.
3O. Business Carried on in Ordinary Course. The business has been
carried on in the ordinary course since the Balance Sheet Date and the Company
has not, since the Balance Sheet Date, sold or otherwise disposed of any of its
assets except in the ordinary course of business. Since the Balance Sheet Date
there has been no (i) change in the business, operations, affairs or condition
of the Company, financial or otherwise, or arising as a result of any
legislative or regulatory change, revocation of any license or right to do
business, fire, explosion, accident, casualty, labor problem, flood, drought,
riot, storm, act of God or otherwise, except changes occurring in the ordinary
course of business and which, in the aggregate, have not materially adversely
affected and will not materially adversely affect the business, operations,
affairs or financial condition of the Company or (ii) material adverse change in
the financial condition, operating results, assets, liabilities, business or
operations of the Company.
3P. Absence of Unusual Transactions. Since the Balance Sheet Date,
the Company has not:
(i) transferred, assigned, sold or otherwise disposed of any
of the Company's assets shown in the balance sheet contained in the Financial
Statements except in the ordinary and usual course of business;
(ii) except as disclosed in the Financial Statements suffered
an operating loss or any extraordinary loss, or waived any rights of substantial
value, or entered into any commitment or transaction not in the ordinary and
usual course of business where such loss, rights, commitment or transaction is
or would be material in relation to the Company or the business, as the case may
be;
(iii) mortgaged, pledged, subjected to lien, granted a
security interest in or otherwise encumbered any of the Company's assets;
(iv) declared or paid any dividends;
(v) incurred any indebtedness except in the ordinary course of
business;
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(vi) authorized or agreed or otherwise become committed to do
any of the foregoing; or
(vii) made a change in the accounting methods, practices or
policies of the Company, other than in accordance with generally accepted
accounting principles.
3Q. Minute Books and Corporate Records. The corporate records and
minute books of the Company contain complete and accurate minutes of all
meetings of, and copies of all bylaws and resolutions passed by, the directors
and shareholders of the Company since its incorporation; all such meetings were
duly called and held, all such bylaws and resolutions were duly passed and the
share certificate books, registers of shareholders, registers of transfers, and
other corporate registers of the Company are complete and accurate in all
material respects. There is in existence neither a shareholders' agreement nor a
unanimous shareholders' agreement governing the affairs of the Company or the
relationships, rights and duties of its shareholders save and except for the
Voting Trust, a complete and correct copy of which has been provided to the
Purchasers, which grants to Xxxxxx X. Xxxxxx the right to vote the Common Stock
subject thereto in accordance with the terms of such agreement and the
Shareholders Agreement.
3R. Accuracy of Books and Records. The books and records, financial
and otherwise, of the Company fairly and correctly set out and disclose in all
material respects the financial position of the Company as of the date hereof
and all material financial transactions of the Company have been accurately
recorded in such books and records.
3S. No Guarantees, etc.. The Company is not a party to or bound by
any agreement of guarantee, indemnification, assumption or endorsement or any
like commitment of the obligations, liabilities (contingent or otherwise) or
indebtedness of any other person, corporation or other entity, except in the
ordinary course of business.
3T. Employment Matters.
(i) The Company is not a party to any written or oral
employment, service, union, pension, deferred profit sharing, benefit, bonus or
other similar agreement or arrangement and none of such agreements contains any
specific agreement as to notice of termination or severance pay in lieu thereof.
The Company is not in arrears in the payment of any contribution or assessment
required to be made to any such plan as in effect, whether such payment is
deferred, contingent or otherwise. The Company does not have any employees who
cannot be dismissed on reasonable notice. To the Company's knowledge, it is not
aware of the impending resignation or termination of employment of any officer.
(ii) The Company has not made any agreements with any labor
union or employee association or made commitments to or conducted negotiations
with any labor union or employee association with respect to any future
agreements. The Company is not required to recognize any union or employee
association representing the employees or any agent having bargaining rights for
the employees.
(iii) To the Company's knowledge, it is not liable for any
damages to any employee or former employee resulting from the violation of any
applicable employment
10
law or employment agreement, nor to the Company's knowledge is any employee in
violation of any of its past employment agreements. The Company is not presently
intending to hire or is not otherwise in negotiation with any potential
employee, consultant or other service provider who may be subject to restrictive
covenants resulting from any previous employment or engagement nor are any
existing employees, consultants or service providers of the Company subject to
restrictive covenants resulting from prior employment or engagements with other
persons.
3U. Title to Property. The Company is the owner of all of its
property with good and marketable title thereto, free and clear of any mortgage,
lien, charge, security interest, adverse claim or other encumbrance whatsoever.
The Company neither owns or has any interest in, nor is a party to any agreement
to purchase any real property. All facilities, equipment, fixtures, vehicles and
other properties owned, leased or used by the Company are in normal operating
condition and repair and are reasonably fit and able for the purposes for which
they are being used.
