EXHIBIT 10.12
SUBSCRIPTION AND PURCHASE AGREEMENT
FOR
9,750,000 SHARES OF SERIES C CONVERTIBLE PREFERRED STOCK,
PAR VALUE $.001 PER SHARE
OF
CKG ▇▇▇▇▇.▇▇▇, INC.
(d/b/a Phase2Media)
(a Delaware corporation)
SUBSCRIPTION AND PURCHASE AGREEMENT (the "Agreement") dated as of the
26/th/ day of August, 1999, by and between CKG ▇▇▇▇▇.▇▇▇, INC., (d/b/a
Phase2Media) a Delaware corporation having offices at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Company"), and the Subscribers listed on Schedule I
attached hereto (collectively, the "Subscribers" and each individual a
"Subscriber").
W I T N E S S E T H:
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WHEREAS, the Subscribers and the Company have arranged for this Agreement
(the "Agreement") to provide for the subscription and, if such subscription as
set forth in this Agreement is accepted by the Company, the purchase by the
Subscribers, on the terms and subject to the conditions set forth in this
Agreement, of an aggregate of 9,750,000 shares of the Company's newly authorized
Series C Convertible Preferred Stock, par value $.001 per share (the "Series C
Preferred Stock") of the Company;
WHEREAS, on the basis of the representations and warranties, and subject to
the terms and conditions set forth herein, the Subscribers desire to subscribe
for and purchase the Series C Preferred Stock and the Company desires to cause
to be sold to each Subscriber, the number of shares of Series C Preferred Stock
set forth opposite each such Subscriber's name on Schedule I annexed hereto;
WHEREAS, the Series C Preferred Stock sold in accordance with this
Agreement, upon the execution of this Agreement, shall not be registered
securities under federal or state securities laws or quoted or listed for
trading on any securities exchange, organized market or quotation system at the
time of acquisition hereunder; and
WHEREAS, in reliance upon certain representations made by the Company and
the Subscribers herein, the transactions contemplated by this Agreement are such
that the offer and
sale of Series C Preferred Stock hereunder will be exempt from registration
under applicable federal and state securities laws pursuant to exemptions made
available under such laws.
NOW, THEREFORE, for and in consideration of the premises, and the mutual
representations, warranties, covenants and agreements set forth herein, and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the parties hereto agree as follows:
1. Subscription for Purchase of Series C Preferred Stock. On the basis
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of the representations, warranties, covenants and agreements, and subject to the
terms and conditions set forth herein, upon the Closing hereof (as that term is
defined in Section 2(a) below) the Company agrees to sell, transfer, convey and
deliver to the Subscribers, and the Subscribers agree to purchase, acquire and
accept delivery of the number of shares of the Series C Preferred Stock set
forth opposite such Subscriber's name on Schedule I attached hereto from the
Company for an aggregate purchase price of $3,800,000 (the "Purchase Price").
2. Closing.
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(a) The closing of the purchase of the Series C Preferred Stock
contemplated by this Agreement shall occur on or about August 26, 1999, at the
offices ▇▇▇▇▇▇▇▇ ▇▇▇▇ & Brandeis, LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ or at such other mutually convenient time or at such other mutually
convenient place as agreed upon by the parties (the "Closing"). The date on
which the Closing takes place is hereinafter referred to as the "Closing Date."
At the Closing, the Subscribers shall deliver the Purchase Price to the Company
or as directed by the Company, in certified funds or by wire transfer, and the
Company shall deliver to each Subscriber a certificate or certificates
representing the Series C Preferred Stock in such amount as set forth opposite
each Subscriber's name on Schedule I annexed hereto and in such denominations as
requested by each Subscriber.
(b) All certificates representing the Series C Preferred Stock shall
bear the restrictive legend referred to in Section 6 below.
3. Representations, Warranties and Covenants of the Subscriber. In
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connection with this Agreement, each of the undersigned Subscribers hereby
represents, warrants and covenants to the Company as follows, all of which
representations, warranties and covenants shall be deemed to be of the essence
hereof:
(a) Investment Intent. The Subscriber represents and warrants that
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the Series C Preferred Stock being purchased is being purchased or acquired
solely for the Subscriber's own account, for investment purposes only and not
with a view towards the distribution or resale to others. The Subscriber
acknowledges, understands and appreciates that the shares of Series C Preferred
Stock have not been registered under the Securities Act of 1933, as amended (the
"Securities Act") by reason of a claimed exemption under the provisions of such
Act which depends, in large part, upon the Subscriber's representations as to
investment intention, investor
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status and related and other matters set forth herein. The Subscriber
understands that, in the view of the United States Securities and Exchange
Commission (the "SEC"), among other things, a purchase with a present intent to
distribute or resell would represent a purchase and acquisition with an intent
inconsistent with its representation to the Company, and the SEC might regard
such a transfer as a deferred sale for which the registration exemption is not
available. The Subscriber agrees and consents to the placement of a legend on
the certificate(s) representing the Series C Preferred Stock purchased and
acquired hereunder, stating that such shares of Series C Preferred Stock have
not been registered under the Act or applicable state securities laws. Such
legend shall be removed promptly following such time as a registration statement
under the Act covering any such shares of Series C Preferred Stock is declared
effective by the SEC.
(b) Certain Risks. That (i) the Series C Preferred Stock represents
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equity securities in a private corporate entity that has an accumulated deficit,
(ii) no return on investment, whether through distributions, appreciation,
transferability or otherwise, and no performance by, through or of the Company,
has been promised, assured, represented or warranted by the Company, or by any
director, officer, employee, agent or representative thereof; (iii) the shares
of Series C Preferred Stock subscribed for under this Agreement (x) are not
registered under applicable federal or state securities laws, and thus may not
be sold, conveyed, assigned or transferred unless registered under such laws or
unless an exemption from registration is available under such laws, as more
fully described below, and (y) are not quoted, traded, listed for trading or
quotation on any organized market or quotation system, and there is therefore no
present public or other market for such shares of Series C Preferred Stock, and
there have not been any representations made by the Company to the Subscriber
that the Series C Preferred Stock ever will be quoted, traded or listed for
trading or quotation on any organized market or quotation system or that there
ever will be a public market for the Series C Preferred Stock; and (iv) that the
purchase of Series C Preferred Stock is a speculative investment, involving a
degree of risk, and is suitable only for a person or entity of adequate
financial means who has no need for liquidity in this investment in that, among
other things, (x) such person or entity may not be able to liquidate their
investment in the event of an emergency or otherwise, (y) transferability is
limited, and (z) in the event of a dissolution or otherwise, such person or
entity could sustain a complete loss of their entire investment.