3V. Material Contracts. A list of the Company's outstanding
agreements, leases, contracts, insurance agreements or commitments, whether
written or oral, of any nature or kind whatsoever, which involve the payments or
obligations in excess of $100,000, is set forth in Schedule 3V to Schedule II
(collectively, the "Material Contracts"). Each Material Contract is a legal,
valid, binding an enforceable in accordance with its terms with respect to the
Company and, to the knowledge of the Company, any other parties bound thereby,
and true and complete copies of each Material Contract have been provided to the
Purchasers. The Company is not, nor has the Company given or been given notice
that any other party is currently in breach, violation or default or event that,
with notice or lapse of time, or both, would conflict with or constitute a
breach, violation or default of any Material Contract that would have a material
adverse effect on the business, financial condition, operations or property of
the Company.
Except as set forth on Schedule 3V to Schedule III, the Company has
not received written notice that any party to any Material Contract intends to
cancel, amend or terminate any such agreement.
3W. Tax and Government Returns. (i) The Company has duly filed in a
timely manner all Returns required to be filed by it (including any and all Tax
elections available to the Company in relation to such Returns) and all
information Returns as to which the nonfiling or late filing could result in
interest or penalties, has made complete and accurate disclosure in such Returns
and has paid all Taxes shown on such Returns as being due and payable and has
also paid all assessments and reassessments and all other Taxes, governmental
charges, penalties, interest and fines due and payable by the Company up to the
date hereof. The Company has made adequate reserve for the Taxes which are
payable during the current fiscal period for which Returns are not yet required
to be filed. There are no agreements, waivers or other arrangements providing
for an extension of time with respect to the assessment or reassessment of
income Tax or the filing of any Return by, or payment of any Tax by, or levying
of any governmental charge against, the Company. There are no actions, audits,
assessments, reassessments, suits, proceedings, investigations or claims now
threatened or pending against the Company in respect of Taxes or any matters
under discussion with any governmental authority relating to Taxes or
governmental charges asserted by any such authority. The Company has never been
the subject of an audit. There are no Tax liens on any assets of the Company,
except for Taxes not yet due
11
and payable. To the Company's knowledge, no taxing authority in a jurisdiction
where the Company does not file Returns has made a claim, assertion or threat
that the Company is or may be subject to taxation by such jurisdiction. The
Company has not been a member of a consolidated, combined or unitary group for
federal or state income Tax purposes. The Company is not and has not been a
party to any Tax sharing agreement. The Company has withheld from each payment
made by it the amount of all Taxes and other deductions required to be withheld
therefrom and has paid the same to the proper taxing or other authority within
the time prescribed under any applicable legislation or regulation. The Company
has not filed a consent pursuant to Section 341(f) of the Internal Revenue Code
of 1986, as amended (the "Code"), relating to collapsible corporations.
(ii) "Tax", and the correlative term "Taxes", for purposes of this
Agreement, means any taxes, assessments, duties, fees, levies, imposts,
deductions, withholdings, including, without limitation, income, gross receipts,
ad valorem, value added, excise, real or personal property, asset, sales, use,
license, payroll, transaction, capital, net worth and franchise taxes, estimated
taxes, withholding, employment, social security, workers compensation, utility,
severance, production, unemployment compensation, occupation, premium, windfall
profits, transfer and gain taxes, or other governmental charges of any nature
whatsoever imposed by any government or taxing authority of any country or
political subdivision of any country and any liabilities with respect thereto,
including any penalties, additions to tax, fines or interest thereon, and
includes any liability of the Company arising under any tax sharing agreement to
which any of them is or has been a party or any liability for Taxes of another
person by contract, as a transferee of successor, under Treas. Reg. ss.1.1502-6
or analogous state, local, or foreign law provision, or otherwise. For purposes
of this Agreement, "Return" shall mean any report, return, statement, estimate,
declaration, notice, form or other information required to be supplied to a
taxing authority in connection with Taxes.
3X. Compliance with Applicable Laws, etc. The Company has conducted
and is conducting its business in compliance with all applicable laws (including
environmental laws), rules and regulations of each jurisdiction in which its
business is carried on and is not in breach of any such laws, rules or
regulations and is duly licensed, registered or qualified in each jurisdiction
in which the Company owns or leases its assets or carries on the business,
except as would not have a material adverse effect, to enable the business to be
carried on as now conducted and its property and assets to be owned, leased and
operated, and all such licenses, registrations and qualifications are valid and
subsisting and in good standing an none of the same contains any burdensome
term, provision, condition or limitation which has or may have a material
adverse effect on the operation of the business.
3Y. Intellectual Property Rights.
(i) Schedule 3Y to Schedule II lists and contains a
description of all patents, patent applications and registrations, trademarks,
trademark applications and registrations, copyrights, copyright applications and
registrations, trade names and industrial designs, domestic or foreign, owned or
used by the Company or relating to the operation of the business, and all other
intellectual property owned or used by the Company or relating to the business
other than copies of standard commercial programs available to the general
public and properly licensed to the Company by the producer thereof (all of the
foregoing being collectively
12
called the "Intellectual Property"). "Company Intellectual Property" means all
Intellectual Property, inventions, processors, designs, know-how, trade secrets,
computer programs and other proprietary rights which are used, have been used,
or are proposed to be used in connection with the business.
(ii) The Company has good and valid title to all of the
Company Intellectual Property, free and clear of any and all encumbrances,
except in the case of any Intellectual Property licensed to the Company.
Complete and correct copies of all agreements whereby any rights in any of the
Intellectual Property have been granted or licensed to the Company have been
provided to the Purchasers. No royalty or other fee is required to be paid by
the Company to any other person in respect of the use of any of the Intellectual
Property except disclosed in Schedule 3Y to Schedule II. The Company has used
commercially reasonable efforts to protect its rights in the Intellectual
Property. The Company has the exclusive right to use all of the Company
Intellectual Property and has not granted any license or other rights to any
other person in respect of the Intellectual Property.
(iii) Other than the right of a non-assigning party to consent
to an assignment of an agreement as provided in such agreement, to the Company's
knowledge, there are no restrictions on the ability of the Company or any
successor to or assignee from the Company to use and exploit all rights in the
Intellectual Property. All statements contained in all applications for
registration of the Intellectual Property were true and correct as of the date
of such applications. Each of the trademarks and trade names in the Intellectual
Property is in use. None of the rights of the Company in the Intellectual
Property will be impaired or affected adversely in any material respect by the
transactions contemplated by this Agreement.
(iv) To the Company's knowledge, the conduct of the business
and the use of the Intellectual Property does not infringe, and the Company has
not received any material notice, complaint, threat or claim alleging
infringement of, any patent, trademark, trade name, copyright, industrial
design, trade secret or other Intellectual Property or proprietary right of any
other person, and the conduct of the business does not include any activity
which may constitute "passing-off."
(v) The Intellectual Property of the Company is, in the
opinion of management, sufficient for the Company to carry on its business and
the Company does not require any additional Intellectual Property in order to
carry on such business.
(vi) To the Company's knowledge, no item of Company
Intellectual Property is subject to any outstanding injunction, judgment, order,
decree, ruling or charge.
(vii) To the Company's knowledge no third party licensor is
subject to any order under the United States Bankruptcy Code.
(viii) Each current and, to the knowledge of the Company,
former employee of the Company has executed the Company's standard form of
Proprietary Information and Non-Disclosure Agreement.
(ix) The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other
13
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with their duties to the Company or
that would conflict with the Company's business as currently proposed to be
conducted or the Company Intellectual Property. Neither the execution nor
delivery of this Agreement, nor the carrying on of the Company's business by the
employees of the Company, nor the conduct of the Company's business as proposed,
will, to the Company's knowledge, conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any employee is now obligated. The Company
does not believe it is or will be necessary to utilize any inventions, trade
secrets or proprietary information of any of its employees made prior to their
employment by the Company, except for inventions, trade secrets or proprietary
information that have been assigned to the Company.
3Z. Obligations of Management. Each officer of the Company other
than the Chairman of the Board is currently devoting one hundred percent (100%)
of such officer's business time to the conduct of the business of the Company.
The Company is not aware of any officer or key employee of the Company other
than the Chairman of the Board planning to work less than full time at the
Company in the future.
3AA. Registration Rights; Rights of First Refusal; Preemptive
Rights. Except as required pursuant to the Investors' Rights Agreement, the
Company is presently not under any obligation, and has not granted any rights,
to register any of the Company's presently outstanding securities or any of its
securities that may hereafter be issued. Except as set forth in the Investors'
Rights Agreement, no other person has any right of first offer or preemptive
right with respect to issuances by the Company of its equity securities.
3AB. Offering Valid. Assuming the accuracy of the representations
and warranties of the Purchasers contained in part 4 hereof, the offer, sale and
issuance of the Shares will be exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and will have been
registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws. Neither the Company nor any agent on its behalf has
solicited or will solicit any offers to sell, or has offered to sell, or will
offer to sell, all or any part of the Shares to any person or persons so as to
bring the sale of such Shares by the Company within the registration provisions
of the Securities Act.