(c) Sophisticated Investor. That (i) the Subscriber has adequate
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means of providing for the Subscriber's current financial needs and possible
contingencies and has no need for liquidity of the Subscriber's investment in
the Series C Preferred Stock; (ii) Subscriber is able to bear the economic risks
inherent in an investment in the Series C Preferred Stock and that an important
consideration bearing on its ability to bear the economic risk of the purchase
of the Series C Preferred Stock is whether the Subscriber can afford a complete
loss of the Subscriber's investment in the Series C Preferred Stock and the
undersigned Subscriber represents and warrants that the Subscriber can afford
such a complete loss; and (iii) the Subscriber has such knowledge and experience
in business, financial, investment and banking matters (including, but not
limited to investments in restricted, non-listed and non-registered securities)
that the Subscriber is capable of evaluating the merits, risks and advisability
of an investment in the Series C Preferred Stock.
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(d) Accredited Investor. That the Subscriber is an "accredited
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investor," as such term is defined in Rule 501 of Regulation D promulgated under
the Act.
(e) Documents, Information and Access. That (i) the Subscriber's
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decision to purchase the Series C Preferred Stock is not based on any
promotional, marketing or sales materials, and (ii) Subscriber and its
representatives have been afforded, prior to purchase thereof, the opportunity
to ask questions of, and to receive answers from, the Company and its
management, and has had access to all documents and information which the
Subscriber deems material to an investment decision with respect to the purchase
of the Series C Preferred Stock hereunder.
(f) No Registration, Review or Approval. The Subscriber acknowledges
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and understands that the limited private offering and sale of Series C Preferred
Stock pursuant to this Agreement has not been reviewed or approved by the SEC or
by any state securities commission, authority or agency, and is not registered
under the Act or under the securities or "blue sky" laws, rules or regulations
of any state. The Subscriber acknowledges, understands and agrees that the
Series C Preferred Stock is being offered and sold hereunder pursuant to (i) a
private placement exemption to the registration provisions of the Act pursuant
to Section 4(2) of such Act, and (ii) a similar exemption to the registration
provisions of applicable state securities laws.
(g) Transfer Restrictions. That the Subscriber will not transfer any
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Series C Preferred Stock purchased under this Agreement unless such Series C
Preferred Stock is registered under the Act and under any applicable state
securities or "blue sky" laws (collectively, the "Securities Laws"), or unless
an exemption is available under such Securities Laws, and that the Company may,
if it chooses, where an exemption from registration is claimed by such
Subscriber, condition any transfer of Series C Preferred Stock out of such the
Subscriber's name on an opinion of the Company's counsel, to the effect that the
proposed transfer is being effected in accordance with, and does not violate, an
applicable exemption from registration under the Securities Laws.
(h) Reliance. The Subscriber understands, acknowledges and
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appreciates that the Company is relying upon all of the representations,
warranties, covenants, understandings, acknowledgments and agreements contained
in this Agreement in determining whether to accept this subscription, sell and
issue the Series C Preferred Stock to the Subscriber.
(i) Accuracy of Representations and Warranties. That all of the
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representations, warranties, understandings and acknowledgments that the
Subscriber has made herein are true and correct in all material respects as of
the date of execution hereof, and that the Subscriber will perform and comply
fully in all material respects with all covenants and agreements set forth
herein, and the Subscriber covenants and agrees that until the acceptance of
this Agreement by the Company, the Subscriber shall inform the Company
immediately in writing of any changes in any of the representations or
warranties provided or contained herein.
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(j) Survival. Subscriber expressly acknowledges and agrees that all
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of its representations, warranties and covenants set forth in this Agreement
shall be of the essence hereof and shall survive the execution, delivery and
Closing of this Agreement, the sale and purchase of the Series C Preferred
Stock.
4. Representations and Warranties of the Company. In order to induce
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each Subscriber to enter into this Agreement and to purchase the Series C
Preferred Stock, the Company hereby represents and warrants to the Subscriber as
follows:
(a) Corporate Power and Authority. The stockholders of the Company
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are, prior to the sales and issuances contemplated hereby, the lawful,
beneficial and record owners of the shares of the Company's common stock, par
value $.001 per share (the "Common Stock"), Class A common stock, Series A
redeemable preferred stock and Series B convertible preferred stock, of the
Company set forth on Schedule 4(d) annexed hereto, representing all of the
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issued and outstanding shares of capital stock of the Company and such
stockholders own such shares free and clear of all liens, encumbrances,
restrictions and claims of every kind, except as set forth on Schedule 4(a).
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The Company has the full legal right, power and authority to enter into this
Agreement, the First Amended and Restated Securityholders' Agreement dated as of
the date hereof by and among the Company and the stockholders of the Company
party thereto (the "Amended Securityholders' Agreement") and the First Amended
and Restated Registration Rights Agreement dated as of the date hereof by and
among the Company and persons listed on Schedule 1 and Schedule 2 thereto (the
"Amended Registration Rights Agreement" and together with this Agreement and the
Amended Securityholders' Agreement, the "Transaction Documents"), and to issue
and sell the shares of Series C Preferred Stock pursuant to this Agreement and
to issue the Common Stock issuable upon conversion of the Series C Preferred
Stock in accordance with the terms of the Certificate of Designations,
Preferences and Rights of the Series C Preferred Stock (the "Series C
Certificate of Designations") and the delivery to Subscriber of the Series C
Preferred Stock pursuant to the provisions of this Agreement will transfer to
the Subscriber valid title thereto, free and clear of all liens, encumbrances,
restrictions and claims of every kind except as set forth on Schedule 4(a).
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(b) Authorization and Noncontravention. Each Transaction Document has
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been duly and validly authorized, executed and delivered by the Company and
constitutes a valid and legally binding agreement of the Company, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditors' rights and to general equity principles. The Series C
Certificate of Designations has been duly and validly authorized by all
necessary corporate action and has been duly filed with the Secretary of State
of the State of Delaware and is in full force and effect. The execution and
delivery by the Company of each Transaction Document and the other agreements
and instruments, to be executed and delivered by them in connection herewith do
not and the consummation of the transactions contemplated hereby and thereby
will not: (i) violate any provision of the Certificate of Incorporation or By-
Laws of the Company; (ii) except as set forth on Schedule 4(b), violate any
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provision of, or result in the termination or acceleration of, or default under,
or entitle any party to accelerate (whether after the filing of
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notice or lapse of time or both) any obligation under, or result in the creation
or imposition of any lien, charge, pledge, security interest or other
encumbrance upon any of the assets of the Company pursuant to any provision of
any mortgage, lien, lease, agreement, license, or instrument, or violate any
law, regulation, order, arbitration award, judgment or decree to which the
Company is a party or by which its property is bound; (iii) violate or conflict
with, or create a default under, any other material restriction of any kind or
character to which the Company is subject; (iv) require any governmental
consent, authorization, filing, approval, or exemption, except as may be
required by Regulation D promulgated under the Securities Act of 1933, as
amended (the "Securities Act"); or (v) violate any consent decree or requirement
to which the Company is subject.
(c) Existence and Good Standing. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has the power to own its property and to carry on its
business as it is now being conducted. The Company is duly qualified to do
business and is in good standing in the jurisdictions listed on Schedule 4(c),
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which are the only jurisdictions in which the character or location of the
properties owned or leased by the Company or the nature of the business
conducted by the Company makes such qualification necessary, except where the
failure to qualify individually or in the aggregate will not have a material
adverse effect on the business of the Company.
(d) Capital Stock.
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(i) A description of the authorized capital stock of the
Company, together with the number of shares of each class outstanding, the names
of each of the holders of such shares and the number of shares held by each
stockholder as of the Closing Date, is set forth on Schedule 4(d) hereto. All of
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such shares of capital stock of the Company have been duly authorized, validly
issued, are fully paid and nonassessable and were issued in compliance with all
applicable federal and state securities laws. No securities directly or
indirectly convertible into or exchangeable for any of the capital stock of the
Company, and no options, warrants, rights, calls or commitments relating to such
shares or other such securities, are outstanding, except as reflected on
Schedule 4(d) hereto. Except as set forth in the Amended Registration Rights
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Agreement, Purchase Warrant Certificate, dated June 17, 1999 issued by the
Company to SLG Graybar Sublease, LLC or as set forth on Schedule 4(d), the
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Company is not under any contractual obligation to register under the Securities
Act any of its presently outstanding securities or any securities which it may
hereafter issue.
(ii) As of the Closing, the Company shall not be subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock and the Company shall not have any
outstanding warrants, options, or other rights to acquire its capital stock,
except as set forth on Schedule 4(d).
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(iii) As of the Closing Date, sufficient shares of authorized
but unissued Common Stock will have been reserved by appropriate corporate
action in connection
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with the prospective conversion of the Series C Preferred Stock into Common
Stock. The issuance of the Common Stock upon conversion of the Series C
Preferred Stock into Common Stock, will not require any further corporate action
by the stockholders or directors of the Company, nor will it be subject to
preemptive rights of any present or future stockholders of the Company, nor will
it conflict with any provision of any agreement to which the Company is a party
or by which it or its assets are bound.
(e) Valid Issuance of Securities; No Personal Liability. When
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delivered in accordance with the terms hereof for the consideration expressed
herein, the Series C Preferred Stock (and the shares of Common Stock issuable
upon conversion of the Series C Preferred Stock) will be duly and validly
issued, the Series C Preferred Stock (and the shares of Common Stock issuable
upon conversion of the Series C Preferred Stock) will be fully paid, non-
assessable and free of preemptive rights, and, when executed and delivered by
the Company, each of this Agreement, and the Series C Preferred Stock will
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other law affecting
creditors' rights generally and of general principles of equity (regardless of
whether considered in a proceeding at law or in equity). Based in part upon the
representations of the Subscribers in this Agreement, the Series C Preferred
Stock will be issued in compliance with all applicable federal and state
securities laws and the offer, sale and issuance of the Series C Preferred Stock
will constitute transactions exempt from the registration requirements of
Section 5 of the Securities Act. The Subscribers, upon purchase of the Series C
Preferred Stock will not be subject to personal liability by reason of being a
holder of the Series C Preferred Stock.
(f) Subsidiaries and Investments. The Company has no (and has never
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had any) subsidiaries and does not own, directly or indirectly, any capital
stock or other equity or ownership or proprietary interest in any corporation,
partnership, association, trust, joint venture or other entity.
(g) Financial Statements and No Material Changes.
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(i) The Company has heretofore furnished the Subscriber with a
true, correct and complete unaudited balance sheet of the Company and the
related statements of income and retained earnings as of June 30, 1999 prepared
by the Company. (The balance sheet of the Company as at June 30, 1999 is
hereinafter referred to as the "Balance Sheet" and such date is hereinafter
referred to as the "Balance Sheet Date"). The Balance Sheet fairly presents in
all material respects the financial condition of the Company at the date thereof
and, except as indicated therein, reflects all known or asserted material claims
against and all material debts and liabilities of the Company, fixed or
contingent, as at the date thereof and the related statements of income and
retained earnings fairly present in all material respects the results of the
operations of the Company and the changes in its financial position for the
period indicated, except as specified therein.
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(ii) Except as specified in Schedule 4(g), since the Balance
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Sheet Date there has been (i) no material adverse change in the assets or
liabilities, or in the business (present or anticipated) or condition, financial
or otherwise, or in the results of operations of the Company except in the
ordinary course of business; and to the best knowledge, information and belief
of the Company, no fact or condition (not of general knowledge) exists or is
contemplated or threatened which might cause such a change in the future.
(h) Title to Properties; Encumbrances. Except as set forth on
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Schedule 4(h) attached hereto and except for properties and assets reflected in
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the Balance Sheet or acquired since the Balance Sheet Date which have been sold
or otherwise disposed of in the ordinary course of business, the Company has,
and on the Closing Date, will have, good, valid and marketable title to (a) all
of its properties and assets (real and personal, tangible and intangible),
including, without limitation, all of the properties and assets reflected in the
Balance Sheet, except as indicated in the notes thereto or in a Schedule to this
Agreement, and (b) all of the properties and assets purchased by the Company
since the Balance Sheet Date; in each case subject to no encumbrance, lien,
charge or other restriction of any kind or character, except for (i) liens
reflected in the Balance Sheet or in a Schedule to this Agreement, (ii) liens
consisting of zoning or planning restrictions, easements, permits and other
restrictions or limitations on the use of real property or irregularities in
title thereto which do not materially detract from the value of, or impair the
use of, such property by the Company in the operation of its business, and (iii)
liens for current taxes, assessments or governmental charges or levies on
property not yet due and delinquent and liens of carriers, warehousemen, vendors
and materialmen incurred in the ordinary course of business securing sums not
yet due and payable (liens of the type described in clauses (i), (ii) and (iii)
above are hereinafter sometimes referred to as "Permitted Liens"). Such
properties and assets are sufficient to enable the Company to carry out its
business as presently conducted and as proposed to be conducted. The Company
has all franchises, permits, licenses, and any other similar authority necessary
for the conduct of its business as now being conducted or proposed to be
conducted, the lack of which could materially and adversely affect the business,
properties, prospects, or financial condition of the Company. The Company is
not in default in any material respect under any of such franchises, permits,
licenses, or other similar authority.
(i) Leases. Schedule 4(i) attached hereto contains an accurate and
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complete list of all leases to which the Company is a party (as lessee or
lessor). Each lease set forth on Schedule 4(i) (or required to be set forth on
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Schedule 4(i)) is in full force and effect; all rents and additional rents due
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to date on each such lease have been paid; in each case, the lessee has been in
possession since the commencement of the original term of such lease and, to its
knowledge, is not in material default thereunder; and there exists no event of
default or event, occurrence, condition or act (including the purchase of the
Series C Preferred Stock, or any of the conditions precedent hereunder) which,
with the giving of notice, the lapse of time or the happening of any further
event or condition, would become a material default under such lease. The
Company is not currently in default of any of the terms or conditions under any
such lease in any material respect, and, to the best knowledge, information and
belief of the Company, all of the covenants
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to be performed by any other party under any such lease have been fully
performed. The property leased by the Company is in a state of good maintenance
and repair.