3AC. Disclosure. The representations and warranties of the Company
included in this Agreement, the Disclosure Schedule and the Ancillary Agreements
are true and correct and do not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements contained in
such representations and warranties not misleading. The Company shall not be
deemed to have made to any Purchaser any representation or warranty other than
as expressly made by the Company in part 3 hereof. Without limiting the
generality of the foregoing, and notwithstanding any express representations and
warranties made by the Company in part 3 hereof, the Company makes no
representation or warranty to any Purchaser with respect to:
(i) any projections, estimates or budgets heretofore delivered
to or made available to a Purchaser of future revenues, expenses or expenditures
or future results of
14
operations, provided such projections, estimates or budgets were made in good
faith by the Company and the Company has a reasonable basis therefor; or
(ii) except as expressly covered by a representation and
warranty contained in part 3 hereof, any other information or documents
(financial or otherwise) made available to a Purchaser or its counsel,
accountants or advisers with respect to the Company.
3AD. Year 2000 Compatibility. All of the hardware, firmware,
software and computer systems (including hardware, firmware, software and
computer systems currently under development) of the Company record, store,
process, calculate and present calendar dates falling on and after January 1,
2000, and calculate any information dependent on or relating to such dates in
the same manner and with the same functionality, data integrity and performance
as such hardware, firmware, software and computer systems record, store,
process, calculate and present calendar dates on or before December 31, 1999, or
calculate any information dependent on or relating to such dates (collectively,
"Year 2000 Compliant"). All of the Company's material hardware, firmware,
software and computer systems will lose no functionality with respect to the
introduction of records containing dates falling on or after January 1, 2000.
All of the Company's and any of its subsidiary's internal computer systems,
including without limitation, its accounting systems, are, to its knowledge
after reasonable inquiry, Year 2000 Compliant.
3AE. Previous Issuances Exempt. Assuming the Investors
representations are true and correct, all shares of capital stock and other
securities issued by the Company prior to the Closing have been issued in
transactions exempt from the registration requirements under the Securities Act
and all applicable state securities or "blue sky" laws, and in compliance with
all applicable corporate laws. The Company has not violated the Securities Act
or any applicable state securities or "blue sky" laws in connection with the
issuance of any shares of capital stock or other securities prior to the
Closing. The Company has not offered any of its capital stock, or any other
securities, for sale to, or solicited any offers to buy any of the foregoing
from the Company, or otherwise approached or negotiated with any other person in
respect thereof, in such a manner as to require registration under the
Securities Act.
3AF. Insurance. The Company maintains valid policies of insurance
with respect to its properties and business of the kinds and in the amounts not
less than is customarily obtained by corporations engaged in the same or similar
business and similarly situated, including, without limitation, workers
compensation insurance and insurance against casualty loss, public liability,
libel, slander, defamation, advertising injury and other risks. A list of the
Company's insurance has been provided to the Purchasers.
4. Representations and Warranties of the Purchasers. Each of the
Purchasers severally represents and warrants to the Company as of date hereof
and as of the date of the Closing, as to itself only as follows:
4A. Investment. Such Purchaser is acquiring the Shares for its own
account for investment and not with a view to, or for sale in connection with,
any distribution thereof, nor with any present intention of distributing or
selling the same and, except as contemplated by this Agreement and the Exhibits
hereto, such Purchaser has no present or contemplated agreement,
15
undertaking, arrangement, obligation, indebtedness, or commitment providing for
the disposition thereof. Such Purchaser acknowledges the restrictions on
transfer of Shares of the Company set forth in part 8 of this Agreement.
4B. Authority. Such Purchaser has full power and authority to enter
into and to perform this Agreement in accordance with its terms. Any Purchaser
which is a corporation, limited liability company, partnership, trust or other
entity represents that it has not been organized, reorganized or recapitalized
specifically for the purpose of investing in the Company.
4C. Accredited Investor. Such Purchaser has substantial experience
in evaluating the merits and risks of its investment in the Company. Such
Purchaser is an "accredited investor" as such term is defined in Rule 501
promulgated under the Securities Act.
4D. Access to Data. During the course of this transaction and prior
to the Closing, Purchasers have had the opportunity to ask questions of and
receive answers from the Company concerning this investment, and the opportunity
to obtain any information necessary to verify the financial data and business of
the Company.
4E. Brokerage. No broker, finder, agent or similar intermediary has
acted on behalf of such Purchaser in connection with the transactions
contemplated by this Agreement and there are no brokerage commissions, finder's
fees or similar compensation in connection therewith based on any arrangement or
agreement made by or on behalf of such Purchaser.
5. [Intentionally omitted.]
6. [Intentionally omitted.]
7. [Intentionally omitted.]
8. Transfer of Shares.
8A. Restrictions. The restrictions on the sale or transfer of Shares
set forth in this part 8 shall cease to apply to such Shares (i) upon any sale
of such Shares pursuant to the Investors' Rights Agreement, Section 4(1) of the
Securities Act or Rule 144 under the Securities Act or (ii) at such time as such
Shares become eligible for sale under Rule 144(k) under the Securities Act.