(j) Material Contracts. Except as set forth on Schedule 4(j) attached
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hereto, the Company is not bound by (a) any agreement, contract or commitment
relating to the employment of any person by the Company, or any bonus, deferred
compensation, pension, profit sharing, stock option, employee stock purchase,
retirement or other employee benefit plan, or arrangement or any collective
bargaining agreement or any other contract with any labor union or severance
agreements, programs, policies or arrangements, (b) any agreement, indenture or
other instrument which contains restrictions with respect to payment of
dividends or any other distribution in respect of its capital stock, (c) any
agreement, contract or commitment relating to capital expenditures not yet made,
which involves $50,000 or more and was not entered into the ordinary course of
business, (d) any loan or advance to, or investment in, any individual,
partnership, limited liability company, joint venture, corporation, trust,
unincorporated organization, government or other entity (each a "Person") or any
agreement, contract or commitment relating to the making of any such loan,
advance or investment which involves $50,000 or more, (e) any guarantee or other
contingent liability in respect of any indebtedness or obligation of any Person
(other than the endorsement of negotiable instruments for collection in the
ordinary course of business), (f) any employment agreement or other contract for
the employment of any officer or employee providing for annual compensation in
excess of $100,000 except for the Employment Agreement, dated as of August 16,
1999, between the Company and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, or any management service,
consulting or any other similar type of contract, unless entered into or
incurred in the ordinary course of business and not involving compensation in
excess of $100,000, (g) any agreement, contract or commitment limiting the
freedom of the Company to engage in any line of business or to compete with any
Person, (h) any bank debt, loan, credit or other financing arrangement, (i)
except as otherwise disclosed in this Agreement or a Schedule or Exhibit annexed
hereto, any agreement, contract or commitment not entered into in the ordinary
course of business which involves $50,000 or more and is not cancelable without
penalty within 30 days, (j) any contract or group of related contracts with the
same party or group of affiliated parties the performance of which involves (or
is reasonably expected to involve) consideration in excess of $50,000 during any
twelve month period, (k) any assignment, license, indemnification or other
agreement with respect to the Proprietary Rights (as defined in Section 4(v)
below) or other intangible property, (l) any agreement under which the Company
has granted any Person any rights related to the registration of securities
under the Securities Act (including, without limitation, demand or piggyback
registration rights), (m) any sales, distribution or franchise agreement, or (n)
any other agreement which is material to its operation and business prospects.
Each contract or agreement set forth on Schedule 4(j) (or required to be set
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forth on Schedule 4(j)) has been, or simultaneously upon the execution and
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delivery hereof will be, executed and delivered and is (or will be) valid,
binding, and enforceable in accordance with its terms and is in full force and
effect; and there exists no material default or event of default or event,
occurrence, condition or act (including the purchase of the Series C Preferred
Stock or any of the conditions precedent hereunder) which, with the giving of
notice, the lapse of time or the happening of any further event or condition,
would become a material default or event of default thereunder. The Company is
not currently in
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default in any material respect of any of the terms or conditions of any
contract or agreement set forth on Schedule 4(j) (or required to be set forth
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on Schedule 4(j)) in any respect, which would, in the aggregate, have a material
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adverse effect on such party.
(k) Restrictive Documents. Except as set forth on Schedule 4(k)
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attached hereto, the Company is not subject to, or a party to, any charter, by-
law, mortgage, lien, lease, license, permit, agreement, contract, instrument,
law, rule, ordinance, regulation, order, judgment or decree, or any other
restriction of any kind or character, which materially and adversely affects the
business (present or anticipated) or condition of the Company, financial or
otherwise, or any of its assets taken as a whole, or which would prevent
consummation of the transactions contemplated by this Agreement, compliance by
the Company with the terms, conditions and provisions hereof or the continued
operation of the Company's business after the date hereof or the Closing Date on
substantially the same basis as heretofore operated or which would restrict the
ability of the Company to acquire any property or conduct business in any area.
(l) Litigation. Except as set forth on Schedule 4(l) attached hereto,
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there is no action, suit, proceeding at law or in equity, arbitration or
administrative or other proceeding by or before or any investigation by any
governmental or other instrumentality or agency, pending, or, to the best
knowledge, information and belief of the Company, threatened, against or
affecting the Company, or any of its properties or rights; and the Company does
not know of any valid basis for any such action, proceeding or investigation.
The foregoing includes, without limitation, actions pending or threatened
involving the prior employment of any of the Company's officers, employees or
consultants, their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers.
There are no actions, suits, proceedings or investigations by the Company
currently pending against any third party, at law or in equity, or before or by
any governmental department, commission, board, bureau, agency or
instrumentality (including, without limitation, any actions, suits, proceedings
or investigations with respect to the transactions contemplated by this
Agreement). The Company is not subject to any arbitration proceedings under
collective bargaining agreements or otherwise or any governmental investigations
or inquiries. Except as set forth on Schedule 4(l), the Company is not party or
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subject to any judgment, order, writ, injunction, or decree entered in any
lawsuit or proceeding which may affect its operations, business practices,
present or anticipated, or ability to acquire any property or conduct business.
(m) Taxes. Except as set forth on Schedule 4(m):
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(i) All taxes and assessments, including, without limitation,
income, property, sales, use, franchise, value added, employees' income
withholding and social security taxes and import duties, including interest and
penalties thereon, imposed by the United States or by any foreign country or by
any state, municipality, subdivision or instrumentality of the United States or
of any foreign country, or by any other taxing authority, for which the Company
may be liable in respect of all periods prior to the Closing Date (including
taxes in respect of tax periods ending on the Closing Date and taxes in respect
of tax periods ending after the Closing Date to
10
the extent attributable to the portion of that period which ends on the Closing
Date), either have been paid when due or will be paid when due. All tax returns
required to be filed through the date hereof (and the Closing Date), including,
without limitation, information returns, have been (or will be) accurately
prepared and duly and timely filed and all deposits and payments required by law
to be made by the Company, including with respect to employees' withholding
taxes, have been duly made in accordance with all applicable laws to the best of
the Company's knowledge or belief.
(ii) There are no tax sharing agreements or arrangements or tax
indemnity agreements between the Company and any other person.
(iii) The Company has never been an includable corporation in any
affiliated group of corporations within the meaning of Section 1504 of the
Internal Revenue Code of 1986, as amended (the "Code") (or any similar provision
of state or other tax law).
(iv) The Company has not filed a consent pursuant to the
collapsible corporation provisions of section 341(f) of the Code (or any similar
provision of state or other tax law) or agreed to have section 341(f)(2) of the
Code or any similar provision of state or other tax law) apply to any
disposition of any asset owned by the Company.
(v) All taxes arising from the transactions described in this
Agreement and payable by the Company, if any, will be paid by the Company.
(n) Liabilities. The Company does not have any outstanding material
-----------
obligations, claims, liabilities or indebtedness, contingent or otherwise,
except as set forth in the Balance Sheet or referred to in the footnotes
thereto, other than liabilities incurred subsequent to the Balance Sheet Date in
the ordinary course of business, and, except as set forth on Schedule 4(n), not
-------------
involving borrowings by the Company. The Company maintains a standard system of
accounting in accordance with GAAP. The Company's financial reserves reflected
in the Balance Sheet are adequate to cover claims already incurred and
reasonably expected to be incurred and the Company's provisions for taxes as set
forth in the Balance Sheet are adequate and accurate for taxes due and accrued.
Except as set forth on Schedule 4(n), the Company is not in default in respect
-------------
of the terms or conditions of any indebtedness.
(o) Compliance with Laws. Except as set forth on Schedule 4(o), the
-------------------- -------------
Company is in compliance in all material respects with all applicable laws,
regulations, orders, judgments and decrees. Neither the Company nor, to the
best of the Company's knowledge, has any employee of the Company has at any time
made any payments for improper or unlawful political contributions or made any
bribes, kickback payments or other illegal payments.
(p) Accounts Receivable. The amount of all accounts receivable,
-------------------
unbilled invoices and other debts due or recorded in the records and books of
account of the Company as being due to it at the Closing Date (less the amount
of any provision or reserve therefor made in the records and books of account of
the Company) constitute valid and enforceable claims that
11
have arisen only from bona fide transactions in the ordinary course of business
and none of such accounts receivable or other debts is or will, to the best
knowledge of the Company, at the Closing Date be subject to any counterclaim or
set-off except to the extent of any such provision or reserve, and there are no
known, contingent or asserted claims, or refusals to pay against any such
receivables or debts. There has been no material adverse change since the
Balance Sheet Date in the amount of accounts receivable or other debts due the
Company or the allowances with respect thereto, or accounts payable of the
Company from that reflected in the Balance Sheet.
(q) Employees; Employee Benefit Plans. No employee or consultant of
---------------------------------
the Company has any agreement or contract, written or oral, except as described
on Schedule 4(q) regarding such person's employment or consultancy with the
-------------
Company. To the best of the Company's knowledge, no employee of the Company nor
any consultant with whom the Company has contracted is in violation of any term
of any employment contract, non-disclosure agreement or any other similar
contract or agreement relating to the relationship of such employee or
consultant with the Company, any former employer or any other party. No
employee of the Company has been granted the right to continued employment by
the Company or to any material compensation following termination of employment
with the Company except as set out on Schedule 4(q) hereto. The Company is not
-------------
aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, nor does the Company
have a present intention to terminate the employment of any officer, key
employee or group of key employees. Set forth on Schedule 4(q) attached hereto
-------------
is an accurate and complete list of all employee benefit plans ("Employee
Benefit Plans") within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended, and the rules and regulations
thereunder ("ERISA"), whether or not any such Employee Benefit Plans are
otherwise exempt from the provisions of ERISA, established, maintained or
contributed to by the Company. All such Employee Benefit Plans are fully funded
and are and at all times have been in compliance in all material respects with
applicable law, including the provisions of ERISA.
(r) No Changes Since Balance Sheet Date. Since the Balance Sheet
-----------------------------------
Date, except as expressly contemplated hereby or as disclosed in a Schedule or
Exhibit hereto, the Company has not (a) incurred any liability or obligation of
any nature (whether accrued, absolute, contingent or otherwise), except in the
ordinary course of business, or paid any material obligation or liability, other
than current liabilities paid in the ordinary course of business, (b) permitted
any of its assets to be subjected to any mortgage, pledge, lien, security
interest, encumbrance, restriction or charge of any kind (other than Permitted
Liens), (c) sold, transferred or otherwise disposed of any assets, including
without limitation, any Proprietary Rights, except in the ordinary course of
business, (d) made any capital expenditure or commitment therefor, except in the
ordinary course of business, (e) declared or paid any dividend or made any
distribution, in cash or other property, on any shares of its capital stock, or
redeemed, purchased or otherwise acquired any shares of its capital stock or any
option, warrant or other right to purchase or acquire any such shares, (f) made
any bonus or profit sharing distribution or payment of any kind, (g) increased
its indebtedness for borrowed money or made any loan to any Person, (h) written
off as uncollectible any notes or accounts receivable, except write-offs in the
ordinary
12
course of business charged to applicable reserves, none of which individually or
in the aggregate would have a material adverse effect to the Company or suffered
any damage, destruction or casualty loss exceeding $50,000 in the aggregate, (i)
granted any increase in the rate of wages, salaries, bonuses or other
remuneration of any executive employee or other employees, (j) cancelled or
waived any claims or rights of substantial value, (k) made any change in any
method of accounting or audit practice, (l) otherwise conducted its business or
entered into any transaction, except in the ordinary course of business, or (m)
agreed, whether or not in writing, to do any of the foregoing. Since the Balance
Sheet Date there has been no material adverse change in the financial condition,
operating results, assets, operations, business, prospects, employee relations
or customer or supplier relations of the Company.
(s) Disclosure. None of this Agreement, the financial statements
----------
referred to in Section 4(g) hereof (including the footnotes thereto), any
Schedule, Exhibit or certificate attached hereto or delivered in accordance with
the terms hereof or any document or statement in writing which has been supplied
by the Company or by any of its directors or officers in connection with the
transactions contemplated by this Agreement contains any untrue statement of a
material fact, or omits any statement of a material fact necessary in order to
make the statements contained herein or therein not misleading in light of the
circumstances under which made. There is no fact (presently understood as such
and not of general knowledge) known to the Company which materially and
adversely affects the business, present or anticipated, or financial condition
of the Company or its properties or assets which has not been set forth in this
Agreement, the financial statements referred to in Section 4(g) hereof
(including the footnotes thereto), any Schedule, Exhibit or certificate attached
hereto or delivered in accordance with the terms hereof or any document or
statement in writing which has been supplied by or on behalf of the Company or
by any of its directors or officers in connection with the transactions
contemplated by this Agreement.
(t) Broker's or Finder's Fees. No agent, broker, person or firm
-------------------------
acting on behalf of the Company is, or will be, entitled to any commission or
broker's or finder's fees from any of the parties hereto, or from any Person
controlling, controlled by or under common control with any of the parties
hereto, in connection with any of the transactions contemplated by this
Agreement. Company agrees to indemnify and hold the Subscriber harmless with
respect to the foregoing.
(u) Environmental Matters. The Company has been and is in material
---------------------
compliance with all provisions of all pollution control laws; hazardous waste
generation, storage, disposal, transportation, handling and cleanup laws; other
environmental protection laws; occupational safety and health standards laws;
and all rules, standards, regulations, permits, license requirements and
authorizations required by or related to such laws (collectively "Environmental
and Safety Laws"), and has obtained all permits, licenses and other
authorizations required thereunder. No proceeding or investigation is pending
or, to its knowledge, threatened, alleging or to the effect that the Company has
violated or is in violation of or bears any liability pursuant to any such law,
rule, standard, regulation, permit, license or authorization or any related
common law theory. The Company is not, and has not been, subject
13
to or bound by any order, decree or otherwise relating to any of the foregoing.