8B. Requirements for Transfer.
(i) The Shares shall not be sold or transferred unless either
(a) such sale or transfer first shall have been registered under the Securities
Act, or (b) the Company first shall have been furnished with an opinion of legal
counsel, reasonably satisfactory to the Company, to the effect that such sale or
transfer is exempt from the registration requirements of the Securities Act.
(ii) Notwithstanding the foregoing, no registration or opinion
of counsel shall be required for (a) a transfer by a Purchaser which is a
partnership to a partner of such partnership, or to the estate of any such
partner, if the transferee agrees in writing to be
16
subject to the terms of this part 8 and the Shareholders Agreement to the same
extent as if such partner were an original Purchaser hereunder, (b) a transfer
made in accordance with Rule 144 under the Securities Act, or (c) a transfer by
a Purchaser which is a corporation to an affiliate of such corporation, if the
transferee agrees in writing to be subject to the terms of this part 8 and the
Shareholders Agreement and Investors' Rights Agreement to the same extent as if
such affiliate were an original Purchaser hereunder.
(iii) Legends. In addition to any other legends which may be
required by law or any Ancillary Agreement, each certificate representing Shares
shall bear legends substantially in the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL SUCH SHARES ARE REGISTERED UNDER SUCH ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS OBTAINED TO THE
EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED."
The foregoing legend shall be removed from the certificates representing any
Shares at the request of the holder thereof, at such time as they become
eligible for resale pursuant to Rule 144(k) under the Securities Act.
8C. Rule 144A Information. The Company shall, at all times during
which it is neither subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act, nor exempt from reporting pursuant to Rule 12g3-2(b) under
the Exchange Act, upon the written request of any Purchaser, provide in writing
to such Purchaser and to any prospective transferee of any Shares of such
Purchaser the information concerning the Company described in Rule 144A(d)(4)
under the Securities Act ("Rule 144A Information"). Upon the written request of
any Purchaser, the Company shall cooperate with and assist such Purchaser or any
member of the National Association of Securities Dealers, Inc. PORTAL system in
applying to designate and thereafter maintain the eligibility of the Shares for
trading through PORTAL. Purchaser shall take all reasonable precautions to
safeguard the Rule 144A Information from disclosure to anyone other than persons
who will assist such transferee in evaluating the purchase of any Shares.
9. Certain Definitions.
"Affiliate" means with respect to any Person, a Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person, and, in the case of
an individual, includes any relative or spouse of such person, or any relative
of such spouse, who has the same home as such Person. The term "control" means
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.
17
"Austin Ventures" means Austin Ventures IV-A, L.P., Austin Ventures
IV-B, L.P., and each of their respective Affiliates.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity or any department, agency or political
subdivision thereof.
"Subsidiary" means any corporation more than 50% of the outstanding
voting securities of which are owned by the Company or any Subsidiary, directly
or indirectly, or a partnership or limited liability company in which the
Company or any Subsidiary is a general partner or manager or holds interests
entitling it to receive more than 50% of the profits or losses of the
partnership or limited liability company.
"Prime New Ventures" means Prime Enterprises II, L.P., Enterprises &
Transcommunications, L.P., Prime VIII, L.P. and each of their respective
Affiliates.
10. Miscellaneous.
10A. Successors and Assigns. The rights and obligations of each
Purchaser under this Agreement may be assigned by such Purchaser to any Person
to which Shares are properly transferred by such Purchaser, and such transferee
shall be deemed a Purchaser for purposes of this Agreement, provided that the
transferee provides written notice of such assignment to the Company and
otherwise complies with all restrictions on transfers.
10B. Confidentiality. Except as may be necessary in connection with
a request by a governmental agency, regulatory or supervisory authority,
regulation of any national securities exchange or court of competent
jurisdiction or as required by law or any national securities exchange, each
Purchaser agrees that it will keep confidential and will not disclose or divulge
any confidential, proprietary or secret information which such Purchaser may
obtain from the Company pursuant to financial statements, reports and other
materials submitted by the Company to such Purchaser pursuant to this Agreement,
the Ancillary Agreements or otherwise, or pursuant to visitation or inspection
rights granted under the Ancillary Agreements, unless such information is known
or until such information becomes known, to the public; provided, however, that
a Purchaser may disclose such information (i) to its attorneys, accountants,
consultants and other professionals to the extent necessary to obtain their
services in connection with its investment in the Company, (ii) to any
prospective Purchaser of any Shares from such Purchaser as long as such
prospective Purchaser agrees in writing to be bound by the provisions of this
paragraph 10B or (iii) to any Affiliate of such Purchaser or to a partner or
shareholder of such Purchaser.