To its knowledge, no underground storage tanks, asbestos containing material, or
PCB-containing materials or equipment is present at any property owned or
occupied by the Company. Without limiting the generality of the foregoing, no
facts, events or conditions relating to the past or present properties or
operations of the Company will, to the Company's knowledge, prevent, hinder or
limit continued compliance with Environmental and Safety Laws or give rise to
any liabilities (contingent or otherwise) or corrective, investigatory or
remedial obligations pursuant to Environmental and Safety Laws, including,
without limitation, obligations or liabilities relating to onsite or offsite
hazardous substance releases, personal injury, property damage or natural
resources damage.
(v) Proprietary Rights. Schedule 4(v) contains a complete and
------------------ -------------
accurate list of all (a) pending patent applications and applications for
registrations of other intellectual property rights filed by or on behalf of the
Company, (b) material unregistered trade names and corporate names owned or used
by the Company and (c) material unregistered trademarks, service marks,
copyrights, mask works and computer software owned or used by the Company
(together the "Proprietary Rights"). Schedule 4(v) also contains a complete and
-------------
accurate list of all licenses and other rights granted by the Company to any
third party or by any third party to the Company with respect to any Proprietary
Rights. The Company exclusively owns, free and clear of liens or encumbrances,
all rights, title and interests to, or has sufficient rights to use pursuant to
a valid license, all Proprietary Rights listed on Schedule 4(v) without conflict
-------------
with or infringement of the rights of others. The Company believes that the
Proprietary Rights are all the rights necessary for the operation of the
businesses of the Company as presently conducted and as presently proposed to be
conducted. To the best of the Company's knowledge, there is no loss or
expiration of any Proprietary Right threatened, pending or reasonably
foreseeable. The Company has taken all reasonably necessary actions to maintain
and protect the Proprietary Rights which it owns and uses. Except as set forth
on Schedule 4(v), as of the date hereof,(i) there have been no claims made
-------------
against the Company asserting the invalidity, misuse or unenforceability of any
Proprietary Rights, and, to the best of the Company's knowledge, there are no
grounds for the same, (ii) the Company has not received a notice of conflict
with the asserted rights of others within the last five years, (iii) the conduct
of the Company's business has not misappropriated or infringed, to the Company's
knowledge, and does not misappropriate or infringe any Proprietary Rights of
other Persons, nor would any future conduct as presently contemplated infringe
any Proprietary Rights of other Persons and (iv) to the best of the Company's
knowledge, the Proprietary Rights owned by or licensed to the Company have not
been infringed or misappropriated by other Persons.
(w) Related-Party Transactions. No consultant, employee, officer,
--------------------------
director or stockholder of the Company or member of such person's immediate
family is indebted to the Company, nor is the Company indebted (or committed to
make loans or extend or guarantee credit) to any of them. None of such persons
has any direct or indirect ownership interest in any firm or corporation with
which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company, except
that consultants, employees, officers, directors or stockholders of the Company
and members of their
14
immediate families may own less than 5% of the outstanding stock in a publicly
traded company that may compete with the Company. No member of the immediate
family of any employee, officer, or director of the Company is directly or
indirectly interested in any material contract, commitment, undertaking or
transaction with the Company.
(x) Insurance. The Company has insurance policies in effect covering the
---------
risks associated with its businesses and properties which are of such character
and in such amounts as are customarily maintained by similarly situated entities
engaged in the same or similar businesses.
(y) Filing of 83(b) Elections. Each officer of the Company that has
-------------------------
received securities of the Company subject to the right of repurchase by the
Company in Section 5.1 of the Amended Securityholders' Agreement has duly and
timely filed an election pursuant to Section 83(b) of the Internal Revenue Code
with respect to such securities.
(z) Exemption from Registration. The Company represents and warrants
---------------------------
that the offer and sale of the Series C Preferred Stock to the Subscriber in
accordance with the terms and provisions of this Agreement is being effected in
accordance with the Act and applicable state securities laws pursuant to (i) a
private placement exemption to the registration provisions of the Act pursuant
to Section 4(2) of such Act, and (ii) a similar exemption to the registration
provisions of applicable state securities laws.
5. Conditions to Closing.
---------------------
(a) The obligations of the Company to consummate the transactions
contemplated by this Agreement on the Closing Date is conditioned upon
satisfaction, on or prior to the Closing Date, of each of the following
conditions:
(i) On or prior to the Closing Date, the Subscribers and all
other parties to the Amended Securityholders' Agreement shall have properly and
validly executed the Amended Securityholders' Agreement and taken all actions
required to be taken by them thereunder, including authorizing an increase in
the number of authorized directors from five to six and appointing the Series C
Designee (as such term is defined in the Amended Securityholders' Agreement).
(ii) The Subscribers and all of the other parties shall have
properly and validly executed the Amended Registration Rights Agreement.
(iii) Receipt by the Company, and/or the Company's designee, by
certified official bank check or wire transfer the entire consideration
specified in Section 1 hereof.
(b) The obligations of the Subscribers to consummate the transactions
contemplated by this Agreement on the Closing Date is conditioned upon
satisfaction, on or prior to the Closing Date, of each of the following
conditions:
15
(i) The Company and all of the other parties thereto shall have
entered into the Amended Securityholders' Agreement.
(ii) The Company and all of the other parties thereto shall have
entered into the Amended Registration Rights Agreement.
(iii) The Company shall have delivered to each of the Subscribers
a certificate or certificates representing the Series C Preferred Stock in such
denominations as requested by the Subscriber.
(iv) The Company shall have filed with the Secretary of State of
the State of Delaware the Series C Certificate of Designations and shall have
delivered evidence of same to the Subscribers.
(v) The Company shall have reimbursed the Subscribers for their
actual documented, costs, including attorneys' fees actually incurred, in
connection with the negotiation, preparation and delivery of this Agreement, the
Amended Securityholders' Agreement, the Amended Registration Rights Agreement,
and the Series C Certificate of Designation up to Twenty Thousand ($20,000)
Dollars.
(vi) The Subscriber shall have received an opinion of Company's
counsel, ▇▇▇▇▇▇▇▇ ▇▇▇▇ & Brandeis, LLP, in the form annexed hereto as Exhibit
-------
5(vi).
------
(vii) The Company shall use the proceeds from the sale of the
Series C Preferred Stock in accordance with the provisions of Section 8(1)
below, and upon the application of such proceeds all agreements by and between
the Company, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and The CKG ▇▇▇▇▇.▇▇▇ Stock Trust (the "Trust")
shall have been terminated.
(viii) The representations and warranties of the Company contained
in this Agreement or in any Exhibit or Schedule attached hereto shall be true,
complete and correct on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such date,
and the Company shall have delivered to the Subscribers a certificate, dated the
Closing Date, to such effect.
(ix) No action or proceeding shall have been instituted or, to
the best knowledge, information and belief of the Company, threatened before a
court or other government body or by any public authority to restrain or
prohibit any of the transactions contemplated hereby, and the Company shall have
delivered to the Subscribers a certificate, dated the Closing Date, to such
effect.
(x) All governmental and other consents, filings and approvals,
if any, necessary to permit the consummation of the transactions contemplated by
this Agreement shall have been received.
16
(xi) The Preferred Stock to be issued and sold by the Company
and to be acquired by the Subscriber shall be (and the shares of Common Stock
issuable upon conversion of the Series C Preferred will be upon issuance by the
Company and acquisition by the Subscribers) duly authorized and validly issued
to the Subscribers, free and clear of all liens, encumbrances, restrictions and
claims of every kind. The Subscribers shall have each received properly
completed stock certificate(s) representing the shares of Preferred Stock being
purchased by the Investors on the Closing Date.
(xii) Good Standing and Other Certificates. The Company shall
------------------------------------
have delivered to the Subscribers (a) copies of the Company's Certificate of
Incorporation, including all amendments thereto, certified by the Secretary of
State of the State of Delaware, (b) certified copies of the Series C Certificate
of Designations, certified by the Secretary of State of the State of Delaware,
as having been filed on or before the Closing Date, (c) a certificate from the
Secretary of State of the State of Delaware to the effect that the Company is in
good standing or subsisting in such State and listing all charter documents of
the Company on file, (d) a certificate from the Secretary of State or other
appropriate official in each State in which the Company is qualified to do
business to the effect that the Company is in good standing in such State, (e) a
certificate as to the tax status of the Company from the appropriate official in
its jurisdiction of incorporation and each State in which the Company is
qualified to do business and (f) a copy of the By-laws and the Certificate of
Incorporation of the Company certified by the Secretary of the Company as being
true, complete and correct and in effect on the Closing Date, after giving
effect to the filing described in Section 5(b) (iv) hereof, and accompanied by a
copy of the adopting resolutions authorizing the Series C Certificate of
Designations and approving the stock issuance contemplated thereby.
(xiii) No Material Adverse Change. Prior to each of the Closing
--------------------------
Date, there shall be no material adverse change in the assets or liabilities,
the business (present or anticipated), or condition, financial or otherwise, or
in the results of operations, of the Company since the Balance Sheet Date and
the Company shall have delivered to the Investors a certificate, dated the
Closing Date, to such effect.
(xiv) Performance of Agreements. All of the agreements of the
-------------------------
Company to be performed on or before the Closing Date pursuant to the terms
hereof or the terms of any Exhibit hereto, shall have been duly performed, and
the Company shall have delivered to the Subscribers a certificate, dated as of
the Closing Date, to such effect.
(xv) All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Subscribers and
their counsel, and the Subscribers shall have received copies of all such
documents and other evidences as they or their counsel may reasonably request in
order to establish the consummation of such transactions and the taking of all
proceedings in connection therewith, including but not limited to documentation
relative to the equity ownership of the CKG ▇▇▇▇▇.▇▇▇ Trust (the "Trust") in the
Company in the event that the Trust is an equity owner of the Company on the
Closing Date.
17
6. Series C Preferred Stock Legends. The Subscriber represents and
--------------------------------
warrants that it has read, considered and understood the legend, referred to in
Section 7.1 of the Amended Securityholders' Agreement, shall be placed on all of
the certificates representing the Series C Preferred Stock and or all shares of
Common Stock issuable upon conversion of the Series C Preferred Stock.
7. Indemnification.
---------------
(a) The Company agrees to indemnify and hold each Subscriber and each
of their respective partners, officers, directors, members, employees, counsel,
accountants, agents, successors and assigns (collectively, an "Indemnified
Party") harmless from damages, liabilities, losses, costs or expenses
(including, without limitation, reasonable counsel fees and expenses) suffered
or paid, directly or indirectly, as a result of or arising out of (i) the
failure of any respective representation or warranty made by the Company in this
Agreement or in any Schedule or Exhibit attached hereto to be true, complete and
correct in all material respects as of the date of this Agreement and as of the
Closing Date or (ii) a breach of the covenant set forth in Section 8(l ) below.
(b) If any action, suit, proceeding or investigation is commenced, as
to which an Indemnified Party proposes to demand indemnification, it shall
notify the Company with reasonable promptness; provided, however, that any
-------- -------
failure by an Indemnified Party to notify the Company shall not relieve the
Company from its obligations hereunder, except to the extent that the Company
shall have been materially prejudiced in its ability to defend the action, suit,
proceedings or investigation for which such indemnification is sought by reason
of such failure. Except as set forth below, an Indemnified Party shall not have
the right to retain counsel of its own choice, and the Company shall pay the
reasonable fees, reasonable expenses and reasonable disbursements of counsel
selected by the Company; and such counsel shall to the extent consistent with
its professional responsibilities cooperate with the Company and any counsel
designated by the Company.
In the event the Company does not assume or fails to conduct in a diligent
manner the defense of any claim or litigation resulting therefrom, (a) the
Indemnified Party may defend, using its own counsel, against such claim or
litigation, in such manner as it deems appropriate, including, but not limited
to, settling such claim or litigation, after giving notice of the same to the
Company, on such terms as the Indemnified Party may deem appropriate, and (b)
the Company shall be entitled to participate in (but not control) the defense of
such action, with its counsel and at its own expense. The Company shall pay the
reasonable fees, reasonable expenses and reasonable disbursements of counsel
selected by an Indemnified Party in the circumstances described in the previous
sentence. If the Company thereafter seeks to question the manner in which the
Indemnified Party defended such third party claim or the amount or nature of any
such settlement, the Company shall have the burden to prove by a preponderance
of the evidence that the Indemnified Party did not defend or settle such third
party claim in a reasonably prudent manner.
18
The Company shall be liable for any settlement of any claim against an
Indemnified Party made with the Company's written consent or made in connection
with the circumstances described in the first sentence of the previous
paragraph. The Company shall not, without prior written consent of an
Indemnified Party, which consent shall not be unreasonably withheld or delayed,
settle or compromise any claim, or permit a default or consent to the entry of
any judgment in respect thereof.
Each party agrees to cooperate fully with the other, such cooperation to
include, without limitation, attendance at depositions and the provision of
relevant documents as may be reasonably requested by the other parties, provided
that the Company will reimburse the Indemnified Party for all of its out-of-
pocket expenses incurred in connection with such cooperation by the Indemnified
Party.
(c) In order to provide for just and equitable contribution, if a
claim for indemnification pursuant to these indemnification provisions is made
but it is found in a final judgment by a court of competent jurisdiction (not
subject to further appeal) that such indemnification may not be enforced in such
case, even though the express provisions hereof provide for indemnification in
such case, then the Company (as applicable), on the one hand, and an Indemnified
Party, on the other, shall contribute to the losses, claims, damages,
obligations, penalties, judgments, awards, liabilities, costs and expenses to
which the indemnified persons may be subject in accordance with the relative
benefits received by the Company (as the case may be), on the one hand, and an
Indemnified Party, on the other hand, in connection with the statements, acts or
omissions which resulted in expenses and the relevant equitable considerations
shall also be considered. No person found liable for a fraudulent
misrepresentation shall be entitled to contribution from any person who is not
also found liable for such fraudulent misrepresentation.