10C. Survival of Representations and Warranties.
(i) Company. All representations and warranties of the Company
contained in this Agreement or contained in any Ancillary Agreement, certificate
or other document delivered or given pursuant to this Agreement shall survive
the Closing and, notwithstanding the Closing or any investigation made by or on
behalf of the Purchasers with respect thereto, shall continue in full force and
effect for the benefit of the Purchasers:
18
(a) for a period of 12 months from the date of the
Closing in respect of matters other than those described in clauses (b), (c) or
(d) below;
(b) for a period of 18 months from the date of the
Closing in respect of matters addressed in Section 3B;
(c) except as otherwise provided in (d) below, in
respect of matters addressed in Sections 3E and 3W, for the period commencing on
the Closing date and ending on the date on which the last applicable limitation
period under any applicable income tax legislation expires with respect to any
taxation year which is relevant in determining any liability under this
Agreement with respect to tax matters; and
(d) there shall be no limit on the representations and
warranties set forth in Sections 3E or 3W or relating to tax liabilities of the
Company based on any misrepresentation made or fraud committed in filing a
return or supplying information for purposes of any legislation imposing tax on
the Company.
(ii) Purchasers. The representations and warranties of the
Purchasers contained in this Agreement or in any Ancillary Agreement,
certificate or other document delivered or given pursuant to this Agreement
shall survive the Closing and, notwithstanding the Closing or any investigation
made by or on behalf of the Company, shall continue in full force and effect for
the benefit of the Company for a period of 12 months from the date of the
Closing and any claim in respect thereof shall be made within such period and
upon the expiration of such period the Purchasers shall have no further
liability to the Company with respect to any such representations or warranties.
10D. Expenses. The Company agrees to pay and hold the Purchasers and
holders of the Shares harmless from liability for the payment of:
(i) the fees and expenses of Fried, Frank, Harris, Xxxxxxx &
Xxxxxxxx, special counsel to certain of the Purchasers arising in connection
with the negotiation and execution of this Agreement, the Ancillary Agreements
and the Restated Articles and consummation of the transactions contemplated
hereby, not to exceed in the aggregate $15,000;
(ii) the fees and expenses of Xxxxxx & Xxxxxx, L.L.P., special
counsel to the holders of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock, and Xxxxxx Godward LLP, special counsel to Xxxx-Xxxxx
Inc., arising in connection with the negotiation and execution of this
Agreement, the Ancillary Agreements and the Restated Articles and consummation
of the transactions contemplated hereby, each not to exceed $2,500;
(iii) sales, documentary, stamp and transfer taxes or other
similar taxes incurred in connection with the Closing of the transactions
contemplated by this Agreement, excluding income taxes, which may be payable
with respect to the execution and delivery of this Agreement or the issuance,
delivery or acquisition of Shares or upon the conversion of the Shares; and
(iv) all costs of the Company's performance of and compliance
with this Agreement, the Ancillary Agreements and the Restated Articles.
19
10E. Notices. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be delivered
personally, by facsimile transmission, by overnight delivery or other courier
service, or by first class certified or registered mail, return receipt
requested, postage prepaid:
(i) if to the Purchasers:
At the address set forth below such Purchasers' names on
Schedule I hereto.
with copies (which shall not constitute notice) to:
in the case of Series D Holders:
GE Capital Equity Investments, Inc.
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attn: General Counsel
Fax: (000) 000-0000
in case of Series A, Series B and Series C Holders:
Xxxxxx & Xxxxxx, L.L.P.
One American Center, Suite 2700
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxx, Esq.
Fax: (000) 000-0000
(ii) if to the Company:
Deja News , Inc.
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Mr. Xxx Xxxxxxxx
President and Chief Executive Officer
Fax: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxx, Phleger & Xxxxxxxx LLP
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: J. Xxxxxxx Xxxxx, Esq.
Fax: (000) 000-0000
Any party may, by not less than ten days notice given in accordance
with this Section to the other parties, designate another address or person for
receipt of notices hereunder.
20
Notice given by personal delivery or courier service shall be effective upon
actual receipt. Notice given by telecopier shall be confirmed by appropriate
answer back and shall be effective upon actual receipt if received during the
recipient's normal business hours, or at the beginning of the recipient's next
business day after receipt if not received during the recipient's normal
business hours. Notice given by mail shall be effective upon the earlier of
actual receipt or 72 hours after having been mailed.
10F. Entire Agreement. This Agreement, together with the Schedules
hereto, the Restated Articles and the Ancillary Agreements, embodies the entire
agreement and understanding among the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings relating to
such subject matter.