8. Miscellaneous.
-------------
(a) Preservation of Confidential Information. The Subscriber shall
----------------------------------------
keep confidential any and all non-public information obtained from the Company
concerning the Company's properties, operations and business (unless readily
ascertainable from public or published information or trade sources) until the
same ceases to be non-public (or becomes so ascertainable).
(b) Amendment; Waiver. This Agreement shall not be changed, modified
-----------------
or amended in any respect except by the mutual written agreement of the parties
hereto. Any provision of this Agreement may be waived in writing by the party
which is entitled to the benefits thereof. No waiver of any provision of this
Agreement shall be deemed to or shall constitute a waiver of any other provision
hereof (whether or not similar), nor shall any such waiver constitute a
continuing waiver.
(c) Binding Effect; Assignment. This Agreement may not be
--------------------------
transferred,
19
assigned, pledged or hypothecated by and party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns.
(d) Governing Law; Venue, Jurisdiction and Litigation Costs. This
-------------------------------------------------------
Agreement and its validity, construction and performance shall be governed in
all respects by the internal laws of the State of New York without giving effect
to such State's conflicts of laws provisions. Each of the Company and the
Subscriber expressly irrevocably consent to the jurisdiction and venue of the
federal courts located in the State of New York, County of New York. The
prevailing party or parties in any such litigation shall be entitled to receive
from the losing party or parties all costs and expenses, including reasonable
counsel fees, incurred by the prevailing party or parties.
(e) Severability. Any term or provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction
only, be ineffective only to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof affecting the validity or
enforceability of such provision in any other jurisdiction.
(f) Headings. The captions, headings and titles preceding the text of
--------
each or any Section, subsection or paragraph hereof are for convenience of
reference only and shall not effect the construction, meaning or interpretation
of this Agreement or any term or provisions hereof.
(g) Counterparts. This Agreement may be executed in one or more
------------
original or facsimile counterparts, each of which shall be deemed an original
and all of which shall be considered one and the same agreement, binding on all
of the parties hereto, notwithstanding that all parties are not signatories to
the same counterpart. Upon delivery of an executed counterpart by the
undersigned Subscriber to the Company, which in turn is executed and delivered
by the Company, this Agreement shall be binding as one original agreement
between the Subscriber and the Company.
(h) Transfer Taxes. Each party hereto shall pay all such sales,
--------------
transfer, use, gross receipts, registration and similar taxes arising out of or
in connection with the transactions contemplated by this Agreement
(collectively, the "Transfer Taxes") as are payable by such party under
applicable law, and the Company shall pay the cost of any documentary stock
transfer stamps, if any, to be affixed to the certificates representing the
Series C Preferred Stock.
(i) Entire Agreement. This Agreement, the Amended Registration Rights
----------------
Agreement and the Amended Securityholders' Agreement merges and supersedes any
and all prior agreements, understandings, discussions, assurances, promises,
representations or warranties among the parties with respect to the subject
matter hereof, and contains the entire agreement among the parties with respect
to the subject matter set forth herein.
(j) Authority; Enforceability. The undersigned Subscriber is duly
-------------------------
authorized
20
to enter into this Subscription Agreement and to perform its obligations
hereunder. Upon the execution and delivery of this Agreement by the undersigned
Subscriber, this Agreement shall be enforceable against the undersigned
Subscriber in accordance with its terms.
(k) Notices. Except as otherwise specified herein to the contrary,
-------
all notices, requests, demands and other communications required or desired to
be given hereunder shall only be effective if given in writing by hand, by
certified or registered mail, return receipt requested, postage prepaid, or by
U.S. express mail service, or by private overnight mail service (e.g. Federal
Express), or by facsimile transmission. Any such notice shall be deemed to have
been given (a) on the business day actually received if given by hand or
facsimile transmission, (b) on the business day immediately subsequent to
mailing, if sent by U.S. express mail service or private overnight mail service,
or (c) three (3) business days following the mailing thereof, if mailed by
certified or registered mail, postage prepaid, return receipt requested, and all
such notices shall be sent to the following addresses (or to such other address
or addresses as a party may have advised the other in the manner provided in
this Section 8(k)):
If to the Company:
▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
CKG ▇▇▇▇▇.▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile no. (▇▇▇) ▇▇▇-▇▇▇▇
with copies simultaneously by like means to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇ ▇▇▇▇ & Brandeis, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile no. (▇▇▇) ▇▇▇-▇▇▇▇
If to the Subscribers, notice shall be given to all parties set forth
in Section 7.5 of the Amended Securityholders' Agreement.
(l) Use of Proceeds. The Company covenants and agrees that it shall
----------------
use the proceeds from the sale of the Series C Preferred Stock to the extent
necessary to effect the redemption of the remaining shares of Common Stock (the
"Redemption") held by the Trust not previously purchased by the Company in
accordance with the terms of the Agreement of Purchase and Sale of Stock dated
as of June 9, 1999, as amended through the date hereof, by and among the Company
and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, as trustee for the Trust. The Company further covenants and
agrees that it shall consummate the Redemption in accordance with all, and has
no liability under any, applicable laws, including, without limitation, the
Securities Act. To the extent that the Company uses less than all of the
proceeds from the sale of the Series C Preferred
21
Stock hereunder to effect the Redemption of the Common Stock of the Trust, the
Company will use any such unused proceeds for general working capital purposes.
(m) No Third Party Beneficiaries. This Agreement and the rights,
----------------------------
benefits, privileges, interests, duties and obligations contained or referred to
herein shall be solely for the benefit of the parties hereto and no third party
shall have any rights or benefits hereunder as a third party beneficiary or
otherwise hereunder.
(n) Publicity. Except as otherwise required by law, none of the
---------
parties hereto shall issue any press release or make any other public statement,
in each case relating to, connected with or arising out of this Agreement or the
matters contained herein. Any statement so issued or made shall require the
reasonable prior approval of the other parties hereto as to the contents and the
manner of presentation and publication thereof.
(o) Several Representations, Warranties, Covenants, Agreements and
--------------------------------------------------------------
Obligations. The representations, warranties, covenants, agreements and
-----------
obligations of the Company hereunder shall be several and not joint.
22
IN WITNESS WHEREOF, the Company and each of the undersigned Subscribers
has each duly executed this Agreement as of this __ day of _____, 1999.
CKG ▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
_____________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Chairman/CEO
SUBSCRIBERS:
VECTOR CAPITAL II, L.P.
By: Vector Capital Partners, II, LLC as
General Partner
/s/ ▇▇▇▇ ▇▇▇▇▇▇
____________________________________
By: ▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Member
STV Partners II, L.L.C.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
General Manager
P2M, LLC
/s/ ▇▇▇▇ ▇▇▇▇▇
_________________________________
▇▇▇▇ ▇▇▇▇▇
Managing Member