10G. Amendments and Waivers. Except as otherwise expressly set forth
in this Agreement, any term of this Agreement may be amended and the observance
of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), with the written consent of
the Company and the holders of 75% of the Shares. Any amendment or waiver
effected in accordance with this paragraph 10G shall be binding upon each holder
of any Shares, each future holder of all such Shares and the Company so long as
such holder or future holder is not affected disproportionately among other
holders. No waivers of or exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be deemed to be, or construed as,
a further or continuing waiver of any such term, condition or provision.
10H. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall be one and the same document.
10I. Headings. The headings of this Agreement are for convenience
only and do not constitute a part of this Agreement.
10J. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
10K. Governing Law. The construction, validity and interpretation of
this Agreement will be governed by the internal laws of the State of New York
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York.
10L. Further Assurances. Each party to this Agreement hereby
covenants and agrees, without the necessity of any further consideration, to
execute and deliver any and all such further documents and take any and all such
other actions as may be necessary and appropriate to carry out the intent and
purposes of this Agreement and to consummate the transactions contemplated
hereby.
10M. Indemnification. The Company will indemnify each Purchaser and
its agents and representatives against, and hold each Purchaser and its agents
and representatives
21
harmless from any and all, loss, claim, damage, action, suit, proceeding,
deficiency or expense, including any and all out-of-pocket costs, including,
without limitation, all reasonable legal and accounting fees relating to,
arising from or in connection with any misrepresentation or breach of a
warranty, agreement, covenant or obligation of the Company contained in this
Agreement, the Ancillary Agreements or the Restated Articles. The obligations of
the Company to indemnify the Purchasers set forth in this paragraph 10M shall
survive forever, subject only to the provisions of paragraph 10C. Any payment by
the Company to a Purchaser pursuant to this Section 10M shall be treated for
federal, state, local and foreign Tax purposes as an adjustment to the price
paid by such purchaser for the Series D Preferred Stock.
10N. Understanding Among Purchasers. Each Purchaser acknowledges
that it is not relying upon any other Purchaser, or any officer, director,
employee, agent, partner or Affiliate of any such other Purchaser, in making its
investment or decision to invest in the Company or in monitoring such
investment. Each Purchaser agrees that no Purchaser nor any controlling person,
officer, director, shareholder, partner, agent or employee of any Purchaser
shall be liable for any action heretofore or hereafter taken or omitted to be
taken by any of them relating to or in connection with the Company or the
Shares. Without limiting the foregoing, no Purchaser (nor any of its Affiliates,
officers, directors, shareholders, partners, agents or employees) or other
holder of any Shares shall have any obligation, liability or responsibility
whatsoever for the accuracy, completeness or fairness of any or all information
about the Company or any Subsidiary or their respective properties, business or
financial and other affairs, acquired by such Purchaser or holder from the
Company or any Subsidiary or the respective officers, directors, employees,
agents, representatives, counsel or auditors of either, and in turn provided to
another Purchaser or holder, nor shall any such Purchaser (or such other Person)
have any obligation or responsibility whatsoever to provide any such information
to any other Purchaser (or such other Person) or holder or to continue to
provide any such information if any information is provided.
10O. Preemptive Rights. By its execution hereof, each of Austin
Ventures, Prime New Ventures, Internet Capital Group LLC, and Xxxx-Xxxxx Inc.
hereby acknowledges and agrees that the Shares being offered, or which may be
purchased, pursuant to the provisions of Section 1B above (together with the
shares of common stock purchased under that certain Stock Purchase Agreement
dated of even date herewith, among Xxxxxx X. Xxxxxx, Xxxxxx X. Xxxxxx and the
purchasers named therein) are in full and final satisfaction of any and all
preemptive rights, rights of first offer or other rights to acquire additional
shares of the capital stock of the Company in connection with the sale of Shares
hereunder.
10P. Mutual Waiver of Jury Trial. THE COMPANY AND EACH OF THE
PARTIES HERETO HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS
AGREEMENT, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
[SIGNATURE PAGES FOLLOW]
22
IN WITNESS WHEREOF, this Series D Convertible Non-Voting Preferred
Stock Purchase Agreement has been executed by the parties hereto as of the date
first written above.
COMPANY:
DEJA NEWS, INC.
By: /s/ Xxx Xxxxxxxx
-------------------------------------
Xxx Xxxxxxxx
President and Chief Executive Officer
PURCHASERS:
GE CAPITAL EQUITY INVESTMENTS, INC.
By:_______________________________________
Name:_____________________________________
Title:____________________________________
NATIONAL BROADCASTING COMPANY, INC.
By:_______________________________________
Name:_____________________________________
Title:____________________________________
COMCAST INTERACTIVE INVESTMENTS, INC.
By:_______________________________________
Name:_____________________________________
Title:____________________________________
[SIGNATURE PAGE TO SERIES D CONVERTIBLE
NON-VOTING STOCK PURCHASE AGREEMENT]
ESSEX PRIVATE PLACEMENT FUND LIMITED
PARTNERSHIP
By:_______________________________________
Name:_____________________________________
Title:____________________________________
XXXX-XXXXX INC.
By: /s/ Xxxxx Xxxx
---------------------------------------
Xxxxx Xxxx
Senior Vice President, Development and Planning
INTERNET CAPITAL GROUP, LLC
By: /s/ Xxxxxxx X. Xxx
--------------------------------------
Xxxxxxx X. Xxx
Managing Director
AUSTIN VENTURES VI, L.P.
By: AV Partners VI, L.P., Its General Partner
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Xxxxxx X. Xxxxxxx
General Partner
[SIGNATURE PAGE TO SERIES D CONVERTIBLE
NON-VOTING STOCK PURCHASE AGREEMENT]
PRIME VIII, L.P.
By: Prime SKA-I, LLC
Its General Partner
By:______________________________________
Name:____________________________________
Title:___________________________________
[SIGNATURE PAGE TO SERIES D CONVERTIBLE
NON-VOTING STOCK PURCHASE AGREEMENT]
XXXXXXXXX & XXXXX CALIFORNIA
By:______________________________________
Its:_____________________________________
XXXXXXXXX & XXXXX EMPLOYEE VENTURE
FUND, X.X. XX
By: H&Q VENTURE MANAGEMENT, L.L.C.
Its General Partner
By:______________________________________
Its:_____________________________________
ACCESS TECHNOLOGY PARTNERS, L.P.
By: ACCESS TECHNOLOGY MANAGEMENT, L.L.C.
Its General Partner
By: H&Q VENTURE MANAGEMENT, L.L.C.
Its Managing Member
By:______________________________________
Its:_____________________________________
ACCESS TECHNOLOGY PARTNERS BROKERS
FUND, L.P.
By: H&Q VENTURE MANAGEMENT, L.L.C.
Its General Partner
By:______________________________________
Its:_____________________________________
[SIGNATURE PAGE TO SERIES D CONVERTIBLE
NON-VOTING STOCK PURCHASE AGREEMENT]
_________________________________________
Printed Name:____________________________
_________________________________________
Printed Name:____________________________
_________________________________________
Printed Name:____________________________
_________________________________________
Printed Name:____________________________
[SIGNATURE PAGE TO SERIES D CONVERTIBLE
NON-VOTING STOCK PURCHASE AGREEMENT]
[SIGNATURE PAGE TO SERIES D CONVERTIBLE
NON-VOTING STOCK PURCHASE AGREEMENT]
SCHEDULE I
SCHEDULE OF PURCHASERS
Number of
Purchaser Shares Purchase Price
------------------------------------- ------------- -----------------
GE Capital Equity Investments, Inc. 1,385,042 $5,000,001.62
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X.X. Xxxxx
National Broadcasting Company, Inc. 831,025 $3,000,000.25
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attn: Vice President, Law;
Corporate and Transaction Group
Comcast Interactive Investments, Inc. 692,521 $2,500,000.81
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxxxxxx Xxxx
Essex Private Placement Fund 277,008 $999,998.88
Limited Partnership
000 Xxxx Xxxxxx, Xxxxx 00
Xxxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxx Xxxxxxxxx
Xxxx-Xxxxx Inc. 386,939 1,396,849.79
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn: Xxxxx Xxxx
Senior Vice President
Internet Capital Group, LLC 1,679,240 6,062,056.40
00 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxx
Managing Director
Austin Ventures VI, L.P. 1,044,655 3,771,204.55
1300 Xxxxxxx Tower
000 X. Xxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx
General Partner
Prime VIII, L.P. 386,941 1,396,857.01
1700 One American Center
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxxxx
Xxxxxxxxx & Xxxxx California 241,837 873,031.57
Xxxxxxxxx & Xxxxx Employee
Venture Fund, X.X. XX
Access Technology Partners, L.P.
Access Technology Partners Brokers
Fund, L.P.
TOTAL 6,925,208 $25,000,000.88
========= ==============
Riders to Promissory Note dated May 14, 1998, by Deja News, Inc., in favor of
-----------------------------------------------------------------------------
Imperial Bank
-------------
Rider 1a
--------
initiates enforcement proceedings in respect of
Rider 1b
--------
reasonably
Rider 1c
--------
materially
Rider 1d
--------
reasonable
Rider 1e
--------
reasonable
Rider 1f
--------
reasonable
Rider 1g
--------
non-exclusive
Rider 1h
--------
due
Rider 2a
--------
Subject to the second paragraph of the above Section hereof under the heading
"Default," a
Accepted and agreed to:
DEJA NEWS, INC.
By:
-----------------------------
Name:
Title:
IMPERIAL BANK
By:
-----------------------------
Name:
Title:
2
